Bernanke committed to price stability

By Scott Lanman  |   2008-6-4  |     NEWSPAPER EDITION

FEDERAL Reserve Chairman Ben S. Bernanke says that interest rates are "well positioned" to promote growth and stable prices, and that policy makers are "attentive" to the impact of the falling dollar.

The Fed is working with the Treasury to "monitor developments in foreign exchange markets" and is aware of the effect of the dollar's decline on inflation and price expectations, Bernanke said yesterday.

Signs of accelerating inflation bolster Bernanke's case for pausing after the Fed lowered its main interest rate by 3.25 percentage points since September. The central bank is trying to mitigate harm from the collapse of the subprime mortgage market while still keeping prices in check, Bloomberg News said.

"For now, policy seems well positioned to promote moderate growth and price stability over time," Bernanke said. "We will, of course, be watching the evolving situation closely and are prepared to act as needed to meet our dual mandate."

Bernanke was speaking via satellite to the International Monetary Conference in Barcelona.

The dollar has weakened 16 percent against the euro in the past year and traded at US$1.5595 yesterday.

"We are attentive to the implications of changes in the value of the dollar for inflation and inflation expectations," he said. The Fed's commitment to price stability and maximum employment "will be key factors ensuring that the dollar remains a strong and stable currency."