Federal Reserve Chariman, Ben Bernanke, gave testimony on the U.S. economy to the congressional Joint Economic Committee today.

In his testimony, Bernanke testified to the current economic conditions, fiscal policy and monetary policy.

Some key elements of the Chairman’s testimony include the following statements:

“Economic growth has continued at a moderate pace so far this year. Economic growth in the first quarter was supported by continued expansion in demand by U.S. households and businesses, which more than offset the drag from declines in government spending, especially defense spending.”

“Conditions in the job market have shown some improvement recently. The unemployment rate, at 7.5 percent in April, has declined more than 1/2 percentage point since last summer.”

“Consumer price inflation has been low. The price index for personal consumption expenditures rose only 1 percent over the 12 months ending in March, down from about 2-1/4 percent during the previous 12 months.”

“Federal fiscal policy, taking into account both discretionary actions and so-called automatic stabilizers, was, on net, quite expansionary during the recession and early in the recovery. However, a substantial part of this impetus was offset by spending cuts and tax increases by state and local governments, most of which are subject to balanced-budget requirements, and by subsequent fiscal tightening at the federal level.”

“The second policy tool now in use is large-scale purchases of longer-term Treasury securities and agency mortgage-backed securities (MBS). These purchases put downward pressure on longer-term interest rates, including mortgage rates. For some months, the FOMC has been buying longer-term Treasury securities at a pace of $45 billion per month and agency MBS at a pace of $40 billion per month. The Committee has said that it will continue its securities purchases until the outlook for the labor market has improved substantially in a context of price stability.”

Bernanke closes by saying:

Because only a healthy economy can deliver sustainably high real rates of return to savers and investors, the best way to achieve higher returns in the medium term and beyond is for the Federal Reserve–consistent with its congressional mandate–to provide policy accommodation as needed to foster maximum employment and price stability. Of course, we will do so with due regard for the efficacy and costs of our policy actions and in a way that is responsive to the evolution of the economic outlook.

Campaign for Liberty Chairman and long time Fed critic, Ron Paul, released the following statement today:

“Today Chairman Bernanke testified that our nation’s long term economic outlook has improved and that consumer inflation is a modest one percent. Chairman Bernanke is grossly misleading the American people when he calls inflation ‘subdued.’

“Just yesterday, it was reported that the median home price in Houston is at an all-time high, having risen 14.5 percent in the last year alone. Americans are struggling with soaring food and energy prices that the federal government conveniently chooses to ignore in its measure of inflation in order to hide the true effects of its policies from the American people.

“The real measure of inflation is the increase in the monetary supply, and the Federal Reserve has increased the Federal Reserve credit by 17.4 percent in the last year alone. The reality is, the Federal Reserve’s policy of monetary expansion through the buying of up to $100 billion of securities each month may help the big-spenders in Congress and their cronies in the banking sector, but it is harming the rest of America.

“Make no mistake, despite Chairman Bernanke’s claims; the Federal Reserve’s unprecedented monetary expansion has created a significant amount of pent-up inflation that, when released, will cause prices to rise even higher and the average American’s standard of living to decline.

“Until our leaders understand that we cannot print our way to prosperity, the American people will continue to suffer the disastrous effects of higher prices, higher unemployment, and lower standards of living and qualities of life for years to come.”