Fed Chief Raises Doubts on Recovery

Mr. Bernanke said that the Federal Reserve has acted forcefully to support growth and that it stood ready to do more. But he emphasized that the rest of the government also needs to act on problems including the federal debt, unemployment, housing, trade, taxation and regulation.

“Monetary policy can be a powerful tool, but it is not a panacea for the problems currently faced by the U.S. economy,” Mr. Bernanke said. “Fostering healthy growth and job creation is a shared responsibility of all economic policy makers.”

Mr. Bernanke began his testimony Tuesday by repeating his basic assessment that the economy has grown more slowly than expected, because of unexpected setbacks like the Japanese earthquake and the European debt crisis and because of domestic problems like the ongoing housing crisis.

“The recovery from the crisis has been much less robust than we hoped,” he said, although he also reiterated that the Fed expects faster growth going forward.

The Fed’s primary policy focus is on the pace of price increases, or inflation, which it seeks to maintain at a steady annual rate of about 2 percent. Prices have increased more quickly over the last year, but the Fed has predicted that the increases will abate, and Mr. Bernanke reiterated that forecast Monday.

But Mr. Bernanke’s description of the economic outlook sounded slightly more worried. He has previously said that the economy would recover so long as the government did nothing to interfere, for example through severe short-term spending cuts. On Tuesday, he seemed to suggest that the government needed to act to preserve the recovery.

“We need to make sure that the recovery continues and doesn’t drop back,” Mr. Bernanke told the Joint Economic Committee.

Mr. Bernanke said that the Fed has not exhausted its options.

The central bank, he said, “is prepared to take further action as appropriate to promote a stronger economic recovery in the context of price stability.”

But his emphasis once again was on the need for the rest of the government to act.

He said that the government should keep four goals in mind: reducing debts to a level that was sustainable in the long term; avoiding short-term reductions that could impede recovery; adjusting spending and tax policies to support growth; and improving the government’s decision-making process.

“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,” Mr. Bernanke said.

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