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Washington - Energy prices are likely to stay high and the extent to which they spill over and push up the price of other goods and services bears close watching, Federal Reserve chairperson Ben Bernanke said on Thursday.
He warned anew that the central bank will be vigilant against inflation.
"The cumulative increases in energy and commodity prices have been large enough that they could account for some of the recent pickup in core inflation," Bernanke said.
When measuring core inflation, volatile energy and food prices are removed so that economists can get a better picture of how other prices are acting.
Just as important as inflation numbers is the inflation mind-set of investors, businesses and consumers, Bernanke suggested.
The fear: If people and companies think inflation will get worse a year from now, they can change their behavior in ways that make it a self-fulfilling prophesy.
Some measures of such "inflation expectations" have "edged up, on net, in recent months," Bernanke noted.
"As yet, these expectations measures have remained within the ranges in which they have fluctuated in recent years and inflation compensation implied by yields on government debt has fallen back somewhat in the past month," he said.
"Nevertheless, these developments bear watching."
Bernanke made his comments in prepared remarks to the Economic Club of Chicago. A copy of his speech was distributed in Washington.