Bernanke says too low inflation can hurt economy
WASHINGTON, March 30 (Reuters) - The U.S. central bank is on track to keep inflation within acceptable bounds, Federal Reserve Board Governor Ben Bernanke said on Tuesday.
"Inflation should not be too high. At the same time, it should not be too low either. Very, very low inflation is bad for the economy," Bernanke said in answer to questions after delivering a speech at Duke University in Durham, North Carolina.
"The Federal Reserve has a responsibility to prevent both high inflation and deflation and to keep inflation within acceptable bounds," he added. "I think right now we're well on our track to doing that."
An audio feed of his remarks was monitored in Washington.
Asked to assess the impact foreign central bank purchases of U.S. Treasury securities may be having on domestic interest rates, Bernanke said any impact was likely small.
"The most reasonable assumption is that these markets for Treasury securities are so deep and so liquid that the impact of these foreign purchases on U.S. domestic interest rates, although certainly not zero, are probably modest," he said.
"I do think there is some affect of foreign official purchases on U.S. Treasury prices and interest rates but ... the impact is measured in basis points, not percentage points," Bernanke added.
He said the impact was small enough that the purchases had not affected the Fed's ability to use overnight interest rates to influence the longer term borrowing costs set by the market.
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