Bernanke Growing More Upbeat About Economy

Washington, DC, May 6, 2009--The U.S. economy seems to be contracting at a slower rate than it was a few months ago, Federal Reserve Chairman Ben S. Bernanke told the Joint Economic Committee yesterday.

His relatively optimistic message to lawmakers was tempered by his forecast that the economy could perform well below its potential for some time to come.

Bernanke's assessment of the economy was more optimistic than the one he offered Congress in late February.

He encountered more questions about how and when the Fed will end its aggressive steps to stimulate the economy than about what further steps he could take to ameliorate a severe recession.

Bernanke said that the "pace of contraction may be slowing," that consumer demand "may be stabilizing" and that the housing market has "shown some signs of bottoming." But he also forecast that once a recovery begins, it will be slow.

In a separate speech in California, San Francisco Federal Reserve President Janet Yellen said she anticipated a "tepid" recovery.

"We expect that the recovery will only gradually gain momentum and that economic slack will diminish slowly," Bernanke said. "In particular, businesses are likely to be cautious about hiring, implying that the unemployment rate could remain high for a time, even after economic growth resumes."

Bernanke's remarks seemed designed to instill confidence in the economy and capture the positive signs that have emerged lately, without suggesting that the Fed is complacent about the economic pain the nation is experiencing.

For example, Bernanke offered a dour forecast for the corporate sector, saying that indicators of business investment "remain extremely weak" and that commercial real estate conditions are "poor."

ust mean it will take longer for the U.S. to claw its way out, she said.