US economy has slowed significantly, says Ben Bernanke

Gulp.  Not good.

In prepared testimony to Congress on Tuesday, Mr Bernanke forecast slower growth for this year and next.

Shares on Wall Street turned negative when he said the central bank stood ready to offer additional monetary support for the world’s biggest economy but provided few details.

In a blow to Barack Obama and others hopeful for better economic news ahead of November’s presidential elections, he said US economic data had been “disappointing”.

“Given that growth is projected to be not much above the rate needed to absorb new entrants into the labor force, the reduction in the unemployment rate seems likely to be frustratingly slow,” he said in his semi-annual testimony.

Unemployment is still stuck above 8%, nearly four years after the worst of the financial crisis.

In terms of risk to the US recovery, Mr Bernanke pointed to the double barrels of the eurozone crisis and US debt.

“The possibility that the situation in Europe will worsen further remains a significant risk to the outlook,” he said, adding that European nations had both the incentive and the means to tackle the crisis.

He again urged Congress to put in place a plan that would reduce US debt while keeping short-term stimulus in place.

Growth rose a modest 2pc in the first quarter of this year, but Mr Bernanke said “available indicators point to a still-smaller gain in the second quarter”.

He said members of the Fed’s top policy-setting panel had predicted that growth will reach 1.9% to 2.4% this year.

“These forecasts are lower than those we made in January, reflecting the generally disappointing tone of recent incoming data.”

He said households remained concerned about their prospects for jobs and income and their “overall level of confidence remains relatively low”.

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