Bernanke said that over the past six months, the economy has grown moderately but unevenly. He said the pause in growth seen in the final three months of 2012 “does not appear to be a stalling-out of the recovery.” He said growth appears to have picked up in the past two months.
Shortly before Bernanke spoke, several reports pointed to surprising economic strength: Americans' confidence in the economy rebounded this month, new-home sales jumped in January to the highest level since 2008, home prices rose at a healthy pace in December compared with a year ago and profits of U.S. banks jumped last quarter to the highest level in six years.
On the battle in Washington over how to restrain budget deficits, Bernanke said it's important not to cut the deficit too much while economic growth remains fragile. He noted the Congressional Budget Office estimates that the automatic spending cuts that take effect Friday would trim growth by 0.6 percentage point this year.
“Congress and the administration should consider replacing the sharp, front-loaded spending cuts required by the sequestration with policies that reduce the federal deficit more gradually in the near term but more substantially in the longer run,” Bernanke said.