The Federal Reserve is prepared to take further steps to help an economy that is “close to faltering,” Fed chairman Ben Bernanke said on Tuesday in his bleakest assessment yet of the fragile U.S. recovery. Citing anemic employment, depressed confidence, and financial risks from Europe, Bernanke urged lawmakers not to cut spending too quickly in the short term even as they grapple with trimming the long-run budget deficit. He made clear that the U.S. central bank’s policy committee considers inflationary pressures well under control and given high unemployment, would be ready to ease monetary conditions further following the launch of a new stimulus measure in September. “The Committee will continue to closely monitor economic developments and is prepared to take further action as appropriate to promote a stronger economic recovery in the context of price stability,” Bernanke told the Joint Economic Committee of Congress. Since then, uncertainty about the outcome of the euro zone’s sovereign debt crisis has undermined U.S. business and consumer confidence and helped to slow economic growth. The business cycle monitoring group ECRI last Friday said that the U.S. economy is tipping into a new recession. Asked whether another round of bond purchases, known as quantitative easing, was in store, Bernanke was noncommittal. “We never take anything off the table because we don’t know where the economy is going to go. We have no immediate plans to do anything like that,” he said. The prospect of further Fed support for the economy lifted U.S. stocks though, after the market saw selling early in the day, pushing the S&P 500 briefly dipping into bear market territory. Fresh clarity on the state of the economy will come on Friday, when the Labor Department releases monthly employment figures. Economists in a Reuters poll forecast a paltry gain of 60,000 jobs for September, and Bernanke in his testimony offered little hope for much improvement. “Recent indicators, including new claims for unemployment insurance and surveys of hiring plans, point to the likelihood of more sluggish job growth in the period ahead,” he told the Joint Economic Committee of Congress.
