The U.S. economy grew 1.3 percent in the second quarter after a 0.4 percent growth in the first quarter, leading Bernanke to tell lawmakers they should tread carefully in cutting spending too quickly even as they try to reduce the federal deficit.
“An important objective is to avoid fiscal actions that could impede the ongoing economic recovery,” Bernanke said.
Bernanke cited tight credit and a depressed housing sector as factors that prevent a more robust growth, and he warned the jobs market may not see improvement in the near future.
“Recent indicators, including new claims for unemployment insurance and surveys of hiring plans, point to the likelihood of more sluggish job growth in the period ahead,” Bernanke said.
The Fed launched “Operation Twist” Monday, selling off $4 billion worth of short-term Treasury holdings and buying the same amount of longer-term holdings.