Shortly before Bernanke spoke, several reports pointed to surprising economic strength: Americans' confidence in the economy rebounded this month, new-home sales jumped in January to the highest level since 2008, home prices rose at a healthy pace in December compared with a year ago and profits of U.S. banks jumped last quarter to the highest level in six years.

On the battle in Washington over how to restrain budget deficits, Bernanke said it's important not to cut the deficit too much while economic growth remains fragile. He noted that the Congressional Budget Office estimates that the automatic spending cuts that take effect Friday would trim growth by 0.6 percentage point this year.

"Congress and the administration should consider replacing the sharp, front-loaded spending cuts required by the sequestration with policies that reduce the federal deficit more gradually in the near term but more substantially in the longer run," Bernanke said.

Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

If you liked this article you might like

What's Behind the Surge in Energy Stocks

Hillary Clinton Says Prosecuting Individuals is Key to Wall Street Reform