Bernanke signals Fed will stick with low-rate policies to boost U.S. economy

WASHINGTON – The head of the U.S. Federal Reserve says inflation could be stirred up by economic stimulus provided by the central bank but the risk is contained for now.

Fed chairman Ben Bernanke says in his latest report to Congress that low interest-rate policies are providing key support for an economy still struggling with high unemployment.

Bernanke acknowledges that the Fed’s aggressive program to buy $85 billion a month in Treasurys and mortgage bonds to keep rates low could eventually ignite inflation or unsettle investors.

But Bernanke says those risks are contained for now, suggesting there’s little reason for a change in policy.

Delivering the Fed’s semiannual report to Congress, Bernanke says the bond purchases are helping to sustain economic growth.

On budget policy, Bernanke urges Congress to replace the automatic spending cuts that are due to start Friday with more gradual reductions in budget deficits in the short run.