Although the United States economy has been slowing down, the Chairman of the Federal Reserve, Ben Bernanke, stated today that he will make sure increasing energy prices do not make recent inflation increases any worse. In an international monetary conference, Bernanke said when the Federal Reserve
determines next months rate move in late June, the inflation outlook will be one of the main topics of consideration. He made it clear that Fed policy makers will take special care to deter the recent pattern of signs of higher core inflation. During the conference, Bernanke stated, "With the economy now evidently in a period of transition, monetary policy must be conducted with great care and with close attention to the evolution of the economic outlook." According to measurements by the Consumer Price Index, "core" inflation rose at an annual rate of 3.2 percent over the last three months and 2.8 percent over the past six months. Bernanke also supplied other important facts about the current economy. Bernanke said that although the economy grew at a rate of 5.3 percent pace in the opening quarter of 2006, it is showing evident signs of slowing down to a moderate pace. An AP release states that private economists believe economic growth in the April-to-June quarter will probably clock in at or slightly above a 2.5 percent pace. According to his remarks, higher energy prices and a slower housing market are playing a role in this slow down by causing consumers to be more cautious in their spending. He also pointed out that the less jobs have been created in recent months, along with an increase in filings for unemployment benefits, have contributed to the gradual slow down. Although consumers, who are responsible for two-thirds of all economic activity, are slowing down, businesses are spending and investing money at a solid rate. The concern over rising energy prices is evident in many areas. Oil prices are currently hovering around seventy-three dollars a barrel, which is barely under the seventy-dollar per barrel all-time high. Gasoline prices have also increased to over three dollars a gallon in many locations. In order t.combat this inflation, Fed policy makers have increased interest rates sixteen times since June 2004. Whether or not interest rates will be raised a seventeenth time at the end of June is causing quite a bit of debate among economists. According to the AP, many economists believe the Fed will raise rates again in order to fight inflation, and believe this position is supported by Bernanke's remarks. Others economists think that the Fed will leave the rates alone and end a two year streak of raising interest rates in order to take time to assess the current economic conditions. On Wall Street, the Dow Jones industrials finished almost two hundred points down after Bernankes inflation warnings. The NASDAQ also had a disappointing day, closing down almost fifty points, while the S&P 500 finished in the red, losing nearly twenty three points.
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