* Fed chairman's growth outlook brightens
* Bernanke says jobless rate still to recede slowly
* Deflation risk has receded-Bernanke
(Adds details, background)
By Dave Clarke
ARLINGTON, Va., Jan 13 The outlook for the U.S.
economy has brightened, Federal Reserve Chairman Ben Bernanke
said on Thursday, though he warned that growth this year won't
be strong enough to bring down the jobless rate as speedily as
policy makers would like.
"We see the economy strengthening. It has looked better in
the last few months. We think a 3 to 4 percent-type of growth
number for 2011 seems reasonable," Bernanke said at an event
sponsored by the Federal Deposit Insurance Corporation.
"That's not going to reduce unemployment at the pace we'd
like it to, but certainly it would be good to see the economy
growing and that means more sales, more business," he added.
Bernanke's forecast suggests prospects have improved
somewhat in policy makers' eyes since November, when the Fed
anticipated the economy would expand in a range of 3 percent to
The Fed in November launched its controversial $600 billion
bond-buying program to spur more robust growth and bring down
the unemployment rate.
Since then a number of economic indicators, ranging from
retail sales to trade figures, have suggested the U.S. recovery
has picked up speed, and Bernanke's assessment has grown
Last week he told Congress that it increasingly appeared
that a self-sustaining recovery was taking hold.
[ID:nN06147394]. He sounded a similar note on Thursday.
"We're seeing some improvement in the labor market. I think
deflation risk has receded considerably. And so we're moving in
the right direction," he said.
A debate looms for the Fed, which meets on Jan. 25-26,
about whether to carry the bond buying through to the program's
intended conclusion in the middle of the year. A number of Fed
officials have signaled a desire to complete the purchases.
Although the program is intended to keep a lid on
longer-term interest rates, they have risen since November -- a
trend that some critics contend shows the program is
Bernanke, however, argued that higher interest rates
reflected stronger growth and more confidence in the health of
the economy. "Interest rates are higher, but I think that's
mostly because the news is better. So I think the policy has
helped," he said.
Fed policies have also helped strengthen the stock market,
the Fed chairman added.
Despite signs of improvement, data on Thursday showed
headwinds continue to buffet the recovery. The number of people
filing first-time claims jobless benefits last week hit the
highest level since October, while producer prices shot higher
last month. [ID:nN13271305]
Addressing concerns that tighter government oversight has
stifled bank lending, Bernanke said the thrust of recent
legislation -- enacted in the wake of the devastating 2007-2009
financial crisis -- was ensuring that the largest banks do not
pose a risk to the broader financial system.
Banks will need to strengthen their balance sheets and make
loans based on borrowers' ability to repay, rather than simply
against collateral, he said. Bernanke said he expects small
business lending to improve in 2011. For more on regulators
views on small business lending, see [ID:nN1395039]
A Fed report showed on Thursday that large financial
institutions eased credit terms for hedge funds, insurance
companies, and other types of borrowers. [ID:nWALDCE7X7]
(For more stories on Fed policy go to [FED/AHEAD])
(Reporting by Dave Clarke; Writing by Pedro da Costa and Mark
Felsenthal; Editing by Gary Crosse and Leslie Adler)