19 Jul 2012

Political stalemate hampering recovery - Bernanke

2:02 pm on 19 July 2012

US Federal Reserve chairman Ben Bernanke says a political stalemate to finding a solution to the country's huge deficit is hampering the economic recovery.

Automatic budget cuts worth $US1.2 trillion begin in January, as the federal government struggles to rein in its ballooning deficit.

However, Mr Bernanke warns that upcoming tax rises and budget cuts could wipe out 5% of US GDP, which could push the country back into recession.

He says Congress needs a longer term vision to tackle the fiscal cliff.