WASHINGTON (Reuters) - U.S. economy may finally be hitting his stride even if growth remains too low to make a dent real unemployment rate in the nation, the Federal Reserve Chairman Ben Bernanke said Friday.
Offer no real clues about the future direction of monetary policy, Bernanke sounded more optimistic caution that he had in his most recent public remarks. He cited improvements in consumer spending and a decrease in claims of unemployment as signs of hope, a sluggish recovery was perking up.
"We have seen increasing evidence that autonomous resumption of consumer and business spending can take hold," the head of the Central Bank said first testified to Congress since the Fed has launched a controversial plan to buy 600 billion in government bonds.
Just a month ago, in an interview on program CBS "60 Minutes, Bernanke expressed trepidation on rebound of the economy."
His remarks Friday were made public one hour after the Government said the economy has generated a disappointing jobs 103,000 in December.
Bernanke, who said that it would take four or five years for the labour market to return to normal, showed no penchant for cutting short purchase program of the Fed, bond designed to stimulate the economy. But it has also offered no advice to buy more beyond June Date limit of the program.
"The Fed will not rush to exit," said Tullett Prebon Economist Lena Komileva. "The potential for more (relief) remains so low labour and housing activity continues to push inflation trends."
Financial markets, which focused on new employment, data showed little reaction to Bernanke remarks.
The U.S. unemployment rate fell to 9.4% in December, the lowest rate since May 2009 and down from 9.8% a month earlier, but the decline was partly due to a worrying increase in the number of people leaving the workforce.
Echoing Bernanke, Fed Board Governor Elizabeth Duke said in a separate speech that recovery seems to be gathering steam, but hiring and inflation remain likely controlled.
"I am encouraged by signs that recovery may have gained traction recently," says Duke.
Improvement of the economic backdrop prompted investors from Wall Street to begin to think about a possible reversal in policy by the Fed, by the end of this year. In summer, few expected anything of monetary tightening until at least 2012.
Underscoring the persistent concern about the Fed on a deep hole how Economics must climb, another official pointed out that the bond purchase program was needed to lift a recovery that was too low for the tooth of high unemployment.
"Latest data come a little stronger," Chicago Fed President Charles Evans said in a speech. "But they do not yet indicate the kind of robust recovery, self-perpetuating we need to fill gaps in large resources of today within a reasonable time."
Evans is one of the staunchest supporters of aggressive Fed actions to stimulate growth and an elector on Panel of parameter of the strategy of the ECB in 2011.
DEFLATION RISK MORE SMALL, NOT GONE
In his testimony before the Senate Committee's Budget, Bernanke defended bond purchases the Fed by highlighting the weakness of employment and that it considered the risks associated with the very low inflation rate.
"High unemployment, the household income amortization and confidence, which could threaten the strength and sustainability of the recovery," said Bernanke.
"Very low inflation increases the risk that new shocks could push the economy into deflation." "Deflation induced economic slack can lead to prolonged periods of poor economic performance".
Many conservative Republicans blasted the bond purchase plan risking inflation. However, the tone of the hearing, was largely respectful, while the Jim Sessions of said Alabama Republican Senator that he does not share confidence from Bernanke that the Central Bank would be able to withdraw its relaunch over time.
Addressing the budget deficit, something hot in Washington, now that the newly empowered Republicans push cuts, Bernanke expenses urged lawmakers approach a remark.
"Fiscal policy makers will need to continue to take into account the low level of economic activity and nature still fragile economic recovery," he said.
At the same time, Bernanke come hard on what he describes as a unsustainable fiscal path over the long term.
"Doing nothing is not an option," Bernanke said. "Lowering the confidence investors deficits will be brought under control would likely increase the rate of interest on government debt and possibly to the wider financial turmoil."
He threw his support behind the proposals for reform of the tax code saying at lower rates and fewer faults were necessary to make the system more efficient.
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