U.S. Federal Reserve (Fed) Chairman Ben Bernanke said in a letter released Thursday that interest-rate policy must be “forward looking” and rely on the central bank's view of how the economy is evolving. “Monetary policy must be forward looking and depend on the Federal Reserve's best assessment of the economic outlook as inferred from economic and financial information,” Bernanke said in a May 24 letter to Representative Jim Saxton (Republican from New Jersey), chairman of the congressional Joint Economic Committee. The relative stability of prices, excluding the volatile energy and food sectors, “has been enhanced by the fact that long-term inflation expectations appear to remain well contained,” Bernanke wrote. “Of course, inflation expectations will remain low only so long as the Federal Reserve demonstrates its commitment to price stability.” The letter, released by Saxton's office, was in response to questions the lawmaker submitted in connection with an April 27 hearing his committee held.
