Bernanke signals more cuts unlikely

WASHINGTON - Federal Reserve Chairman Ben Bernanke signaled strongly Tuesday that further interest rate cuts are unlikely because of concerns about inflation. High oil prices are a double-edged sword that can both put a damper on already weak growth and spread inflation, he said.

Bernanke, in remarks delivered via satellite to an international monetary conference in Spain, said that the Fed's powerful doses of rate reductions that started last September along with the government's $168 billion stimulus package, including rebates for people and tax breaks for businesses, should bring about "somewhat better economic conditions" in the second half of this year.

To help brace the economy, the Fed in late April dropped its key rate to 2 percent, a nearly four-year low, but hinted that could be the last reduction for a while. Bernanke drove that point home again on Tuesday.

"For now policy seems well positioned to promote moderate growth and price stability over time," he said.

The Fed's juggling act has gotten harder. It is trying to right a wobbly economy without aggravating inflation. The Fed chief also raised his biggest public concerns to date about the impact of the weak dollar on inflation.

Many economists believe the Fed will hold rates steady at its next meeting on June 24-25 and probably through much, if not all, of this year. A few believe that inflation could flare up and force the Fed to begin boosting rates near the end of this year.

Bernanke, however, suggested that leaving rates at their current levels should be sufficient to accomplish the Fed's goals.

Economic growth in the current quarter, he acknowledged, is "likely to be relatively weak." Even as he reiterated the Fed's hope for a pickup in growth in the second half of this year and into 2009, Bernanke said the economy continues to battle against a trio of negative forces - a housing slump, credit problems and fragile financial markets.