Bernanke Warns Steep Budget Cuts Could Hurt Economic Recovery

In a hearing with the Senate Banking, Housing, and Urban Development Committee Thursday, Federal Reserve Chairman Ben Bernanke warned that severe budget cuts could stifle already modest economic recovery.

“I only ask or suggest that as Congress looks at the timing and composition of its changes to the budget that it does take into account that in the near term the recovery is still rather fragile,” Bernanke said. “Sharp and excessive cuts in the short term would be potentially damaging to that recovery.”

Although Bernake noted that economic recovery is slow, he said that it is moving along as the Federal Reserve Board predicted.

“We think that by the second half of the year, we will be more or less on target in terms of where we want to be on inflation. And although job creation has not been how we like it to be, it has been consistent with our expectations.”