NEW YORK ( TheStreet) -- U.S. Federal Reserve Chairman Ben Bernanke said Tuesday the country's job situation is "far from normal" and that accommodative monetary policies cannot be lifted yet.
Speaking at the International Monetary Conference in Atlanta, Bernanke
the fuzzy employment picture, including the growing ranks of the long-term unemployed, is still a big question mark for the U.S. economy.
"Although it is moving in the right direction, the economy is still producing at levels well below its potential; consequently, accommodative monetary policies are still needed," he said. "Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established"
| Federal Reserve Chairman Ben Bernanke
Bernanke said he expects accommodative monetary policies to continue once the Fed's current $600 billion bond-buying program, known as "QE2," wraps up at the end of this month. The fed funds rate will remain at "exceptionally low levels," he added.
He also acknowledged the economic recovery has been "frustratingly slow" for millions of unemployed workers and said improvement is occurring at an uneven pace across the sectors. The weak housing market was also cited as a concern.
"Housing plays important role in recovery ... it's been a less vigorous recovery than we like," he said.
Bernanke expects the negative supply chain impact from the Japan earthquake to wane in the second half of the year.
"Our fiscal problems are long term, so the appropriate response should be to enact a long-term plan for fiscal consolidation," he stated.
But to avoid sudden fiscal contraction, the government should quickly implement long term, credible budget cuts, Bernanke said.
Bernanke said that slack in the labor market suggests inflation levels will remain in check. The bulk of inflation this quarter has so far been attributable to high gas prices, rather than factors specific to the U.S. economy.
Once energy prices stabilize, so will price inflation, he said.
David Rodriguez, quantitative strategist at DailyFX, said Bernanke's statement was "surprisingly downbeat."
"Though the Fed Chairman said that economic growth is likely to pick up in the second half of the year, overall dour comments virtually guarantee that U.S. interest rates will remain near record-lows through the foreseeable future," Rodriguez said.
-- Written by Andrea Tse in New York.
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