Members of Congress sharply questioned Federal Reserve Chairman Ben Bernanke Wednesday over whether the Fed's policies are raising the risk of rising 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 prices for gasoline and food.
Bernanke said inflation in the United States remains "quite low." 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 to invigorate spending and the economy by lowering rates on loans and by 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.
"Many of us fear monetary policy is on a difficult track," Ryan said.
Bernanke defended the bond-purchase program, saying it is needed to ease high unemployment. He credited all the Fed's stimulus policies with creating or saving 3 million jobs over the past several years.
The unemployment rate was 9 percent in January after the fastest two-month decline in 53 years. Bernanke said the drop is encouraging but cautioned that it will take several years for hiring to return to normal.
He also warned that failing to forge a plan to reduce the government's $1 trillion-plus deficits over the long term could eventually hurt the economy.
The Fed chief said the economy is strengthening, helped by more spending by consumers and businesses. However, the economic recovery won't be assured until companies step up hiring on a consistent basis.
Bernanke is making his first appearance before the House since Republicans took control last month. He faced some tough questions from them, despite being a member of the party.
Ryan also expressed concerns about the nation's exploding government deficits. If left unchecked, it will eventually hurt the economy. Ryan favors budget cuts to get the deficits under control.
Bernanke repeated a warning that Republicans, saying they should not play political games with the Treasury Department's request to raise the government borrowing authority beyond the current $14.3 trillion ceiling.
"We do not want to default on our debts. It would be very destructive," Bernanke said.
House Republicans have vowed to make deep spending cuts a precondition for voting to raise the debt ceiling.
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