Bernanke warns Congress against hurting recovery

Federal Reserve Board Chairman Ben Bernanke
© AFP/Getty Images/File Chip Somodevilla

WASHINGTON (AFP) – Federal Reserve Chairman Ben Bernanke on Tuesday said the United States may face yet more slow jobs growth, as he warned short-term budget cuts and financial turmoil could further threaten the economy.

In an address to Congress, Bernanke said recent indicators “point to the likelihood of more sluggish job growth in the period ahead,” as he urged lawmakers to do what they can to boost the recovery amid the ongoing crisis in Europe.

The Fed chief told lawmakers that a credible plan to cut long-term deficits was needed urgently, but one that should “avoid fiscal actions that could impede the ongoing economic recovery.”

Appearing amid growing criticism from the Republican Party that the Fed’s effort to boost growth risks stoking inflation, Bernanke called on lawmakers to do their part.

“Monetary policy can be a powerful tool, but it is not a panacea,” he said, urging sensible budget policy decisions that “avoid fiscal actions that could impede the ongoing economic recovery.”

With many clamoring for immediate and severe budget cuts of the like seen in Europe, Bernanke warned that could hit a recovery that “has been much less robust than we had hoped.”

“There is evident need to improve the process for making long-term budget decisions, to create greater predictability and clarity, while avoiding disruptions to the financial markets and the economy,” he said.

His comments also come amid heightened concern that Europe’s debt crisis could spill over to the continent’s banks and beyond.

“It is difficult to judge how much these financial strains have affected US economic activity thus far, but there seems little doubt that they have hurt household and business confidence, and that they pose ongoing risks to growth,” Bernanke said.