Washington – New Federal Reserve Chairman Ben Bernanke refused Thursday to get pinned down on just how much higher interest rates will need to go to keep the economy and inflation on an even keel.
“There are two possible mistakes. One is to go on too long, and one is not to go on long enough,” Bernanke said during a Senate Banking Committee hearing. “And it’s a very difficult balancing act.”
The comments came as Sen. Jim Bunning, R-Ky., worried that the Federal Reserve could raise interest rates too high and push the economy into a recession – something the central bank has been blamed for at various times in its history.
Bernanke smoothly moved through questions on a range of economic matters – including bloated trade and budget deficits and growing trade tensions with China.
On the future course of interest rates, Bernanke repeated a statement made Wednesday before the House Financial Services Committee that he agreed with an assessment made by his Federal Reserve colleagues in late January – while Alan Greenspan was still chairman – that interest rates would probably need to move higher.
Bernanke, who took over the Fed helm Feb. 1, will have the next word on interest rates March 27-28 – his first meeting as Fed chief.
Economists predict the Fed will boost rates by another quarter percentage point to 4.75 percent at that time. That would mark the 15th increase of that size since the Fed began to tighten credit in June 2004.
Although economists – and Fed officials – disagree on how many more rate increases may be coming, most agree that the Fed’s rate-raising campaign is drawing to a close.
