Bernanke: Financial markets and institutions remain under considerable stress

16 July 2008

A top priority of the central bank would be to keep financial markets functioning, Bernanke said. “We could see an unwelcome rise in actual inflation over the longer term”, he warned.

A top priority of the central bank would be to keep financial markets functioning, and that the Fed was paying close attention to the troubles of mortgage giants Fannie Mae and Freddie Mac, Federal Reserve Chairman Ben Bernanke told the Senate Committee on Banking. “We could see an unwelcome rise in actual inflation over the longer term”, he warned. “A critical responsibility of monetary policy makers is to prevent that process from taking hold.”

 

A weakening housing market, tighter credit and rising oil prices threaten the US economy, Bernanke said. “The possibility of higher energy prices, tighter credit conditions, and a still-deeper contraction in housing markets all represent significant downside risks to the outlook for growth. At the same time, upside risks to the inflation outlook have intensified lately”, he said.

 

Full testimony

 

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