Fed chairman Ben Bernanke says recovery in US 'fragile'

Although the US economy is improving, it is too early to say that the recovery will last, Federal Reserve chairman Ben Bernanke has said.

Unemployment could stay "elevated", although inflation is likely to remain "subdued", he said in a speech to the Economic Club of Washington. Interest rates were likely to stay low for "an extended period", he added. Following Mr Bernanke's comments, the dollar lost recent gains it had made against the euro.

The euro rose by more than one cent to $1.4883 after Mr Bernanke's remarks, before falling back to $1.4821. US stocks also rose modestly after the speech, but finished broadly flat, with the Dow Jones index closing just 1 point higher at 10,390.

'Some way to go'

During Mr Bernanke's tenure, the US central bank has cut interest rates to close to zero, and has spent $3 trillion (£1.8tn) on propping up the credit markets and trying to boost the economy. Investors had been hoping that Mr Bernanke would give some clues as to how the Fed might unwind its economic stimulus efforts, following a government report on Friday which showed that in November, employers cut the lowest number of jobs since the recession began.

The surprisingly positive report had fuelled speculation that interest rates could rise sooner than had been anticipated. But Mr Bernanke said that rates would remain low, and the outlook for rates would be discussed at the Fed's meeting on 15-16 December.

"We still have some way to go before we can be assured that the recovery will be self-sustaining," he said

source : BBC NEWS