The head of the U.S. central bank predicts "moderate" economic growth, but cautions it will take a "significant" amount of time to restore the 8.5 million jobs lost in the recession.
U.S. Federal Reserve Chairman Ben Bernanke made the comments to a congressional committee Wednesday.
He said the recession has damaged the finances of state and local governments, squeezing them between falling tax revenue and the rising need for services. This problem is restraining economic growth by cutting the money available for construction projects. Bernanke also said problems in the housing market and declining bank lending are hampering growth.
The Fed chief told Congress that the government must "move decisively" to cut its budget deficit or risk losing the confidence of the public and investors over the long term.
Before Bernanke spoke, a Commerce Department report said U.S. retail sales rose strongly (1.6 percent) in March as consumers bought more cars and other goods.
Outside the volatile area of auto sales, the overall economy saw a more modest sales increase of six-tenths of one percent.
Analysts interviewed by news agencies say the report is more evidence that the U.S. economic recovery is expanding beyond the manufacturing sector.
A separate government report says inflation rose slightly (one-tenth of a percent) in March.
With inflation tame for the time being, the U.S. central bank can continue its policy of stimulating the battered U.S. economy by holding interest rates at their current ultra-low levels.
