WASHINGTON (Bloomberg) — Federal Reserve Chairman Ben Bernanke said increased global links between economies may have helped spur US inflation.Booming demand for energy and commodities by China and other countries has contributed to the surge in their prices in recent years, Bernanke said in a speech at the Stanford Institute for Economic Policy Research in Stanford, California, late on Friday. This dynamic may offset the effect of trade in slowing price increases on manufactured goods, he said.

“When the offsetting effects of globalisation on the prices of manufactured imports and on energy and commodity prices are considered together, there seems to be little basis for concluding that globalisation overall has significantly reduced inflation,” said Bernanke. “Indeed, the opposite may be true.”

Bernanke said Fed policy makers must increasingly analyse international economic developments in determining monetary policy. At the same time, he concluded that globalisation hasn’t reduced the US central bank’s control over monetary policy.

“Globalisation has not materially affected the ability of the Federal Reserve to influence financial conditions in the United States,” said Bernanke, 53. He didn’t mention financial markets, current economic conditions or the path of interest rates in his prepared remarks.

In response to a question after the speech, Bernanke reiterated that the central bank sees no “spill-over” from rising delinquencies in subprime mortgages. “We’re obviously going to watch it very carefully,” he added.

Bernanke cited a study that showed oil prices in 2005 would have been as much as 40 percent lower if not for the increasing share of world trade and output accounted for by developing countries.

“We think of globalism as putting downward pressure on prices but the demand for energy and raw materials put upward pressure on prices,” said Alice Rivlin, a former Fed vice chairman who attended Bernanke’s dinner yesterday. “The net effect may be quite small.”

Fed officials are some of the strongest advocates of free trade and capital flows, arguing they boost living standards and wealth. Democrats that control Congress are more sceptical and want the Fed to focus as aggressively on spurring employment and incomes as on keeping inflation low. Some legislators assert that cheaper labour costs in China and a surge in imports are hurting employment and restraining wages.

Bernanke, answering questions from the audience, said links between the unemployment rate and other measures of slack in the economy with inflation have loosened over time. He also said the Fed calculates the Labour Department’s measures of inflation still overstates price gains by as much as 1 percentage point.

The central bank has left its benchmark lending rate at 5.25 percent since August. Prior to that, policy makers tightened credit for two years.

US stocks capped their biggest weekly drop in four years on Friday, partly because of signs the economy is slowing. The Fed chairman told the House Budget Committee in Washington on February 28 that he expects the economy to strengthen in the middle of the year.

Bernanke’s predecessor Alan Greenspan said twice this week that a recession in the US is possible later this year. St. Louis Fed President William Poole told an audience in Santiago, Chile yesterday that policy makers don’t consider a recession likely.