Bernanke: Spike in gas prices to fade

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WASHINGTON, Feb. 29 (UPI) -- U.S. Federal Reserve Chairman Ben Bernanke applauded recent financial policies in Europe Wednesday and said the gasoline price spike would be temporary.

Describing the U.S. economic recovery as "uneven," Bernanke said the Fed expects unemployment "to edge down only slowly towards levels consistent with the (Federal Open Market) Committee's statutory mandate."

With the recovery "somewhat slower than previously estimated," Bernanke said "financial strains in Europe have weighed on financial conditions and global economic growth."

However, after two years of struggling to gain control of government debt, Europe, he said, has recently put into effect, "a number of constructive policy actions ... including the European Central Bank's program to extend three-year collateralized loans to European financial institutions."

Bernanke also applauded the new $170 billion aid package for Greece, but said "challenges remain for the eurozone."

In Europe, however, "further steps will also be required to boost growth and competitiveness in a number of countries," he said.

Concerning the recent run up in gasoline prices, Bernanke said policymakers at the Fed, had "expected the subdued level of inflation to persist beyond this year."

However, "since these projections were made, gasoline prices have moved up, primarily reflecting higher global oil prices -- a development that is likely to push up inflation temporarily while reducing consumers' purchasing power."

In a prepared speech for his semiannual presentation before the House Committee on Financial Services, Bernanke said the Fed "would continue to monitor energy markets carefully."