Bernanke acknowledges his 'lapse' hurt market

WASHINGTON -- Federal Reserve chairman Ben Bernanke said he suffered a ``lapse of judgment" by talking recently to a CNBC anchor, a conversation that caused the stock market to tank when his comments were reported.

Senator Jim Bunning, Republican of Kentucky, asked Bernanke about the episode yesterday during a Senate Banking Committee hearing on financial literacy.

``Senator, that episode you refer to was a lapse of judgment on my part," Bernanke replied. ``In the future my communications with the public and with the market will be entirely through regular and formal channels."

Bernanke took over the Fed job Feb. 1. On April 27, he raised the possibility of the Fed's pausing its two-year, credit-tightening campaign. Stocks rallied that day.

But on May 1, CNBC reported that Bernanke had told CNBC anchor Maria Bartiromo that investors had misinterpreted his recent congressional remarks as an indication the Fed was nearly done raising rates. Stocks -- which had been up for most of that day -- slumped. Bernanke had actually talked to Bartiromo a few days earlier, on April 29.

Besides raising questions about Bernanke's communications skills, the incident underscored the fact a single word uttered by a Fed chief can move prices.

Bunning, who opposed Bernanke's nomination, said: ``I warned you to be careful about what you say because people are going to follow your words very closely."

He also took issue with the decision to push interest rates higher to fend off inflation. The Fed's last increase left a key rate at a five-year high of 5 percent.