WASHINGTON – Federal Reserve Chairman Ben Bernanke warned Monday that it's too soon to know whether the economic recovery will last and again pledged to hold rates at extra-low levels for an "extended period."
The Fed chief's speech to the Economic Club of Washington made clear he thinks the economy will struggle even as it recovers from the recession. He said the economy confronts "formidable headwinds" — including a weak job market, cautious consumers and tight credit.
Those forces "seem likely to keep the pace of expansion moderate," he said.
Special: Get Sarah Palin’s New Book – Incredible FREE Offer – Click Here Now.
The central bank has leeway to keep rates low because inflation is under control and is expected to stay tame because of the economy's weakness. Some private forecasters even fear that the recovery could fizzle late next year as government stimulus fades.
Asked about prospects for such a "double dip" recession, Bernanke said he could not guarantee it won't happen. He stuck with his forecast for a moderate recovery but said a "vigorous snapback" is less likely.
Bernanke said he expects "modest" economic growth next year. That should help push down the nation's unemployment rate — now at 10 percent — "but at a pace slower than we would like," he acknowledged.
Under one Fed forecast released last month, the jobless rate would remain stubbornly high next year — ranging from 9.3 to 9.7 percent. The Fed has warned that it could take five or six years for the job market to return to normal.
To nurture the recovery, the Fed has kept rates at record low near zero for a year. The central bank is widely expected to leave rates at those super-low levels at its meeting on Dec. 15-16. By doing so, the Fed hopes to entice people and businesses to boost spending, which would aid the recovery.
Despite all the negative forces, consumers recently have shown their resilience and kept spending. Home sales have firmed helped by the government's tax buyer credit. Car sales were aided by the government's now-defunct Cash for Clunkers rebates.
Business spending on new equipment and software also showed signs of stabilizing, and better economic conditions abroad have boosted U.S. exports.
The speech, which outlined the most frequently asked questions put to the central bank, comes as Bernanke seeks another four-year term.
Some lawmakers skewered Bernanke at his Senate confirmation hearing last week about high unemployment, regulatory lapses that contributed to the financial crisis and the Wall Street bailouts that followed.
Even as some senators vowed to block his confirmation, it appears Bernanke will be able to secure the votes necessary to be approved to another term.
As he did last week, Bernanke said he has the tools and the political will to reverse course and start boosting interest rates and tightening monetary policy when the time is right. He didn't say when that would be, although many economists think it will be later next year.
On other matters, Bernanke predicted taxpayers will get all their money back from the financial bailouts as well as some "fairly significant extra income" from the investments. "I think we're in very good shape," he said.
He also voiced his opposition again to congressional efforts to audit the Fed. His concern is that the legislation will affect the Fed's setting of interest rates.
"Reducing the independence of the Fed ... would be bad for markets, bad for the Fed's credibility, bad for inflation expectations and bad for the dollar," he said.
Asked what he likes best about being Fed chief, Bernanke struck a lighthearted tone.
"I get to go through the security lines at the airport much more quickly and I can take along even three ounces of fluid if I want to," Bernanke said, causing the audience to erupt in laughter.
© 2013 Newsmax. All rights reserved.