WASHINGTON — Federal Reserve Chairman Ben Bernanke said Monday he is confident the US economy will continue to expand, but he urged the US Congress and the White House to act to support stronger growth.
"We expect the economy to continue grow... We are not expecting a recession," Bernanke told an audience in Indianapolis, Indiana.
However, he said the economy is growing at a weak 1.5-2 percent rate, not fast enough to lower the employment rate, and that the Fed's stimulus efforts need to be backed up by action from the rest of the government.
"Our concern is not really a recession. Our concern is that growth will continue but at a pace that's insufficient to put people back to work," he told the Economic Club of Indiana.
"Many other steps could be taken to strengthen our economy over time, such as putting the federal budget on a sustainable path, reforming the tax code, improving our educational system, supporting technological innovation, and expanding international trade," Bernanke said.
"They must find ways to put the federal budget on a sustainable path, but not so abruptly as to endanger the economic recovery in the near term.
"In particular, the Congress and the administration will soon have to address the so-called fiscal cliff, a combination of sharply higher taxes and reduced spending that is set to happen at the beginning of the year.
"According to the Congressional Budget Office and virtually all other experts, if that were allowed to occur, it would likely throw the economy back into recession," he warned.
In a poison-pill law crafted last year, Congress and the White House agreed to implement radical spending cuts and tax hikes from January 2, 2013 -- the so-called fiscal cliff -- if the two political parties could not agree on a more moderate solution to the government's deficit problem.
So far no solution is in sight.
Meanwhile, Bernanke warned against moves in Congress aimed at getting Congressional review power over monetary policy-making at the Fed.
"These reviews (or the prospect of reviews) of individual policy decisions could be seen, with good reason, as efforts to bring political pressure to bear on monetary policymakers," he said.
"A perceived politicization of monetary policy would reduce public confidence in the ability of the Federal Reserve to make its policy decisions based strictly on what is good for the economy in the longer term."