Fed chairman Ben Bernanke is testifying today to a Congressional committee. He notes that retreating crude oil prices are helping to keep inflation at bay, although a report today showed prices bouncing back after the better than expected improvement in housing starts and declining gasoline inventories.
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Oil prices have risen above $90 per barrel for six days in a row. The Fed predicts an inflation rate
of between 1.2% and 1.7% this year, well within the Federal Open Market Committee’s (FOMC) target rate of 2%.
Oil strategists feel the spike in prices and inventories is temporary and does not change the overall outlook for plentiful oil supplies and the longer term trend for lower prices. As long as the US dollar remains stronger than the euro, investment in the oil sector will continue to be unattractive.