Ben Bernanke today left the door open to higher interest rates, saying the increase might be needed to prevent new speculative investment bubbles from forming. But for critics who blame the Fed for feeding that speculative housing boom by holding interest rates too low for too long after the 2001 recession, Bernanke says that stronger regulation is the best way to prevent financial speculation from getting out of hand and throwing the economy into a new crisis.
Bernanke, in a speech to the American Economic Association's annual meeting, defended the central bank's actions. Extra-low rates were needed to get the economy and job creation back to full throttle after the Sept. 11 attacks and accounting scandals that rocked Wall Street, he said. When the Fed meets later this month, it is expected to keep its key bank lending rate at a record low, near zero. The big question is whether the Fed will provide clues about when it will start raising rates to prevent inflation. (More Ben Bernanke stories.)
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