Bernanke strongly defends Fed rate policies

• Bernanke requests Congress respect the central bank's private discussions
• Fed chair says lower rates are necessary to lower unemployment
• Lower borrowing rates will also help reduce reduce federal budget deficit

WASHINGTON (AP) -- Chairman Ben Bernanke is offering a sharp defense of the Federal Reserve's bold policies to stimulate the weak economy, while cautioning Congress to respect its private discussions.

Bernanke says the Fed needs to drive down borrowing rates because the economy isn't growing fast enough to reduce high unemployment. The unemployment rate is 8.1%.

He says low rates could help lower the federal budget deficit by reducing the government's borrowing costs and generating more tax revenue through stronger growth.

Bernanke is also using his speech to the Indiana Economic Club to caution Congress against changing the law so it could review the Fed's interest-rate policy discussions.

Such a step would improperly inject political pressure into those talks and make Fed policymakers less likely to act, Bernanke warns.

The House has passed legislation to give Congress' investigative arm broader authority to audit the Fed, including reviewing its interest-rate policymaking. The Senate hasn't adopted the bill.

Bernanke warned that such a step would improperly inject political pressure into the Fed's private deliberations and make officials less likely to act.

His speech Monday follows the Fed's decision at its Sept. 12-13 meeting to launch a new mortgage-buying program to try to help boost the housing market, spur hiring and accelerate economic growth.

The Fed said it would keep buying the bonds until the job market showed substantial improvement. It also decided to keep its benchmark short-term interest rate near zero through at least mid-2015.In his speech,

Bernanke sought to reassure investors that the timetable for keeping rates low "doesn't mean we expect the economy to be weak through 2015." Rather, he said the Fed expects to keep rates low well after the economy strengthens.

Bernanke spoke two days before President Barack Obama and GOP challenger Mitt Romney will hold a debate in which the economy is the central theme. And on Friday, the government will release its September jobs report. Economists expect only modest hiring gains and continued unemployment above 8%.

The U.S. economy is struggling more than three years after the Great Recession ended. High unemployment and weak pay growth have made consumers more cautious about spending, which has hurt manufacturing and slowed broader growth.

Bernanke reiterated his argument that lower rates boost growth by helping increase prices of stocks, homes and other assets. That, in turn, increases household wealth and tends to make consumers and businesses more willing to spend.

Bernanke noted that when the Fed launched its first round of bond buying in late 2008, the average rate on a 30-year fixed-rate mortgage was a little above 6%. Today, the rate is 3.49%, the lowest since long-term mortgages began in the 1950s.

Still, the job market's recovery remains slow, in part because many Americans lack the credit to qualify for a mortgage or can't afford the larger down payments now required.