The head of the U.S. central bank, Ben Bernanke, warned Tuesday that a series of abrupt cuts in government spending could hurt the fragile economic recovery.
The Federal Reserve Chairman spoke to the Senate Banking Committee about billions of dollars in spending cuts that could go into effect soon unless congressional Republicans and U.S. President Barack Obama and his Democratic party allies can reach a compromise.
Bernanke said the so-called "sequester" would be a "significant headwind" that could cut economic growth.
"Given the still-moderate underlying pace of economic growth, this additional near-term burden on the recovery is significant," said Bernanke. "Moreover, besides having adverse effects on jobs and incomes, a slower recovery would lead to less actual deficit reduction in the short run for any given set of fiscal actions."
Bernanke also defended the Fed's efforts to bolster the economy with ultra-low interest rates and a huge program of bond purchases. He said the program is helping, and officials are watching closely for signs the efforts to boost the economy will overshoot and spark inflation.
He also said that a slowdown in the last few months of last year is a temporary problem.