Bernanke gives grim economic outlook

Federal Reserve Chairman Ben Bernanke gave a grim assessment of the economy Tuesday, telling members of a Senate panel that higher energy prices and the troubled housing market suggested limited growth.

In testimony before the Senate Banking Committee, Bernanke also stated that inflation remained high, and the risk of further inflation is increasingly a worry.

{mosads}“The possibility of higher energy prices, tighter credit conditions and a still-deeper contraction in housing markets all represent significant downside risks to the outlook for growth,” Bernanke said in his prepared testimony on the Reserve’s monetary report to Congress. “Given the high degree of uncertainty, monetary policymakers will need to carefully assess incoming information bearing on the outlook for both inflation and growth.”

Rising oil and agriculture commodity prices have increased the cost of energy and food, but Bernanke said the extent to which this has raised prices of other goods and services so far is limited. Still, he highlighted it as a real concern.

“But with businesses facing persistently higher input prices, they may attempt to pass through such costs into prices of final goods and services more aggressively than they have so far,” he said.

Bernanke also said the plunging value of the dollar has raised prices on imports, adding pressure for both consumers and business.