INSTANT VIEW: Bernanke says economic uncertainty has risen

NEW YORK (Reuters) - Federal Reserve Chairman Ben Bernanke said on Wednesday uncertainties surrounding the U.S. economic outlook have increased somewhat recently, and that future Fed decisions will depend on what happens to both inflation and economic growth.

KEY POINTS: - "To date, the incoming data have supported the view that the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing in core inflation," Bernanke said in testimony prepared for delivery to the congressional Joint Economic Committee. - "The near-term prospects for the housing market remain uncertain," he said, adding that developments in the subprime mortgage market had raised additional questions about the housing sector.

COMMENTARY:

GARY WOLFER, SENIOR PORTFOLIO MANAGER, UNIVEST WEALTH MANAGEMENT & TRUST, SOUDERTON, PENNSYLVANIA:

"The stock market is reacting negatively with hopes dashed of any near-term cuts. He does acknowledge the housing slowdown, with rising inventory flipping back into the market which could bleed into the economy.

But he feels the risk to inflation is still of paramount importance. Core (inflation) readings remain fairly high according to the Fed's 1 percent to 2 percent range.

The Fed has kept the (inflation) bias unchanged last week, but it will likely change to a balanced bias as early as May. The factors favor a decline in rates."

THOMAS HIGGINS, CHIEF ECONOMIST, PAYDEN AND RYGEL

INVESTMENT MANAGEMENT, LOS ANGELES, CALIFORNIA:

"There's nothing shocking in Bernanke's testimony. The bond market is responding more to the durable goods report this morning which, across the board, was a weak report. Bernanke is saying essentially what the Federal Reserve said in its policy statement last week, but in more detail. He mentions the sub-prime issue and the risks to growth in a little more detail. He mentioned the spillover from weakness in housing to employment. And then he talked about the weakness in business investment which we saw in today's durable goods orders report, which was supposed to be a bounceback from last month's weakness."

DON KOWALCHIK, A DEBT STRATEGIST AT A.G. EDWARDS & SONS IN ST. LOUIS:

"Fed Chairman Bernanke commented that business spending is slowing down more than expected and is now saying spending is not quite as strong as we thought it was. Maybe the bond market is saying that there is some flow through from housing to the business sector now and with that you are getting a selloff in the equity market, of which the bond market is the beneficiary."

TOM SOWANICK, CHIEF INVESTMENT OFFICER AT CLEARBROOK FINANCIAL LLC IN PRINCETON, NEW JERSEY:

"I am surprised that he is not more guarded about the potential risk to a broader slowdown from housing. That said, stocks are under further selling pressure because Bernanke's testimony does not suggest an early ease."

RICHARD GILHOOLY, FIXED-INCOME MARKET STRATEGIST AT BNP PARIBAS, NEW YORK:

"The initial reaction is as per the equity market response that he is not at all risking inflation credibility by tipping his hand any further to a possible rate cut. He is suggesting that the uncertainties have grown but that they have not reached any conclusions at this point and that inflation is still the predominant concern.