The European crisis and the threat that Congress could force a drastic cut in spending pose important risks for the US economy, Federal Reserve Chairman Ben Bernanke told Congress Thursday.
Bernanke said in prepared testimony that otherwise the economy would continue to grow at a moderate pace and that inflation did not pose a significant challenge.
But he gave no hint of the need for more fiscal stimulus to strengthen growth, though he noted the Fed is ready to adjust its interest rate-pressuring bond purchases "as appropriate to promote a stronger economic recovery."
"Economic growth appears poised to continue at a moderate pace over coming quarters," Bernanke told the Congress's joint economic committee.
However, he added, "the situation in Europe poses significant risks to the US financial system and economy and must be monitored closely."
Another looming threat is the "fiscal cliff" legislation in place that could force a drastic cut in government spending and higher taxes for Americans at the year's end, moves that economists say could drive the country back to recession if not changed.
"The so-called fiscal cliff would, if allowed to occur, pose a significant threat to the recovery," Bernanke said.