New Fed Chief Bernanke Issues Warning on Inflation

By Tim Ahmann, Reuters

In his Capitol Hill debut as Federal Reserve chief, Ben Bernanke on Wednesday said the U.S. economy was running so near capacity that higher interest rates may be needed to quell the risk of inflation.

The Fed chairman appeared keen to establish credentials as an inflation “hawk” in his first extensive comments since taking office two weeks ago by stressing the need to keep price pressures contained.

“The risk exists that, with aggregate demand exhibiting considerable momentum, output could overshoot its sustainable path, leading ultimately — in the absence of countervailing monetary policy action — to further upward pressure on inflation,” Bernanke told the U.S. House of Representatives Financial Services Committee.

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