Bernanke predicts slow recovery

The chairman of the U.S. Federal Reserve told Congress 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.

Ben Bernanke testified before the Joint Economic Committee, where he also once again called on members of Congress and the president to take action to reduce record-high budget deficits.

Although big deficits are "unavoidable" now to deal with the damage caused by the recession, he said, growing debt poses risks to the country's long-term economic health.

A credible plan to reduce the deficit would provide benefits such as 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.

Bernanke predicted that the economic recovery would continue even after massive government stimulus spending ends later this year.

Economic data suggest that growth in demand by consumers and businesses "will be sufficient to promote a moderate economic recovery in coming quarters," he said.

In response to questions from lawmakers, Bernanke repeated the central bank's pledge to keep interest rates at record lows for an "extended period" to aid the recovery. Rates have been at historic low levels since December 2008.

The soonest the Federal Reserve will begin raising short-term interest rates is in the late fall, according to 34 of the 44 economists polled in a new AP Economy Survey that debuted on Monday.

Beige Book takes optimistic tone

Later on Wednesday, the Fed released its Beige Book, a survey of economic conditions from across the country.

All in all, the bookechoed the cautious optimism that the Fed chair parroted earlier in the day. Merchants are seeing better sales and factories are boosting production, but many companies are still wary of ramping up hiring, the survey suggested.

Save for St. Louis, all 12 of the regions polled for the survey said "economic activity increased somewhat" since the last publication.

The new survey suggested that consumers whose spending accounts for 70 per cent of national economic activity are doing their part to keep the recovery going. Retailers in most parts of the country reported sales increases, and merchants were "cautiously optimistic regarding future sales," the report said.

"Nothing earth-shattering here, but just slow and somewhat steady (or steadying) improvement," BMO economist Jennifer Lee said of the Beige Book's findings.