Bernanke grilled on inflation

The chairman of the U.S. Federal Reserve, Ben Bernanke, faced sharp questioning from members of congress Wednesday over whether the Fed's stimulus policies risk rising inflation in the coming months.

House budget committee chairman Paul Ryan, a Republican, said he was concerned that the Fed won't be able to detect inflation until "the cow is out of the barn" and suggested that inflation is already spreading dangerously through the economy.

Bernanke acknowledged that inflation is surging in emerging economies.

But he downplayed the risks to the U.S. economy, even as lawmakers expressed concerns about rising prices for gasoline and food.

He said inflation in the U.S. remains "quite low," and attributed higher prices to strong demand from emerging economies such as China — not the Fed's policies to stimulate the economy, including buying $600 billion worth of government debt.

His remarks suggest the Fed will stick with its program, which is aimed at stimulating spending and the economy by lowering rates on loans and by boosting prices on stocks.

Bernanke also said the American recovery appears to be strengthening and that the drop in unemployment over the last two months is encouraging.

The U.S. jobless rate was nine per cent in January, after its fastest two-month decline in 53 years.

That, and an increase in spending by consumers and businesses, Bernanke said, provide "some grounds for optimism."

But he cautioned that it would take several years for hiring to return to normal.

Bernanke also called for politicians to come up with a plan for reducing the government's $1 trillion-plus deficit, warning that failure to do so could eventually hurt the economy.