WASHINGTON — Federal Reserve Chairman Ben Bernanke told Congress on Wednesday that he has confidence the unfolding economic recovery will have staying power, although it won't be strong enough to bring quick relief to high unemployment.
Bernanke, testifying before Congress' Joint Economic Committee, also once again called on lawmakers and the White House to come up with a plan to whittle down record-high budget deficits.
Even though sizable deficits right now are "unavoidable" given the damage wrought by the recession, the persistence of red ink raises risks to the country's long-term economic health, he said.
A credible plan to pare the deficit could provide the economy with benefits in the near term, including lower longer-term interest rates and increased consumer and business confidence, Bernanke told lawmakers.
"Addressing the country's fiscal problems will require difficult choices, but postponing them will only make them more difficult," he warned.
On the economy, Bernanke seemed slightly more optimistic that the fledgling recovery will keep going after massive government stimulus fades later this year. Incoming economic barometers suggest that growth in demand by consumers and businesses "will be sufficient to promote a moderate economic recovery in coming quarters," he said.
In fact, the odds of a "double-dip" recession, where the economy would start shrinking again, have receded, Bernanke said. "We're seeing some building momentum," he observed. "So it looks like we're on a path to moderate recovery and that the risk of a double-dip, while certainly not negligible, is certainly less than it was a few months ago."
Fielding questions from lawmakers, Bernanke repeated the Fed's pledge to keep interest rates at record lows for an "extended period" to aid the recovery. Rates have been at super-low levels since December 2008.
"The economy is still very, very rough," said Rep. Maurice Hinchey, D-N.Y.
At some point when the recovery is firmly entrenched, the Fed will need to start boosting rates to prevent any inflation problems.
The soonest the Federal Reserve will begin raising short-term interest rates is the fourth quarter, according to 34 of the 44 economists polled in a new AP Economy Survey that debuted Monday.
Businesses, meanwhile, have boosted spending on equipment and software at a solid pace and factories are benefiting from stronger demand for U.S. exports, Bernanke noted. Improved financial conditions are also helping out the economy.
However, problems still remain.
Bernanke said weakness in the housing and commercial real estate sectors is putting "significant restraints" on the pace of the economic recovery. And the poor fiscal conditions of many state and local governments have led to continuing cutbacks in workers, another force that will hold back the recovery, he said.
On the jobs front, Bernanke was encouraged by the 162,000 jobs added in March, the most in three years. However, the moderate pace of the economic recovery means that the 8 million-plus jobs lost by the recession won't quickly return. Bernanke said it will take a "significant amount of time" to restore those positions.