Inflation could rise as commodity prices soar

BY CUTTING interest rates by a full 0.5% on Tuesday Federal Reserve chairman Ben Bernanke sent a clear signal to the markets that the bank’s focus had shifted to preventing recession in the US and not the threat posed by inflation.

It’s a pretty dramatic U-turn in the new Fed chairman’s stance, but then the circumstances facing the US have changed dramatically since he warned members of congress in mid-July that inflation was the bank’s primary worry.

Some international economists have expressed concerns the dramatic shift in his stance, precipitated by the credit crisis in the US caused by irresponsible home lending, may result in spiralling inflation.