Fed Nominees Rebut Deflation Risk
WASHINGTON -- President Bush's latest two nominees to the Federal Reserve Board said they expect the economic recovery to continue and see little risk of deflation, suggesting they think the Fed may have no need to cut interest rates again.</br></br>Ben S. Bernanke and Donald Kohn, who would fill two remaining vacancies on the Fed's seven-member board of governors, told the Senate Banking Committee the economic outlook remains bright despite growing worries about the U.S. financial system.</br></br>"I think we're in a situation where vigilant optimism is probably the right approach," said Mr. Bernanke, a Princeton University economics professor who sits on a national committee that determines when recessions begin and end. "The economy is recovering, but there's no sign of inflation," he said.</br></br>Asked if continuing weakness could lead to Fed rate cuts, he said that -- despite already-low rates -- "if necessary, we could do so."</br></br>Mr. Bernanke, 48 years old, also said the recent decline of U.S. stock prices has done "large and serious harm" to national wealth that could hurt economic growth for the rest of the year.