Ben Bernanke, the chairman of the US Federal Reserve declared that the US economy was under no threat by rising oil prices unless they will be sustaining it; however, there is a sign that some investors have sold off their equities.
He also said that unrest in Libya will affect the US inflation slightly as the prices of oil will increase. According to Bernanke, the economy can be self supporting, but the chances of job growth are slim. He was still optimistic regarding the job market during the next quarters as there was a steep decline in unemployment.
Bernanke also warned that if Congress fails to raise the $14.3 trillion ceiling of debt, this will cause catastrophic effects. On Tuesday it was stated by the Treasury Department that the debt limit would be reached by April 15. His warning came hours before the fund bill for short term was approved by the house.
He also said that the chances of deflation were now negligible. Omer Esiner, the Chief Analyst of the Commonwealth Foreign Exchange, commented that the deflation risk is reasonable according to the Feds, an encouraging sign that would help the Feds in easing the program.
Bernanke was apparently not concerned that the economy might be harmed because of the recent increase in crude oil prices after the unrest in Middle East and North Africa. According to him, the rise in prices will most likely have an effect of a slight increase in inflation, although he stressed that Federal Reserve needs to act if there is a threat of inflation in the future.
He further commented that they are monitoring the developments very closely and are well equipped to react as required during this time of recovery in a price stability perspective.