Financial crisis posing major challenge

JACKSON, Wyo. (AP)--Federal Reserve Chairman Ben Bernanke said Friday the financial crisis that has pounded the country--coupled with higher inflation--is taking a toll on the economy and poses a major challenge to Fed policymakers as they try to restore stability.

While Bernanke welcomed the recent drops in oil and other commodities' prices, and believes inflation will moderate this year and next, the Fed chief also warned the inflation outlook remains highly uncertain. The Fed, he said, would monitor the situation closely and will "act as necessary" to make sure that inflation doesn't get out of hand.

Given dueling economic cross-currents_ weak economic growth and higher inflation--many economists believe the Fed will leave rates where they are at its next meeting on Sept. 16, and probably through the rest of this year.

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Stocks jump on falling oil, inflation forecast

NEW YORK (AP)--Wall Street capped a volatile week with sharp gains Friday as oil prices tumbled and after Federal Reserve Chairman Ben Bernanke said inflation pressures are likely to moderate. The Dow Jones industrial average rose nearly 200 points to 11,628.06, near its highs of the session.

Speculation that Lehman Brothers Holdings Inc. could be sold helped buoy the financial sector and the overall market. Analysts warned this week that the investment bank could book large write-downs for bad debt. But reports Friday that Korea Development Bank is considering buying the company sent investors rushing for the stock. Investors also appeared cheered by an inflation forecast from Bernanke who said that inflation pressures should moderate this year amid tepid economic growth.

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Oil prices fall over $6 on stronger dollar