Bernanke sticks to hawkish tone for Senate panel
Fed chief warns about inflation risks in testimony to Senate Banking Committee.
February 16, 2006: 10:18 AM EST
WASHINGTON (Reuters) - Federal Reserve Chairman Ben Bernanke was set Thursday to repeat an upbeat assessment of the U.S. economy's health and warn anew on inflation risks in a second day of testimony and questioning on Capitol Hill.
Testifying before the Senate Banking Committee, Bernanke said in his prepared testimony the U.S. expansion remained "on track."
"The economy now appears to be operating at a relatively high level of resource utilization," he said in remarks that were virtually identical to an opening statement he delivered to a House panel Wednesday.
"The risk exists that, with aggregate demand exhibiting considerable momentum, output could overshoot its sustainable path, leading ultimately -- in the absence of countervailing monetary policy action -- to further upward pressure on inflation," Bernanke said.
The new Fed chief, sworn in as Alan Greenspan's replacement on Feb. 1, was expected to once again dodge questions from lawmakers for views on how to address burgeoning government red ink, as he did in his first congressional appearance before the House Financial Services Committee.
That appearance drew generally high marks from financial analysts, who said Bernanke's straight-forward style and crisp answers were a welcome departure from Greenspan's often elliptical remarks.
"For the first time in 18 years, we managed to get through one of these semiannual congressional testimonies without a bottle of Advil in one hand and a thesaurus in the other," wrote David Rosenberg, chief North American economist at Merrill Lynch.
While Bernanke stressed the Fed's commitment to keep inflation contained, he also noted the economy was not without downside risks.
On balance, his testimony on Wednesday left expectations for further rates hikes from the Federal Reserve little changed.
The central bank has raised overnight interest rates to 4.5 percent in 14 small steps dating to June 2004. Markets expect another quarter-percentage point rate hike when Bernanke leads his first policy-making session on March 27-28 and there's a good chance of a second one by mid-year.