The Federal Reserve has a dual mandate: keep inflation low and promote full employment in the US. To fulfill the second part of the mandate, Mr. Bernanke has lowered interest rates to almost zero.
But if inflation starts to bubble, he will be in a bind.
On Tuesday, Bernanke testified before Congress that he thought the rise in oil prices would be short-lived and would result in only modest inflation. But if prices don’t come back down, the Fed chairman has acknowledged there could be a surge in inflation, says Chicago-based Phil Flynn, director of research at PFG Best, a commodities broker.
“If prices go up, Bernanke is a loser,” says Mr. Flynn.
