Federal Reserve Chairman Ben Bernanke warned on Wednesday that rising U.S. debt was contributing to a spike in longer-term interest rates, and said now was the time to start working on reining in deficits.

He gave no clue as to whether the U.S. central bank would step up its purchases of government debt or mortgage-backed securities to offset the rising borrowing rates, something investors have been watching for.

Maintaining the confidence of the financial markets requires that we, as a nation, begin planning now for the restoration of fiscal balance, Bernanke said in testimony prepared for delivery to 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.

Bernanke gave a relatively upbeat assessment of the economy, saying he still expected the recession to bottom out and growth to resume later this year.

He said financial markets had improved, thanks in part to the Fed's efforts to restore lending, but he noted the recent spike in yields on longer-term Treasury debt and fixed-rate mortgages.

These increases appear to reflect concerns about large federal deficits but also other causes, including greater optimism about the economic outlook, a reversal of flight-to-quality flows, and technical factors related to the hedging of mortgage holdings, Bernanke said.

(Reporting by Mark Felsenthal and Emily Kaiser; Editing by Neil Stempleman)

Ben Bernanke