Speaking exclusively to The Times, Bernanke rejects suggestions that the US fiscal deficit and public spending are out of control and says that the rest of the world needs to do much more to redress global economic imbalances that have produced the largest US current account deficit on record.

This interview is likely to be the last public comment that Bernanke will make before his confirmation hearings at the US Senate. By convention, nominees for such posts do not give interviews before they are confirmed.

From his office at the White House last Tuesday, just days before the President disclosed that he had picked him to succeed Alan Greenspan as Chairman of the US Federal Reserve, Bernanke presented a decidedly optimistic view of US economic prospects. He noted that growth had averaged about 4 per cent for the past two years and said that, despite figures last month that showed consumer prices rising at their fastest level in 25 years, inflation remained firmly under control.

Bernanke said that the steep rise in oil prices this year had pushed up headline inflation, but there was little cause to fear that inflation had spilled over into the economy as a whole. "The evidence seems to be that it is primarily in energy and some raw materials and has not fed into broader inflation measures or expectations," he said. "My anticipation is that’s the way it’s going to stay."

Bernanke was still a governor of the Fed when the central bank began raising interest rates last year and he indicated that he would not deviate from the central bank’s current path of raising rates steadily to ward off inflationary risks. "I have confidence the Fed is going to remain vigilant and ensure inflation is contained within the more volatile energy sector," he said.

He praised the Fed’s conduct of monetary policy over the past two decades under Greenspan and Greenspan’s predecessor Paul Volcker, which he said had played a key role in keeping inflation expectations low. As a result the US was much better placed to deal with shocks such as oil price rises than it had been 30 years ago, when inflation took off, driven at least in part by loose monetary policy.

Bernanke also played down suggestions by some economists that the surge in energy costs could force consumers to retrench and produce a sharp slowdown in US growth.

He said: "The increase in [energy] costs consumers have to pay will be a drag on their disposable income. But offsetting that we have a strong expansion going on, a lot of job creation; income growth is good and we still have accommodative fiscal and monetary policy." In sum, he said, "I don’t think either an upsurge in core inflation or a recession is a likely consequence of what we have seen."

In remarks sure to draw attention from critics, especially from US senators who must now vote whether to confirm Bernanke in the post, the man who for the past four months has been President Bush’s chief economic adviser stoutly defended the President’s economic record, and took issue with those who have said US public spending and the budget deficit are spiralling out of control.

With big rises in spending in recent months approved by Congress and signed by the President, some economists argue that the US is set for an explosion of public spending and deficits. Greenspan himself has been increasingly critical of the US fiscal performance, and last month reportedly told a French official that US public spending was "out of control".

However, Bernanke noted that in the current fiscal year the federal budget deficit was about 2.6 per cent of GDP. "That’s not far above the long-term average," he said. He acknowledged that there would be additional costs from rebuilding after the hurricane disasters of the summer, but said the US would keep spending down. "We will have some costs associated with Katrina and hurricane relief, but the President has maintained the importance of keeping spending and deficits on a downward track — with the aim of cutting the deficit in half by 2009."

Asked whether spending was "out of control" he said: "It’s an overstatement to say current spending is radically different from the past." However, the nominee for the Fed chairmanship acknowledged that the US faced "a serious situation" in the longer term. He said reform of so-called entitlements spending on the elderly, especially on healthcare, would need to be reformed radically if the US was to avoid much higher costs.

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