"I do think the monetary policy has been constructive in bringing employment back toward the maximum employment level," Bernanke said Wednesday, appearing before the House Financial Services Committee. The central bank has kept short- term interest rates near zero since December 2008 and embarked on two rounds of bond-buying to help support the economy. However, he said the strength of the labor market in the long term depends on choices made by Congress and the White House.
"Monetary policy is not a panacea. It can help offset cyclical fluctuations and financial crises like we've had, but the long-term health of the economy depends mostly on decisions taken by the Congress and the administration," Bernanke said.
Lawmakers sparring over how to best reduce the federal budget deficit tried to get the central banker to weigh in on how the government should target cuts in spending. Bernanke agreed that a careful eye must be kept on health-care costs, which are expected to increase, but refrained from specifying where exactly the government should slash spending.
"The main thing is to achieve stability," he said. If markets lose confidence in the government's ability to maintain fiscal stability, interest rates could go up, he cautioned.
Bernanke repeated a warning that the country faces a potential "massive fiscal cliff" at the end of the year when the Bush-era tax cuts are scheduled to expire and automatic spending cuts are slated to kick in at the beginning of 2013.
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