Bernanke: Economy 'on track' to expand

Federal Reserve Chairman Ben Bernanke said the economy "appears to be on track" to expand.

Bernanke said that the economy should grow through 2011 but that the jobless rate would come down only slowly, according to his prepared testimony Wednesday before the House Budget Committee.

Gross domestic product will grow by about 3.5 percent this year and "at a somewhat faster pace next year," Bernanke said.

"This pace of growth, were it to be realized, would probably be associated with only a slow reduction in the unemployment rate over time," he said. "In this environment, inflation is likely to remain subdued."

Consumer spending would continue at a "moderate pace," helping sustain the economic recovery as fiscal stimulus recedes, Bernanke said.

He warned of several factors that would restrain the recovery's pace, including continued troubles in the housing market, the lack of credit and state and local budget cuts to public jobs and construction spending.

The debt problems of Greece and other European problems had roiled markets but would likely have just a modest impact on the U.S. economy because of international and Fed efforts to ensure stability, Bernanke said.

"The actions taken by European leaders represent a firm commitment to resolve the prevailing stresses and restore market confidence and stability," Bernanke said. "If markets continue to stabilize, then the effects of the crisis on economic growth in the United States seem likely to be modest."

Bernanke called on policymakers in the U.S. to address their own country's debt, which he said "appears to be on an unsustainable path."

The federal debt hit $13 trillion last month and will grow by nearly $1 trillion annually under the Obama administration's proposed budget, according to the Congressional Budget Office.

"Achieving long-term fiscal sustainability will be difficult," Bernanke said. "But unless we as a nation make a strong commitment to fiscal responsibility, in the longer run, we will have neither financial stability nor healthy growth."