Tuesday, March 1, 2011

Bernanke Now Sees Inflation Caused by Oil, Commodities, and The Low U.S. Dollar

No wonder gold is zooming higher. All these years if easy money and, printing, and quantitative easing were doomed to have an effect on inflation.

A lower U.S. dollar means higher oil prices. Ben S. Bernanke said today that the surge in oil and other commodity prices "suggests a temporary and relatively modest increase in U.S. consumer price inflation,”

He added that this "probably won’t cause a permanent increase in broader inflation and repeated that borrowing costs are likely to stay low".

He said again that the Fed’s outlook that while growth will accelerate this year, he still wants to see a “sustained period of stronger job creation.”

Thus, this likely means more QE on the way, and oil prices remainig higher, regardless of Lybia, Iran, or elsewhere.

Other comments:

“sustained rises in the prices of oil or other commodities would represent a threat both to economic growth and to overall price stability, particularly if they were to cause inflation expectations to become less well anchored,”

“We will continue to monitor these developments closely and are prepared to respond as necessary to best support the ongoing recovery in a context of price stability.”

“downside risks to the recovery have receded, and the risk of deflation has become negligible,”
[price increases  “rising global demand for raw materials, particularly in some fast-growing emerging market economies, coupled with constraints on global supply in some cases,” “have risen significantly in terms of all major currencies,” rejecting the idea that the Fed’s easy monetary policy is responsible.

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