U.S. consumer prices jumped by one-point-one percent in June, the
second largest increase in prices in 26 years. The surge is largely
attributed to soaring energy prices, which rocketed upward by six
percent. Federal Reserve Chairman Ben Bernanke expressed concerns about
inflation and the overall economy during his second day of testimony on
Capitol Hill. VOA's Cindy Saine reports from Washington.
bigger than anticipated rise in prices is cutting deeply into
consumers' buying power, with average weekly wages, adjusted for
inflation, falling by zero-point-nine percent. The surge in energy
costs is also trimming business spending and hurting economic growth.
to the House Financial Services Committee, Federal Reserve Chairman Ben
Bernanke said inflation is a threat to hopes for an economic recovery.
has remained high, running at nearly a three-and-a-half percent annual
rate over the first five months of this year, as measured by the price
index for personal consumption expenditures. And, with gasoline and
other consumer energy prices rising in recent weeks, inflation seems
likely to move temporarily higher in the near term," he said.
Bernanke said consumers and businesses alike are likely to be cautious with their spending.
Commerce Department report shows that Americans cut back on purchasing
cars, furniture and restaurant meals last month as the cost of gasoline
soared. Analysts say the current economic situation puts the central
bank in a difficult position, because it may not dare to counter
inflation by raising interest rates at a time when the U.S. economy
remains weak, and global financial markets are under stress.
at Wednesday's hearing if the U.S. economy is in a recession, Bernanke
said that will be determined later by economists. But he said there is
no doubt that many Americans are facing tough times right now. "Whether
it's a technical reception or not is not all that relevant. It's
clearly the case that for a variety of reasons families are facing
hardships in terms of higher energy costs, declining wealth, all the
things that you mentioned, so this is clearly a rough time," he said.
the bleak forecast by Bernanke, U.S. stocks rallied late Wednesday.
The Dow Jones industrial average climbed about two percent as oil
prices declined slightly and Wells Fargo Company issued upbeat
quarterly results, easing concerns about the banking sector.