Bernanke said downside risks to growth had diminished, and said for the first time that the risk of deflation—a key justification for the Fed's bond-buying spree —was now "negligible." At the same time, Bernanke did not appear concerned that a recent spike in the price of crude oil, driven in part by a wave of pro-democracy revolutions in the Middle East and North Africa, would do much harm to the U.S. economic outlook.
Crude oil prices briefly surpassed $100 a barrel in late February but have since come down to around $98.
Bernanke said the Fed expects inflation to remain low and that long-term inflation expectations appear contained, both according to market indicators and surveys of consumers.
"The most likely outcome is that the recent rise in commodity prices will lead to, at most, a temporary and relatively modest increase in U.S. consumer price inflation," Bernanke said.
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