|U.S. Federal Reserve Chairman Ben Bernanke testifies before the Joint Economic Committee on Capitol Hill in Washington D.C., capital of the United States, Oct. 4, 2011. Bernanke on Tuesday told lawmakers that monetary policy is not "panacea" for curing the U.S. economic problems, calling for Congress and all economic policymakers to act together to boost the recovery. (Xinhua/Zhang Jun)
WASHINGTON, Oct. 4 (Xinhua) -- U.S. Federal Reserve Chairman Ben Bernanke told lawmakers Tuesday that monetary policy is not "panacea" for curing the U.S. economic problems, while calling for the Congress and all economic policymakers to act together to boost the recovery.
"Monetary policy can be a powerful tool, but it is not a panacea for the problems currently faced by the U.S. economy," Bernanke said in his testimony before the Joint Economic Committee of U.S. Congress. "Fostering healthy growth and job creation is a shared responsibility of all economic policymakers, in close cooperation with the private sector."
The central banker said that "fiscal policy is of critical importance," adding that a wide range of other policies-- pertaining to labor markets, housing, trade, taxation, and regulation, for example-- also have important roles to play.
He noted that it has been three years since the beginning of the most intense phase of the financial crisis in the late summer and fall of 2008, and more than two years since the economic recovery began in June 2009. However, the U.S. overall output still had not returned to the level that it had attained before the crisis.
U.S. economy slowed to an annual growth rate of just 0.9 percent in the first six months of this year. Forecasters said that growth will increase in the second half of this year -- to an annual rate of 2 percent to 2.5 percent, which is still far below the 4 to 5 percent pace that can significantly reduce unemployment.
U.S. unemployment rate, currently at 9.1 percent, is expected to keep at around 9 percent through the electoral year of 2012.
Bernanke warned lawmakers that a sharp spending cut may drag the anemic economy down to slower recovery.
"There is evident need to improve the process for making long-term budget decisions, to create greater predictability and clarity, while avoiding disruptions to the financial markets and the economy," he said.
For the central bank's part, Bernanke noted that the Fed has been keeping federal fund rate at near zero level since December 2008 and will keep the low rate through mid-2013. It also has implemented two rounds of so called "quantitative easing" policies, meaning purchasing government treasuries to keep interest rates low.
More recently, the Fed announced last month to take "operation twist", a policy designed to increase the average maturity of the securities in the Federal Reserve's portfolio, with an aim to maintain the low interest rate environment.
Economists hold that there is little space left for the monetary policy to stimulate the economy.