WASHINGTON - The U.S. economic recovery is still not yet on a sustainable path, and near-zero interest rates are still needed, Federal Reserve Board Chairman Ben Bernanke told lawmakers on Wednesday.
Bernanke's prepared testimony yielded very few surprises, and he echoed what he and other members of the Fed have been saying for months.
Economic growth expanded at a 4 percent pace over the past two quarters of 2009 but was pushed higher by temporary factors. Whether the recovery can last depends on whether businesses and consumers open their wallets, he said.
"As the impetus provided by the inventory cycle is temporary, and as the fiscal support for economic growth likely will diminish later this year, a sustained recovery will depend on continued growth in private-sector final demand for goods and services," Bernanke said.
Bernanke's comments came in the first of two days of testimony before Congress on the economic outlook and the Fed's monetary policy.
Bernanke said the economy appears to be headed in the right direction.
"Private final demand does seem to be growing at a moderate pace," he said. He noted that consumer spending has recently picked up and said there were "tentative signs of stabilization in the labor market.
Offsetting this optimism is the terrible condition of the labor market.
"Notwithstanding these positive signs, the job market remains quite weak," he said.
More than 40 percent of the unemployed have been out of work for six months or more, he noted.
Bernanke said that the inflation outlook was benign. "Most indicators suggest that inflation likely will be subdued for some time," Bernanke said.
As expected, Bernanke repeated that the Fed is prepared to exit its ultra-low monetary policy when a sustainable recovery is apparent despite the massive excess reserves held by banks.
In an effort to respond to criticism by members of Congress that the Fed has been too secretive during the financial crisis about who was receiving central bank assistance, Bernanke said he would support releasing the identities of all firms who got Fed help as long as there was a sufficient lag so it would not hurt the institution's reputation.
Bernanke said this would require legislation from Congress.
Bernanke said the Fed would support a probe by the Government Accountability Office of all of the Fed's emergency lending facilities. Most of these facilities have ended as the financial crisis has eased.
The facilities were used by the Fed to buy many types of assets from banks to keep credit flowing through the financial system. Several news agencies had filed suit to uncover the identities of the participants in the Fed programs. So far, the Fed has battled against these requests.
Bernanke also made a strong call for the Fed to retain its powers to supervise the nation's largest banks.
He said the central bank was overhauling its own supervisory procedures, including creating a routine stress test for the banks.
"More generally, the Federal Reserve is committed to doing all that can be done to ensure that our economy is never again devastated by a financial collapse," he said.