WASHINGTON – Federal Reserve Chairman Ben Bernanke said yesterday that core inflation rates have reached a level at or above the upper range that many economists, including Mr. Bernanke, say is conducive to price stability and long-run growth.

And with rising prices in mind, the Federal Open Market Committee, the Fed’s monetary policy-setting arm, will keep a sharp eye on inflation readings to make sure the recent upward trend doesn’t continue, Mr. Bernanke said in a speech prepared to be delivered at the International Monetary Conference in Washington.

Core inflation readings over the past three to six months have “reached a level that, if sustained, would be at or above the upper end of the range that many economists, including myself, would consider consistent with price stability and the promotion of maximum long run growth,” Mr. Bernanke said.

The Fed chairman cited recent data that showed core inflation as measured by the consumer price index, excluding food and energy prices, was 3.2% over the last three months, and 2.8% over the past six months. And core inflation based on the price index for personal consumption expenditures for the three- and six-month periods was 3% and 2.3%, respectively.

“These are unwelcome developments,” Mr. Bernanke said.

Mr. Bernanke said the FOMC was committed to maintaining low and stable inflation. “The Committee will be vigilant to ensure that the recent pattern of elevated monthly core inflation readings is not sustained,” Mr. Bernanke said.

In pursuit of controlled inflation, and taking into account the lagging effects of monetary policy on the economy, “the Committee will seek a trajectory for the economy that aligns economic activity with the underlying productivity capacity,” the Fed chairman added.

The Fed chairman said much of the recent increase in consumer price inflation could be chalked up to rising energy costs.

And while pass-through from those higher gasoline and commodity prices to core consumer prices seems to have remained low, “the cumulative increases in energy and commodity prices have been large enough that they could account for some of the recent pickup in core inflation,” Mr. Bernanke said.

The Fed chairman said the FOMC must “continue to resist any tendency for increases in energy and commodity prices to become permanently embedded in core inflation.”

The best way to unhook price increases in energy and commodities from high rates of inflation is to anchor the “public’s long-term inflation expectations,” he said.

On the broad economic outlook, Mr. Bernanke said the past three years of above-trend growth is likely to give way to a period of moderation in economic expansion.

“It is reasonably clear that the U.S. economy is entering a period of transition,” Mr. Bernanke said.

“After three years of above-trend growth, slack has been substantially reduced,” he said.

The Fed chairman pointed to decelerating consumer spending, driven by higher energy prices, and a cooling housing market, along with lower-than-expected payroll growth, as evidence that economic growth may be slowing.

“These developments are consistent with the softening in the pace of overall economic activity that seems to be under way,” Mr. Bernanke said.

The Dow Jones Industrial Average posted its third-largest decline of the year yesterday. Economic worries rattled investors, with Standard Pacific and U.S. Steel showing weakness. However, Trizec Properties rose on news of a potential buyout.

The Dow Jones Industrial Average fell 199.15, or 1.77%, to 11048.72, with only one member, Walt Disney Company, finishing higher. The Nasdaq Composite Index declined 49.79, or 2.24% to 2169.62 and the Standard & Poor’s 500 Index lost 22.93, or 1.78%, to 1265.29.

Stocks started the day off in negative territory, but selling worsened after Mr. Bernanke’s comments. Yesterday’s decline in the Dow Jones Industrial Average was the largest drop since May 17.