Bernanke: Inflation may rise again

Washington -- U.S. Federal Reserve Chairman Ben Bernanke said Wednesday underlying U.S. inflation might rise again and a recent softening might prove temporary.

Recent core-inflation readings, excluding volatile food and energy prices, have been "favorable," Bernanke said in his semiannual monetary policy report to Congress.

But they "are subject to considerable noise, and some of the recent improvement could also be the result of transitory influences," he said.

He repeated inflation remained the economy's predominant risk.

Even with that risk, he said, "the U.S. economy appears likely to expand at a moderate pace over the second half of 2007, with growth then strengthening a bit in 2008 to a rate close to the economy's underlying trend."

Economists generally see the economy expanding between 2.5 percent and 3 percent through December.

The U.S. housing slowdown "will likely continue to weigh on economic growth over coming quarters," although the drag's magnitude "should diminish," Bernanke said.

"As always, in determining the appropriate stance of policy, we will be alert to the possibility that the economy is not evolving in the way we currently judge to be the most likely," he added.

Copyright 2007 by United Press International.