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Housing's Hurt Spoils His View
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Bernanke and several other officials have described their policy goals by saying they would seek to keep core inflation between 1 and 2 percent -- a range many investors have come to believe is the Fed's unofficial comfort zone. Core inflation was 1.9 percent in the 12 months that ended in May.
But yesterday, Bernanke said that "the Fed is concerned about the overall inflation rate" in the long term, and worries that persistently higher food and energy prices might cause consumers to expect, and thus cause, higher inflation. "We drive. We eat. We understand this," he said.
Several committee members pressed Bernanke on what they and the Fed could do to address growing U.S. income inequality.
"I think the single most pressing economic issue facing the country today is excess and growing inequality," Frank said.
Bernanke responded that the trend is more than 30 years old, and largely reflects advances in technology that favor more highly skilled workers, and globalization.
The Fed's best response, he said, is to maintain a steady and strong economy. Congress and other economic policymakers should focus on ways to strengthen educational and economic opportunities, while finding ways to assist workers seeking new skills and careers, he said.
Responding to questions from the committee, Bernanke also said hedge and private-equity funds and other private pools of investment capital provide "important benefits" for the economy by spreading financial risks and increasing liquidity in the markets.
The Fed chief suggested the boom in private corporate buyouts was a healthy trend. "In private equity in particular, they play an important role in the market for corporate control," he said. "We need to have a mechanism whereby poorly run companies' weak managements are subject to being taken over, replaced and their companies improved."
