What did Fed Chair Bernanke say about rising oil and our US economy? Ken Mahoney

As of late, the big question on everyone’s mind has been: Will the recovery stick? And while the talking heads have been debating their positions on the issue, the chief talking head himself – Federal Reserve Chairman Ben Bernanke – appeared before the House Financial Services Committee and a Senate panel last week to offer his semiannual report on the state of the economy.

What was the word? Bernanke said the economy is gaining traction and stressed that the Fed is prepared to act if higher commodity prices start to have a negative effect on U.S. growth. His comments also offered a brighter outlook on the status of rising energy costs, inflation risk, and job creation. Good news indeed!

While acknowledging that a prolonged rise in oil prices could pose a danger to the economic recovery, the Fed chief countered that other risks to the economy, including rising commodity prices, were more likely to affect consumer spending. At the same time, Bernanke reiterated his commitment to keeping inflation low, and added: "I recognize that the increases in gas prices are very troubling… but they are not inflation per se. Inflation is an increase in the overall price level, which is very low. The inflation rate right now is 1.2% for all goods and services".
As for jobs, Bernanke expressed confidence that growth would increase this year. Supporting his view, the Labor Department announced on Friday that the nation’s unemployment rate fell to 8.9% in February, the lowest level in two years. The report suggests that companies are gaining confidence in the economy and their own financial prospects. It also strengthens hopes that businesses will shift into a more aggressive hiring mode to heighten momentum for the ongoing recovery.

Against the backdrop of geopolitical turmoil that has packed the headlines in recent weeks, the Fed chairman’s testimony offered a positive perspective on the improving state of the American recovery.

HEADLINES:
On Tuesday, Apple Chief Steve Jobs introduced the world to the iPad2, a sleeker, faster follow-up to the original. The market sent shares of Research in Motion down 0.3%, and Motorola was down by over 4%. The new iPad2 sports front and back facing cameras, more memory, and a faster processor, but despite the upgrades, the iPad2 starts at $499, while Xoom tablets will run between $599 and $799.

President Barack Obama said Saturday that he is willing to offer deeper spending cuts if it means Republicans and Democrats can work out their differences and reach an agreement on the federal budget. The standoff over government spending intensified this past week as Republicans ripped the White House’s offer to make $6.5 billion in budget cuts this fiscal year, and the threat of a government shutdown lay over the horizon. Government operations are now running on a stopgap funding measure that expires on March 19.

U.S. manufacturers expanded at the fastest pace in nearly seven years last month, but a sudden rise in the price of raw materials could threaten their profits. The Institute for Supply Management said its index of manufacturing activity rose to 61.4 in February, the highest reading since May 2004. But prices paid for steel, plastics, rubber and other raw materials rose for a third straight month, a sign that increasing production costs could spark higher inflation.

National Football League owners and players agreed Friday to a seven-day extension to contract talks in an effort to resolve the league’s labor dispute. The agreement means the CBA will remain in force until the night of March 11 and averts the threat of a lockout by the owners or a lawsuit by the players for at least a week. The owners were due to earn about $4 billion in TV money this coming season, even in the event of a lockout.

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