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Bernanke's Precarious Position

The Fed's in a tricky spot as it tries to bolster growth while maintaining its inflation-fighting credibility

Ben Bernanke's appearance before a Senate panel on Valentine's Day wasn't greeted affectionately on Wall Street. The Fed chairman's pointed update on the Federal Reserve's current thinking on the economy and financial markets on Feb. 14 before the Senate Committee on Banking, Housing & Urban Affairs put a damper on both stocks and Treasuries.

Bernanke was joined by Treasury Secretary Henry Paulson and Securities & Exchange Commission Chairman Christopher Cox, and the three were fairly consistent in forecasting slower, but not negative, growth, with a downside bias. Bernanke plainly noted: "In part as the result of the developments in financial markets, the outlook for the economy has worsened in recent months, and the downside risks to growth have increased."