Fed chief Bernanke forecasts moderate inflation

Federal Reserve Chairman Ben Bernanke said inflation was on track to ease later this year and next. Bernanke made the comments Friday at an economic conference before leading economists and policymakers in Jackson Hole, Wyoming.

Decreasing commodity prices, increased stability of the dollar, and slower growth were cited reasons for the improved outlook.

"If not reversed, these developments, together with a pace of growth that is likely to fall short of potential for a time, should lead inflation to moderate later this year and next year," Bernanke said.

The chairman also warned the Fed would not stand by, signaling interest rate hikes, if price increases did not slow over the medium term.

"Nevertheless, the inflation outlook remains highly uncertain, not least because of the difficulty of predicting the future course of commodity prices, and we will continue to monitor inflation and inflation expectations closely. The FOMC is committed to achieving medium-term price stability and will act as necessary to attain that objective," Bernanke continued.

News of Bernanke’s comments provided a surge to stocks, strengthened the dollar, and helped drive commodities like gold and oil lower Friday.

Bernanke’s comments on inflation follow a Labor Department report Tuesday that wholesale prices jumped to their highest annual rate in 27 years, and last week’s report that consumer prices jumped by 0.8 percent in July, rising 5.6 percent for the fastest pace in 17 years.

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