Fed must do its part for economy, Bernanke says

WASHINGTON Thu Sep 30, 2010 4:23pm EDT

WASHINGTON (Reuters) - Federal Reserve Chairman Ben Bernanke said on Thursday the U.S. economic recovery remains disappointingly slow with unemployment too high.

The Fed has a role to play in returning the economy health, he told teachers at a town-hall event.

"We certainly have in the near term and the medium term ... some very difficult challenges," he said.

"First and perhaps foremost, even though our economy is stabilized and growing, clearly it is still a very difficult time for many Americans," Bernanke said.

"The unemployment rate is still almost 10 percent, inflation is quite low, and the Federal Reserve has the responsibility ... to do our part to help the economy recover and make sure that jobs come back to the United States."

Bernanke fielded questions by video from teachers in each of the Fed's 12 districts. While he did not go into detail about the outlook for the economy or Fed policy, his remarks conveyed concern for the sluggish pace of recovery and a sense the Fed should be active.

The Fed recently said it stands ready to act to help the recovery if necessary. It has promised to keep interest rates exceptionally low for an extended period and has pumped $1.7 trillion into the financial system through purchases of longer-term Treasury securities and mortgage-related debt.

With economic growth expected to be weak in the second half of 2010 and unemployment high, most analysts expect the Fed to relaunch another buying spree of bonds when it meets in early November. The U.S. central bank had already decided in August to help protect the recovery by reinvesting maturing securities to keep its portfolio at a steady size rather than letting it shrink.

Bernanke told the teachers it was not uncommon for a recovery following a financial crisis to be slow. Consumers may pull back from spending as they cope with lost wealth or to reduce debt, but growth may come from business investments and exports, he said.

"The economy is moving, perhaps not as quickly as we would like, and we want to make sure that progress continues," he said.

(Reporting by Mark Felsenthal, Editing by Kenneth Barry)

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