Fed chairman renews inflation concerns

Delivering his second economic report to Congress, the top US central banker also stressed that these are difficult and uncertain times for Fed policy-makers, saying the climate of slowing growth and rising inflation puts the Fed in a tricky spot in terms of setting interest rates.

‘‘The recent rise in inflation is of concern’’ to Fed policy-makers, Bernanke said in prepared remarks to the Senate Banking Committee. He said that possible increases in the prices of oil as well as other raw materials ‘‘remain a risk to the inflation outlook.’’

‘‘Persistently higher inflation would erode’’ the economy’s performance ‘‘and would be costly to reverse,’’ Bernanke added.

‘‘The Federal Reserve must take account of these risks in making its policy decisions.’’

On the other hand, a slowing economy should reduce inflation pressures going forward, he indicated. A slowing housing market and more cautious consumers—whose spending accounts for a big chunk of economic activity—are the main factors behind the moderation in overall economic growth, Bernanke said.

But he also left the door to further increases in interest rates to keep inflation at bay.

‘‘The extent and timing of any additional firming that may be needed to address inflation risks will depend’’ on what incoming barometers say about the price climate and economic activity, he said.

The Fed has been boosting interest rates since June 2004 to fend off inflation. At the Fed’s last meeting on June 29, policy-makers pushed a key rate to 5.25 percent, the highest in more than five years, and the 17th rake hike.

Fed’s next meeting is August 8.

JEANNINE AVERSA