Ben Bernanke, the chairman of the US Federal Reserve, has doused hopes of an interest rate cut in coming months, warning that inflation is still the chief risk to the American economy.
In remarks that sent shivers through Wall Street, Mr Bernanke said the US faced double pressure from a deep housing downturn and "somewhat elevated" levels of core inflation.
The Dow Jones index fell 106 points in early trading in New York as investors fretted over the growing signs of "stagflation", which is typically poisonous for equities.
Mr Bernanke said there was a "big risk" that high capacity usage would prevent inflation falling back down to the Federal Reserve's comfort level.
He reminded investors to control their appetite for risk in a hazardous world. "Lack of attention to risk management is not desirable since we have no idea where the shock will come from," he said.
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/06/06/cnfed106.xml
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Wednesday, 6 June 2007
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