Fed: Fear inflation, not recession

NEW YORK, Nov. 28 (UPI) -- The chairman of the U.S. Federal Reserve said Monday inflation, not recession, is the main financial threat to the nation's economy.

Ben S. Bernanke, who was speaking in New York, said "core inflation ... remains uncomfortably high."

He said the core consumer price index inflation "over the most recent 12 months was 2.7 percent, up from 2.1 percent over the previous 12 months."

Bernanke also noted another key inflation measure, the price index for personal consumption expenditures excluding food and energy, was up 2.4 percent over the past year, compared with a 2.1 percent rise in the preceding 12 months.

While he expects core inflation to moderate gradually over the next year or so, Bernanke said: "There are substantial uncertainties about the inflation forecast. In the case of inflation, the risks to the forecast seem primarily to the upside. Given the current level of inflation, a failure of inflation to moderate as expected would be especially troublesome."

His remarks virtually halted a bond market rally that began earlier in the day after weak data on durable goods orders.