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'Critical' to deal with cliff challenge: Bernanke

December 12, 2012

US Federal Reserve Chairman Ben Bernanke speaks during a news conference in Washington December 12, 2012. -Reuters Photo

WASHINGTON: US Federal Reserve chief Ben Bernanke called on politicians Wednesday to compromise on a deficit deal to avoid the looming fiscal cliff.

“It will be critical that fiscal policy makers come together soon to achieve longer term fiscal sustainability without adopting policies that could derail the ongoing recovery,” Bernanke warned at a news conference.

“Clearly the fiscal cliff is having affects on the economy,” he told journalists after a Fed policy board meeting.

“Even though we have not even reached the point of the fiscal cliff potentially kicking in, it's already affecting business investment and hiring decisions by creating uncertainty or creating pessimism.”

He said the recent fall in consumer sentiment was tied to concerns about the fiscal cliff.

Bernanke repeated his warning that the Fed has few tools at hand to deal with the combined harsh tax increases and spending cuts that will hit from January 1, likely sending the country back to recession, if politicians did not agree on another course.

“It's just too big given the tools we have available.”