Bernanke Sees Limited U.S. Inflation Risk

Fed Chairman Ben Bernanke went to Capitol Hill today to meet with the newly formed House Budget Committee, commonly known on CNBC (NASDAQ:CMCSA) as “Ryan’s Den,” and affectionately named after its Republican Chairman Congressman Paul Ryan from Wisconsin who is an outspoken critic of the Fed policy widely known as quantitative easing.

Voicing his concerns over spawning inflation, Congressman Ryan went head to head with Dr. Bernanke over Fed policy, but Bernanke seemed to carry the day as he said that unemployment wasn’t getting better anytime soon and that he planned to continue his $600 billion quantitative easing and possibly more until the situation improves.

Despite rising commodity prices around the world, the Chairman sees limited inflation risk at home and says there just aren’t enough jobs since we’ve only recouped approximately one million out of the eight million jobs lost during this recession.

Meanwhile, money continues to fly from emerging markets as (NYSE:EEM) iShares Emerging Markets Index dropped -2.3% and (NYSE:FXI) the iShares China FTSE China 25 index shed -2.5%.

At home, the dollar (NYSE:UUP) lost ground for the third straight day while oil (NYSE:USO) declined and (NYSE:TLT) Treasuries rose.

Next week President Obama’s budget proposal for 2012 lands on Capitol Hill and every proposal for spending cuts that I see from either party is like spraying a garden hose on a forest fire.  Although that might not be so bad as Bernanke cautioned that severe cuts in government spending could harm the so called recovery which is clearly missing in action in the real estate market as the MBA mortgage index dropped -5.5% versus a +11.3% last month.

Cisco (NASDAQ:CSCO) beat expectations but was pummeled in the after hours session and major indexes took a breather from lofty, overbought levels.

Tomorrow brings weekly unemployment numbers and a ton of earnings reports including carefully watched Sprint (NYSE:S) and Pepsi Cola (NYSE:PEP).

For now, we stay the course with the cautionary warning, “ya all be careful out there.”

Disclosure: No positions in ETFs or stocks discussed in this article.

John Nyaradi is the author of Super Sectors: How To Outsmart the Markets Using Sector Rotation and ETFs.

Fresh Off the Press! Our Market Outlook 2011 is here. You won’t want to invest without it >>

Improve Your 2011 Financial Health: Join the winning team of stock pickers with Wall St. Cheat Sheet’s acclaimed premium newsletter >>