WASHINGTON — Members of Congress sharply questioned Federal Reserve Chairman Ben Bernanke Wednesday over whether the Fed's policies are raising the risk of higher inflation in the months ahead.
House Budget Committee Chairman Paul Ryan, R-Wis., said he is concerned the Fed won't be able to detect inflation until "the cow is out of the barn" and inflation is already spreading dangerously through the economy.
Bernanke acknowledged inflation is surging in emerging economies. But he downplayed the risks to the U.S. economy, even as lawmakers expressed concerns about rising gasoline and food prices.
Inflation in the United States remains "quite low," Bernanke said. He blamed higher prices on strong demand from fast-growing countries such as China — not the Fed's policies to stimulate the economy, including buying $600 billion worth of Treasury debt. His remarks suggest the Fed will stick with the bond-buying plan through June, as scheduled. The program is aimed at invigorating the economy by lowering rates on loans and boosting prices on stocks.
It was Bernanke's first appearance before the House since Republicans took control last month. He faced tough questions from them, despite being a member of the party.
Ryan worries the Fed's stimulus policies, including the debt purchases, could trigger inflation or fuel speculative buying of stocks or other assets: "Many of us fear monetary policy is on a difficult track.''
Rep. Todd Rokita, R-Ind., seemed skeptical of the Fed's ability to fend off inflation before it gets out of hand. In the Fed's history, when did the Fed "get it right?" Rokita asked.
Bernanke said former Fed Chairman Paul Volcker brought down double-digit inflation during the 1980s by pushing up interest rates to levels not seen since the Civil War.
He said he was confident the Fed has the political will to boost interest rates and snuff out inflationary forces before they take hold.
Bernanke did acknowledge that rising gas prices are a threat to the economy. Prices have been around $3 a gallon nationally. If they were to go above $4 a gallon, that would "take a significant amount of disposable income away from people," he said.
Still, he defended the bond-purchase program, saying it is needed to ease high unemployment, and credited all the Fed's stimulus policies with creating or saving 3 million jobs the past several years.
The unemployment rate was 9 percent in January after the fastest two-month decline in 53 years. Bernanke said the drop is encouraging but cautioned it will take four or five years for hiring to return to normal — around 5 or 6 percent. He said the economic recovery won't be assured until companies step up hiring on a consistent basis.
Ryan and Bernanke agreed Congress and the White House must have a plan to reduce the government's $1 trillion-plus deficits. Ryan favors budget cuts. Bernanke didn't endorse specific policies. He said lawmakers should hold off on spending cuts or tax increases until the economy is in better shape.
Bernanke again warned Republicans they shouldn't play political games with the Treasury Department's request to raise the government borrowing authority. Treasury has asked to raise the $14.3 trillion debt ceiling. House Republicans have vowed to make deep spending cuts a precondition.
At the same time Bernanke was testifying, Rep. Ron Paul, R-Texas, held a hearing on whether the Fed's bond-buying program and record-low interest rates can really help create jobs. Paul, an outspoken critic of the central bank, favors abolishing the Fed.
Lawmakers at that hearing also expressed concerns that the Fed's policies will spur inflation.
"If the Fed didn't see this mess coming, will they see the recovery starting in time to turn off the printing presses to stop inflation," asked Rep. Frank Lucas, R-Okla. "I am not sure their vision in the future will be any better than in the past."