Stocks Rise as Bernanke Hints That Fed May Pause Rate Increases
Federal Reserve Chairman Ben S. Bernanke said yesterday that the central bank remains worried about rising inflation, but he did not signal any immediate plan to raise interest rates again to combat it, sending stock prices soaring in relief.</br></br>Bernanke, testifying on Capitol Hill, did say the possibility of worsening inflation is the biggest threat to the U.S. economy, suggesting the Fed would combat that danger if necessary by raising interest rates in coming months.</br></br>But the Fed chairman also left open the possibility that the Fed may pause, at least briefly, after two years of steady interest- rate increases, taking no action at its next policymaking meeting, on Aug. 8.</br></br>"We will be evaluating all options when we come to meet in August," Bernanke told the Senate Banking Committee as he presented the Fed's economic forecasts for the next 18 months.</br></br>Markets rallied around the world. The Dow Jones industrial average jumped 212 points, or nearly 2 percent. Some analysts described the financial markets' reaction as a "relief rally" because Bernanke did not signal firm plans for another rate hike in August. Many traders had braced for a tougher warning after the Labor Department released a worrisome inflation report yesterday morning, before the chairman testified.