Published August 31, 2005
WASHINGTON – Hurricane Katrina (search) is likely to have only a modest impact on the U.S. economy as long as the hit to the energy sector proves transitory, White House economic adviser Ben Bernanke (search) said on Wednesday.
"Clearly, it's going to affect the Gulf Coast economy quite a bit," Bernanke told CNBC television. "That's going to be enough to have at least a noticeable or at least some impact on the aggregate (national) data.
"Looking forward ... reconstruction is going to add jobs and growth to the economy," he added. "As long as we find that the energy impact is only temporary and there's not permanent damage to the infrastructure, my guess is that the effects on the overall economy will be fairly modest."
He added that most indications suggested the effect on the energy sector would indeed be temporary.
Bernanke, chairman of President Bush's Council of Economic Advisers (search), said the administration's decision to release oil from emergency stockpiles should be helpful.
"There are some petroleum refineries that don't have crude and by allowing them to draw from the Strategic Petroleum Reserve (search) they will be able to produce more gasoline," he said.
Bernanke said the bond market's reaction to the hurricane, pushing market-set interest rates lower, showed more concern about the potential hit to growth than to the risk of a broad inflation surge due to soaring energy prices.
"I think that is a vote of confidence in the Federal Reserve," the former Fed governor said. "People are confident that inflation will be low despite these shocks to gasoline and oil prices."