Bernanke: U.S. economy will soon start to grow
Further, he said, tight credit, which has hampered the economic recovery and Americans' ability to get mortgages, car loans and credit cards, will also likely take some time to loosen as banks still account for losses.
It is with tight credit in mind that Bernanke and the Fed's board of governors earlier this month decided to keep interest rates at near zero for the foreseeable future.
Bernanke did say, however, that short-term lending markets are functioning "more normally," and that other parts of the financial system were also gaining purchase.
The Fed chief would like the U.S. to join the ranks of France and Germany, which reported earlier this month that their economies grew in the second quarter, as gross domestic product figures rose in each country by 0.3 percent. By contrast, the U.S., home to the world's largest economy, saw its GDP shrink 0.3 percent during the same period.
In response to Bernanke's comments about economic recovery, as well as other good economic news, stocks rallied, with Dow Jones industrial average gaining more than 150 points to around 9,500 Friday morning. A report showing sales of existing homes climbed an unanticipated 7.2 percent last month, the largest monthly increase in 10 years, also helped propel stocks higher.
In his speech, Bernanke praised the world community's quick response to the economic crisis that reached a dramatic climax last fall when investment banking giant Lehman Bros. failed.
Though history is full of examples of inadequate response to financial crises, Bernanke said, the actions taken by world leaders last year helped stave off a much worse economic crisis that threatened the collapse of the entire financial system.
In past crises, slow or inadequate measure often resulted in greater economic damage and increased costs, he said. By contrast, he said "In this episode policymakers in the United States and around the globe responded with speed and force to arrest a rapidly deteriorating and dangerous situation."