Federal Reserve Chairman Ben Bernanke told lawmakers Wednesday that the economy continues to heal slowly but unemployment is expected to remain elevated for a "significant amount of time."
The economy should grow in the neighborhood of 3.5% in 2010 and at a somewhat faster pace next year, but this "pace of growth, were it to be realized, would probably be associated with only a slow reduction in the unemployment rate over time," said Bernanke in testimony before the House Budget Committee.
The nation's central banker said high levels of unemployment should ensure that inflation will remained subdued, affirming the Fed's policy of keeping rates low to stimulate economic growth and employment.
As for the financial crisis in the European Union, Bernanke said the actions taken by European leaders "represent a firm commitment to resolve the prevailing stresses and restore market confidence and stability."
Looking farther out, Bernanke once again warned of the long-term consequences of running unsustainable deficits, saying the future stability of the economy is at stake.
The federal government's budget deficit currently stands at more than10% of gross domestic product, the highest level since World War II.
Bernanke: Recovery on Pace but Unemployment to Stay High