US inflation rate ‘still relatively contained’: Paulson

US inflation rate ‘still relatively contained’: Paulson

 

(LONDON) Treasury Secretary Henry Paulson said inflation that strips out food and fuel costs in the US remains in check and he praised the job Federal Reserve chairman Ben S Bernanke is doing conducting monetary policy.

 

‘Core inflation is still relatively contained,’ Mr Paulson said in an interview that aired yesterday on the British Broadcasting Corp’s Newsnight programme.

 

‘We’re dealing with some other challenges and excesses in our capital markets, no doubt about that.’

 

The US central bank’s Federal Open Market Committee last week said it expects price gains will ‘moderate’ this year and next, cautioning that ‘uncertainty about the inflation outlook remains high’.

 

In the interview, Mr Paulson aligned himself with Mr Bernanke’s decisions, which include seven reductions since September in the benchmark interest rate to 2 per cent.

 

‘I’ve been very supportive of what I’ve seen the Fed do and Ben Bernanke do since I’ve been working with him and I’m very supportive of his posture,’ Mr Paulson said, declining to say whether rates should be raised.

 

‘You’re not going to get me commenting on that,’ he said. ‘I just have great reverence and respect for the independence of our central banks – your Bank of England and our Fed – and they’ve got tough jobs to do.’

 

Mr Paulson is in London to discuss financial regulation with his UK counterparts. He said in the interview that rising energy and food prices are affecting developing nations such as China and India as well as the industrial world.

 

Inflation ‘is getting the No 1 focus’, Mr Paulson said, citing his recent travels to discuss economic conditions with his counterparts.

 

Mr Paulson visited Moscow, Berlin and Frankfurt earlier this week; he has also been to Mexico, Japan and the Middle East this year.

 

A June 27 Commerce Department report showed lower-than-expected rises in an inflation measure preferred by Federal Reserve policymakers.

 

The central bankers’ preferred gauge of prices, which excludes food and fuel, increased 0.1 per cent in May, compared with a 0.2 per cent median estimate in the Bloomberg survey.

 

The price measure was up 2.1 per cent from May 2007, also less than anticipated. Wages and salaries grew just 0.3 per cent in May, the Commerce Department figures showed.

 

Mr Paulson said that overall, the global economic slowdown has ‘further to go’. He repeated his view that the US economy will improve by year end, even as the housing market correction has not yet run its course.

 

‘I expect us to be growing, with stronger growth by year end,’ Mr Paulson said. ‘In terms of other places in the world, I think they may be in different parts of the cycle.’ – Bloomberg

 

Source: Straits Times

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