February 26, 2008
|Helicopter Ben obliquely acknowledges inflation causing “slower growth,” that is to say the housing sector and jobs market are down the tubes.|
WASHINGTON (CNNMoney.com) — The economy faces the prospect of slower growth, but increasing concerns over inflation could complicate the Federal Reserve’s efforts to stimulate the economy, Fed Chairman Ben Bernanke told lawmakers Wednesday.
The central bank chief, in testimony before the House Financial Services Committee, said that the housing sector and jobs market could deteriorate further. He also warned that lending could be squeezed by tighter credit conditions.
“[I]t is important to recognize that downside risks to growth remain,” Bernanke said. The Fed “will act in a timely manner as needed to support growth.”
The markets turned higher Wednesday on Bernanke’s testimony, as investors read signals that the Fed was prepared to continue cutting rates if necessary to stimulate the economy.
In fact, the growing consensus is that the Fed will cut interest rates by another half a percentage point when policymakers meet again on March 18.