INSTANT VIEW: Bernanke: inflation outlook "highly uncertain"

NEW YORK (Reuters) - U.S. Federal Reserve Chairman Ben Bernanke on Friday called the U.S. inflation outlook "highly uncertain," and said central bank policy-makers would do what they must to preserve price stability.

KEY POINTS:

* Bernanke, speaking to a Kansas City Federal Reserve Bank conference in Jackson Hole, Wyoming, said declines in commodity prices and stability in the dollar are encouraging.

* Bernanke also said the year-old financial storm "has not yet subsided."

COMMENTS:

BRIAN DOLAN, CHIEF CURRENCY STRATEGIST, FOREX.COM, BEDMINSTER, NEW JERSEY:

"Bernanke's optimism is likely to be translated as ongoing dovishness. His expectations that inflation will ease again suggest no urgency to remove accommodation...(and this) plays into the notion that the Fed is on hold for the foreseeable future. His positive comments on the dollar aside, the interest rate implications of his remarks are dollar-negative."

JOSH STILES, SENIOR BOND STRATEGIST, IDEAGLOBAL, NEW YORK:

"The way Bernanke can try to uphold the Fed's inflation-fighting credentials while leaving real interest rates in negative territory when headline and core inflation are unacceptably high is to focus on his dovish outlook for inflation, saying that inflation is all going to go away. Bernanke has a generally benign outlook on inflation. He sees this current, unacceptably high inflation as temporary.

"We will get some relief on headline inflation because oil has come off, but that leaves open the question of how lasting that relief will be and what will happen to core inflation in the meantime. I think core inflation will go up. I'd like to see what Bernanke does if oil goes back to the highs as the economy slides."

KEVIN FLANAGAN, FIXED INCOME STRATEGIST, GLOBAL WEALTH MANAGEMENT, MORGAN STANLEY, PURCHASE, NEW YORK:

"The emphasis still is on the economic and market risks, but still trying to walk a fine line on inflation as well."

"There is nothing to suggest the Fed would do another easing."

"There will be no change in monetary policy for the foreseeable future. He is continuing to focus on the same themes that the Board has been focusing on."

"On liquidity facilities, there is the acknowledgement that balance sheet strains remain and the Fed will continue to make adjustments as needed."

OMER ESINER, SENIOR MARKET ANALYST AT RUESCH INTERNATIONAL IN WASHINGTON:

"(Ben) Bernanke's comments are not really new. If anything, his remarks on the stability of the dollar should be seen as positive. The overall bias remains supportive to the dollar but with lingering concerns on the U.S. credit market and with oil prices bouncing back and forth, I would expect some volatility in the dollar within the next couple of weeks."

STEPHEN STANLEY, CHIEF ECONOMIST, RBS GREENWICH CAPITAL, GREENWICH, CONNECTICUT:

"We think the Fed is on hold for a while that's kind of been priced in to the market for a while. So there's not a lot of boat-rocking going on here. The one thing that is enough to raise my eyebrow is the fact that he is specifically applauding the rise in the dollar. Usually the fed has nothing at all to say about the currency. At one point the Fed was almost cheerleading the weakness, saying it was good for exports, etcetera. That changed after he made those dollar comments in June. It seems like he's kind of pushing the same idea here."

ANDREW BRENNER, SENIOR VICE PRESIDENT, MF GLOBAL, NEW YORK:

"Headlines for everyone, bulls/bears. (Bernanke said) rates relatively low, coupled with financial crisis not yet subsided. So far markets are unsure how to take the headlines."

SUBODH KUMAR, CHIEF INVESTMENT STRATEGIST, SUBODH KUMAR & ASSOCIATES, TORONTO:

"The inflation numbers have been moving up in recent releases. But Bernanke seems to be saying that the Fed is essentially going to remain on hold. I think the market is maybe removing some of the expectations that have been voiced about the Fed being poised for rate hikes. My view has always been that the major central banks will not have any rate increases at least until the middle of next year. What Bernanke has said, what we've heard from Trichet, confirms this. The markets seem to be bouncing like a pinball between what happens in commodity prices to what happens in credit to what happens with interest rates. That's probably not going to stop any time soon."

MARKET REACTION:

STOCKS: U.S. equity indexes add to gains

BONDS: U.S. Treasury prices slightly pare losses

DOLLAR: U.S. dollar trims some earlier gains

RATE FUTURES: Fed fund futures are little moved, suggesting little chance of an FOMC rate hike this year