In a speech at the New York Economic Club, Bernanke acknowledged the pace of recovery from the worst economic downturn since the Great Depression has been "disappointingly slow," with the average annual growth in real gross domestic product coming in at about 2 percent since the recession bottomed out in 2009.
He said inflation "has generally remained subdued" and is "likely to remain close to or a little below" the Federal Open Market Committee's target for the next few years, mainly because of "ongoing slack in labor and product markets" that are expected to hold down wages and prices.
Bernanke cautioned that uncertainty about how Congress handles the so-called fiscal cliff -- the nickname given to a combination of the scheduled expiration of lower federal income tax rates and spending cuts mandated by law -- "appears already to be affecting private spending and investment decisions and may be contributing to an increased sense of caution in financial markets, with adverse effects on the economy."
"Such uncertainties will only be increased by discord and delay," he said. "In contrast, cooperation and creativity to deliver fiscal clarity -- in particular, a plan for resolving the nation's longer-term budgetary issues without harming the recovery -- could help make the new year a very good one for the American economy."
Bernanke said the Federal Reserve "is doing its part by providing accommodative monetary policy to promote a stronger economic recovery in a context of price stability" but monetary policy "is by no means a panacea for our economic ills."
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