US Federal Reserve chairman Ben Bernanke last night signalled that the bank would act to resist rising inflation as energy costs.
Bernanke also played down a May surge in the US unemployment rate from 5.1% to 5.5%, the biggest jump in 22 years, saying the risks of a substantial downturn in the US economy had receded.
His remarks suggest inflation is now a bigger worry than growth for the Fed, indicating that US policy-makers have little intention to cut interest rates further.
'The latest round of increases in energy prices has added to the upside risks to inflation and inflation expectations,' Bernanke said at a conference organised by the Boston Federal Reserve.
'The Federal Open Market Committee will strongly resist an erosion of longer-term inflation expectations,' he added. The FOMC sets US interest rates.
Despite Bernanke's inflation warning, the third in just one week, analysts have been sceptical that tough talk on prices would be followed up with real action in the form of higher interest rates.
Bernanke appeared relatively sanguine about the economic outlook, more so than he had been just a couple of months back. 'Although activity during the current quarter is likely to be weak, the risk that the economy has entered a substantial downturn appears to have diminished over the past month or so,' he said.
The Federal Open Market Committee next meets on June 24-25. Financial markets largely expect the Fed will not begin to raise interest rates until its October meeting.
