WASHINGTON (December 12, 2012)--Federal Reserve Chairman Ben Bernanke said Wednesday the U.S. economy is already being hurt by the "fiscal cliff" standoff in Washington, but he said the Fed believes the crisis will be resolved without significant long-term damage.
At a news conference Wednesday in Washington, Bernanke said the steep tax increases and spending cuts can be avoided with a successful budget deal.
The Fed's latest forecasts for stronger economic growth next year and slightly lower unemployment assume that happens.
"Clearly the fiscal cliff is having effects on the economy," he said.
He said the uncertainty surrounding the resolution is already affecting consumer and business confidence and it has led businesses to cut back on investment.
Bernanke says the most helpful thing that Congress and the Obama administration can do is resolve the issue quickly.
The Fed predicted Wednesday the unemployment rate will stay elevated until late 2015, suggesting it will keep short-term interest rates low for the next three years.
The latest economic projections released Wednesday from the Fed were little changed from September.
The central bank still expects economic growth to be no stronger than 3 percent next year and says growth could improve to 3.5 percent in 2014 and 3.7 percent in 2015.
The Fed expects unemployment rates no lower than 7.4 percent next year and 6.8 percent by the end of 2014.
The earliest the Fed thinks unemployment will drop below 6.5 percent is the end of 2015.