Reuters Bernanke sees recession ending soon; warns on debt

WASHINGTON (Reuters) - Federal Reserve Chairman Ben Bernanke sounded a cautiously upbeat note on the U.S. economy on Wednesday but warned that corralling government debt was vital to ensuring the nation's long-term health.

In testimony to Congress, Bernanke sounded more confident that the U.S. recession would end this year than he had just one month ago, and he said the risk of a dangerous downward spiral in prices had receded.

Delivering a message that appeared aimed at soothing jittery financial markets and reassuring foreign investors that the United States would get a grip on its budget once the economic crisis has passed, Bernanke said rising deficits posed a significant long-term threat.

"Maintaining the confidence of the financial markets requires that we, as a nation, begin planning now for the restoration of fiscal balance," Bernanke told the House of Representatives' Budget Committee.

"Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth."

He said rising debt was contributing to a jump in longer-term interest rates. However, he gave no clue as to whether the U.S. central bank would step up its purchases of government and mortgage-related debt to keep rates low, something investors have been watching for.

Financial markets largely shrugged off Bernanke's testimony, with weaker-than-expected economic data driving prices for U.S. stocks down and Treasury debt up.