WASHINGTON -- Federal Reserve Chairman Ben Bernanke Wednesday urged lawmakers to commit to reducing the nearly $2 trillion budget deficit, warning that the government can't borrow "indefinitely" to meet the growing demand on its resources. Mr. Bernanke also reiterated that the pace of economic contraction appears to be slowing, setting the stage for a return to growth later this year. But that growth won't be robust, he said. "Unless we demonstrate a strong commitment to fiscal sustainability in the longer run, we will have neither financial stability nor healthy economic growth," Mr. Bernanke said in prepared testimony to the House Budget Committee. (Read the full remarks.) He also told lawmakers that the Fed won't accommodate wider budget deficits by simply printing money, saying the central bank "will not monetize" the federal debt. Uh...you already are...
"Sizable" job losses, he said, should continue for "the next few months," pushing the unemployment rate higher. The government releases May payroll figures Friday. Economists expect another payroll decline of over 500,000, raising the jobless rate past 9%.
"I am comfortable with the policy actions that the Federal Reserve has taken," he said. He said the Fed will remove policy accommodation at the right time and at the right speed, though he acknowledged that will be a tricky call to make. Separately, Mr. Bernanke also said he expects the Fed's purchases of mortgage-backed securities will eventually provide revenue for the U.S. Treasury.