Federal Reserve chairman Bern Bernanke has said he expects a slow but steady US recovery from recession, which will require ultra-low interest rates to remain in effect for more time.
The Fed chairman, in his semi-annual report to Congress, said he expected unemployment to remain stubbornly high.
'After declining for a year and a half, economic activity in the US turned up in the second half of 2009, supported by an improvement in financial conditions, stimulus from monetary and fiscal policies, and a recovery in foreign economies,' he said.
Bernanke said these factors, along with increased business and household confidence, were likely to boost spending and sustain a recovery. But he warned that growth would be held back by continuing caution among consumers, tight credit conditions and continued weakness in labour markets.
The Fed has kept its main interest rate in a range of zero to 0.25% for over a year as part of a massive effort to spark recovery. The central bank raised its discount rate for emergency bank loans earlier this month by a quarter-point but indicated that this was not a sign of tightening of overall policy.
Bernanke's remarks came as figures showed that sales of new homes in the US plunged 11.2% in January from December in a fresh sign of weakness in the troubled housing market.
Sales of new single-family houses fell to a seasonally adjusted annual rate of 309,000, from a revised December rate of 348,000, the Commerce Department said. It was the third consecutive month of declining sales and much worse than the 354,000 rate expected by most analysts. The January reading was 6.1% below the rate from a year earlier.
