In a prepared speech at the Federal Reserve Bank of Kansas City Economic Symposium in Jackson Hole, WY, Fed chairman Ben S. Bernanke said with regard to current economic prospects, that despite positive signs in manufacturing, housing and international trade and the rebound in equipment and software investment and improving conditions in financial and credit markets, the economic situation is “obviously far from satisfactory.”

Bernanke said he sees growth being held back currently by a number of headwinds, namely:

. The housing sector, although showing signs of improvement, remains at low levels and is contributing much less to the recovery than would normally be expected at this stage of the cycle.

. Notwithstanding some recent improvement in tax revenues, state and local governments still face tight budget situations and continue to cut real spending and employment.

. Stresses in credit and financial markets continue to restrain the economy and tight borrowing conditions remain a problem today. Bernanke noted, however, more recently uncertainty about developments in Europe – through global trade and financial linkages – have a significant effect on the U.S. economy as well.

In his conclusion, Bernanke defended his posture of maintaining interest rates “close to its effective lower bound”, noting that in their absence, the 2007-2009 recession would have been deeper and the current recovery would have been slower than has actually occurred.

To read the text of Ben S. Bernanke’s speech click here.