Our colleague Michael Derby has this overview of Fed Chairman Ben Bernanke’s testimony up on Capitol Hill this morning:
In testimony before Congress, Fed Chief Ben Bernanke says he sees a continued US recovery and expects inflation to stay contained. But he also warns sustained commodity-price increases could threaten the recovery and warns the central bank won’t allow inflation to take hold. Most of Bernanke’s comments on the outlook hew closes to things he and other Fed officials have said. Put another way, the remarks are no game changer, although they do reflect the increased attention paid to commodity prices.
The two most interesting topics today and tomorrow are likely to be the end of QE2, and commodity prices. On the former, you may get a hint or two, but that’ll be it. On the latter, the Fed chairman is still holding to his opinion that Fed policies are not the cause of the inflationary wave that’s spreading across the globe.
I just don’t know where to go with that. The Fed’s been trying like madmen for the past two years to spark inflation, given they’re terrified of deflation. The dollar is the world’s reserve currency. Most markets trade in dollars. Bernanke can do the “Huh? Wha? Don’t look at me” bit, but it’s not a very convincing act.