Fed Boss Likely to Get Earful on Higher Gas Prices

Source from：http://abcnews.go.com/Business/wireStory?id=13025076

Federal Reserve Chairman Ben Bernanke will likely face sharp questioning this week from members of Congress about rising gas prices, faster inflation and high unemployment.

Just as the economy has gained some momentum, a new danger has emerged. Sharply higher fuel costs could prompt people to spend less on other things, slowing the recovery and possibly hiring.

That new risks — along with already elevated unemployment — are likely to be cited by Bernanke as reasons why the Fed must stick with its stimulus program and buy $600 billion worth of Treasury bonds through June.

At the same time, Bernanke is likely to downplay concerns that rising energy and food prices will trigger high inflation.

Bernanke is slated to kick off back-to-back appearances on Capitol Hill Tuesday, when he delivers the Fed's twice-a-year economic report to Congress.

On the one hand, Bernanke will express confidence that the economy will gain more speed this year. But Bernanke will also acknowledge that economic growth still won't be strong enough to quickly lower unemployment, now at 9 percent.

The Fed chief will likely stress that the United States can't fully recover from the worst recession in decades until hiring improves.

"For Bernanke, the labor market is ground zero for a sustainable expansion," said economist Sal Guatieri at BMO Capital Markets.

The Fed's bond-purchase program is intended to spur more spending and invigorate the economy by lowering rates on loans and boosting prices on stocks.

However, Republicans in Congress and some Fed officials worry that the program could trigger inflation and a wave of speculative buying on Wall Street that could lead to new bubbles in the prices of assets like stocks and bonds.

Bernanke has repeatedly defended the program, saying it is needed to energize growth and reduce unemployment. Fears of inflation are overblown, he has said.