每日时讯英文阅读：BERNANKE HIGHLIGHTS RISKS

BERNANKE HIGHLIGHTS RISKS

By Krishna Guha and James Politi in Washington and Michael Mackenzie in New York

Wednesday, July 16, 2008

Ben Bernanke yesterday highlighted the “numerous difficulties” facing the US economy in a sobering testimony that sent the markets on a rollercoaster ride as he signalled serious risks to growth and higher than expected inflation.

The Federal Reserve chairman told Congress that strains in financial markets, declining house prices, a weaker labour market and higher oil prices were all putting pressure on the outlook.

Shares in the US – already weak before Mr Bernanke spoke – fell sharply, before rallying on a substantial decline in oil prices. But the main European and Asian markets fell sharply throughout the day with financial stocks particularly hard hit. In London the FTSE100 closed down 2.4 per cent at 5171.9, its lowest level since October 2005.

By midday, oil had slumped to $138.42 a barrel after trading at an early high of $146.73. As oil slid, the euro, which had hit a new record high of $1.6038 against the dollar in early trading, eased back. Gold rallied to its highest level in four months.

Promising that the Fed would continue to view restoring the financial markets to health as “a top priority”, Mr Bernanke said policymakers believed that the risks to growth were “skewed to the downside”.

But he said the inflation risk had “intensified lately” with continued increases in oil and other commodity prices that would push overall inflation higher in the short term. Mr Bernanke said it was “critical” that policymakers prevent higher inflation from becoming entrenched in the shape of higher inflation expectations that would feed into domestic wage and price-setting.

The Fed chairman said he was less concerned about the possibility of widespread bank failures than he was about the prospect that banks would cut back on lending to the economy as they absorb losses and try to reduce their leverage.