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Bernanke denies stagflation looms

Feb. 28, 2008 at 5:29 PM

WASHINGTON, Feb. 28 (UPI) -- U.S. Federal Reserve Chairman Ben S. Bernanke told the Senate Banking Committee Thursday he did not believe the economy was headed towards stagflation.

Stagflation is a period of high inflation and slow or nonexistent economic growth like that experienced in the United States in the 1970s.

"I don't think we're anywhere near the situation that prevailed in the 1970s," Bernanke said.

"I do very much believe that the U.S. economy will return to a strong growth path with price stability," he said, warning committee members "monetary policy works with a lag."

Sen. Jim Bunning, R-Ky, asked Bernanke,"Then does that bode well with the lowering of interest rates and the higher rate of unemployment?

"That indicates to me that someone in the Journal today that talked about stagflation might be talking more sense than we might anticipate," he said.

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