FXstreet.com (Barcelona) - Ben Bernanke is giving a speech at the University of Michigan, with the talk centered on two big issues. One is the long run sustainability of the US debt, while the other is the fragile recovery.

Fed's Bernanke said Federal budget must be brought under control, warning that plans to adjust the budget should be carefully well thought in order to avoid pushing the economy into recession

He said that the economy "is not out of the woods", and stressed the improved optimism after the fiscal cliff deal, which in Bernanke's words, "eliminated a good bit of the restrictive components."

The Fed's president continued by saying that "fiscal cuts too sharp may weaken economy." Fed's Bernanke said is key that Congress address debt ceiling.

Bernanke: "It's going to be a long haul on the budget."

According to David Scutt, Treasury Dealer at Arab Bank Australia, "Bernanke sounds nervous, you can hear it in his voice. Nothing but dovish words so far. Probably hints at where this is heading..."

Fed's Bernanke noted 'some modest improvement' in jobs market, although he wants to see rosier numbers in the economy and the labour market.

With regards to the number of tools available to stimulate the economy, Bernanke said "the Fed is not out of ammunition", adding that judging by the reaction of markets since the establishments of the first QE program, "overall QE has succeeded in reducing long-term rates; we have found (QE) to be an effective tool."

Bernanke said is early to determine the effect of asset purchases, suggesting the extension of QE in the near term seems a done deal, while waiting further proves, especially in the labour market, to determine length of QE extension.

While growth has been moderate, the housing sector, has shown positives signs, Bernanke said. "For the first time since 06/07 we have seen sustained increase in home prices, which should help us throughout the year..."

Bernanke said Fed's policy unlikely to create over inflation, adding that small changes in interest rates will not make much difference for the economy as a whole. Low inflation and high unemployment makes the case for aggressive monetary policy, he said. The Chairman continues to monitor the closely costs and risks of the easing policy.

He remains worried on the cost of high unemployment, saying main efforts should be aimed at fueling economic strength for a better labour market.

On global growth, Bernanke sees it "somewhat slower", while highlighting that emerging markets fundamentals are 'pretty good.'

Bernanke's speech could be summarized as follows, the Fed has done its fair part, now Congress needs to rolls the sleeves and pitch in to do theirs...