WASHINGTON – Members of Congress sharply questioned Federal Reserve Chairman Ben Bernanke Wednesday over whether the Fed’s policies are raising the risk of higher inflation in the months ahead.
House Budget Committee Chairman Paul Ryan, R-Wis., said he is concerned that the Fed won’t be able to detect inflation until “the cow is out of the barn” and inflation is already spreading dangerously through the economy.
Bernanke acknowledged that inflation is surging in emerging economies. But he downplayed the risks to the U.S. economy, even as lawmakers expressed concerns about rising gasoline and food prices.
Inflation in the United States remains “quite low,” Bernanke said. He blamed higher prices on strong demand from fast-growing countries such as China – not the Fed’s policies to stimulate the economy, including buying $600 billion worth of Treasury debt.
Bernanke’s remarks suggest the Fed will stick with the bond-buying plan through June, as scheduled. The program is aimed at invigorating the economy by lowering rates on loans and boosting prices on stocks.
Ryan worries that the Fed’s stimulus policies, including the debt purchases, could trigger inflation or fuel speculative buying of stocks or other assets.
Rep. Todd Rokita, R-Ind., seemed skeptical of the Fed’s ability to fend off inflation before it gets out of hand. In the Fed’s history, when did the Fed “get it right?” Rokita asked.
Bernanke said former Fed Chairman Paul Volcker brought down double-digit inflation during the 1980s by pushing up interest rates to levels not seen since the Civil War.
The Fed chief said he was confident the Fed has the political will to boost interest rates and snuff out inflationary forces before they take hold.
Bernanke also defended the bond-purchase program, saying it is needed to ease high unemployment.