WASHINGTON (AP) — The U.S. economy is already being hurt by the "fiscal cliff" standoff in Washington, Federal Reserve Chairman Ben Bernanke said Wednesday. But Bernanke said the Fed believes the crisis will be resolved without significant long-term damage.
The steep tax increases and spending cuts can be avoided with a successful budget deal, Bernanke said during a news conference after the Fed's final meeting of the year. The Fed's latest forecasts for stronger economic growth next year and slightly lower unemployment assume that happens.
Still, Bernanke said the uncertainty surrounding the resolution is already affecting consumer and business confidence. And it has led businesses to cut back on investment.
"Clearly the fiscal cliff is having effects on the economy," Bernanke said.
Bernanke said the most helpful thing that Congress and the Obama administration can do is resolve the issue quickly.
"I'm hoping that Congress will do the right thing on the fiscal cliff," Bernanke said. "There is a problem with kicking the can down the road."
Bernanke repeated his belief that if the scheduled tax hikes and spending cuts do take effect in January, they will have a significantly adverse effect on the economy, regardless of what the Fed might do.
"We cannot offset the full impact of the fiscal cliff. It's just too big," Bernanke said.