Federal Reserve Chairman Ben S. Bernanke said the "head winds" of reduced bank lending and a weak job market will restrain the pace of the nation's recovery from the longest, deepest economic downturn in seven decades.
The unemployment rate, which reached 10.2 percent in October and is expected to climb higher, "will decline only slowly if economic growth remains moderate, as I expect," Mr. Bernanke said Monday in a speech at the Economic Club of New York.
Mr. Bernanke also said inflation will likely remain subdued for some time.
Given his expectations of moderate economic growth and low inflation, Mr. Bernanke repeated the Fed's projection that "exceptionally low levels" of short-term interest rates will remain in effect "for an extended period."
Mr. Bernanke delivered his outlook after the Commerce Department reported that retail sales, buttressed by a rebound at auto dealers, increased more than expected in October. But the 1.4 percent gain followed a big downward revision for September - from a decline of 1.5 percent to a drop of 2.3 percent.
Sales last month fell at many retail outlets, including furniture stores, electronics and appliance stores and building-material dealers. Economists say that consumer spending remains under pressure.
"Fundamentally, conditions remain poor for consumers, and spending will be limited," said Scott Hoyt of Moody's Economy.com. He noted that household wealth has declined substantially during this recession, and wage income is 5 percent below year-ago levels.