WASHINGTON — Federal Reserve Chairman Ben Bernanke told Congress Wednesday the economic outlook remains "unusually uncertain," and the central bank is ready to take new steps to keep the recovery alive if the economy worsens.
Testifying before the Senate Banking Committee, Bernanke also said record low interest rates are still needed to bolster the economy. He repeated a pledge to keep them there for an "extended period." Bernanke downplayed the odds that the economy will slide back into a "double-dip" recession, but he acknowledged the economy is fragile.
Given that, the Fed is "prepared to take further policy actions as needed" to keep the recovery on track, he said. Bernanke said Fed policymakers haven't settled on "leading options," but they are being explored.
"If the recovery seems to be faltering, we have to at least review our options," Bernanke said. However, he added later: "We are not prepared to take any specific steps in the near term" because the Fed is still evaluating the strength of the recovery.
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Bernanke is trying to send Congress, Wall Street and Main Street a positive message that the recovery will last in the face of growing threats. At the same time, he wants to assure Americans that the Fed will take new stimulative actions if necessary.
The recovery, which had been flashing signs of strengthening earlier this year, is losing momentum. And fears are growing that it could stall.
Consumers have cut spending. Businesses are sitting on cash, reluctant to beef up hiring and expand operations. A stalled housing market, near double-digit unemployment and an edgy Wall Street shaken by Europe's debt crisis also play into the economic slowdown.
"In short, it look likes our economy is in need of additional help," said the committee's chairman, Sen. Chris Dodd, D-Conn. Sen. Richard Shelby of Alabama, the highest-ranking Republican on the panel, said the economic outlook has become a "bit more cloudy."
If the recovery were to flash serious signs of backsliding, the Fed could revive programs to buy mortgage securities or government debt. It could cut to zero the interest rate paid to banks on money left at the Fed or lower the rate banks pay for emergency Fed loans.