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Bernanke says joblessness to linger despite growth

The outlook for the U.S. economy has brightened, Federal Reserve Chairman Ben Bernanke said Thursday, though he warned growth won't be strong enough to bring down the jobless rate as speedily as policy makers would like.
Image: Ben Bernanke Speaks At FDIC Forum In Arlington
Federal Reserve Chairman Ben Bernanke participates in a panel discussion of the Small Business Forum, co-hosted by CNBC and the FDIC.Alex Wong / Getty Images
/ Source: Reuters

The outlook for the U.S. economy has brightened, Federal Reserve Chairman Ben Bernanke said Thursday, though he warned growth won't be strong enough to bring down the jobless rate as speedily as policy makers would like.

"We see the economy strengthening. It has looked better in the last few months. We think a 3 to 4 percent-type of growth number for 2011 seems reasonable," Bernanke said at an event sponsored by the Federal Deposit Insurance Corp.

"That's not going to reduce unemployment at the pace we'd like it to, but certainly it would be good to see the economy growing and that means more sales, more business," he added.

Bernanke's forecast suggests prospects have improved somewhat in policy makers' eyes since November, when the Fed anticipated the economy would expand in a range of 3 percent to 3.6 percent.

The Fed in November launched its $600 billion bond-buying program to spur more robust growth and bring down the unemployment rate. Since then a number of economic indicators have suggested the U.S. recovery has picked up speed.

Last week the Fed chief told Congress that it increasingly appeared that a self-sustaining recovery was taking hold. He sounded a similar note on Thursday.

"We're seeing some improvement in the labor market. I think deflation risk has receded considerably. And so we're moving in the right direction," he said.

A debate looms for the Fed, which meets on Jan. 25-26, about whether to carry the bond buying through to the program's intended conclusion in the middle of the year. A number of Fed officials have signaled a desire to complete the purchases.

Although the program is intended to keep a lid on longer-term interest rates, they have risen since November — a trend that some critics contend shows the program is ineffective.

Bernanke, however, argued that higher interest rates reflected stronger growth and more confidence in the health of the economy. "Interest rates are higher, but I think that's mostly because the news is better. So I think the policy has helped," he said.

Fed policies have also helped strengthen the stock market, the Fed chairman added.