By Jeannine Aversa, AP Economics Writer
WASHINGTON (AP) — Federal Reserve Chairman Ben Bernanke told Congress on Wednesday that the outlook for the economy remains "unusually uncertain" but that the Fed plans no specific steps "in the near term" to try to fuel the struggling recovery.
Instead, Bernanke said the Fed would monitor the strength of the recovery and consider action if matters worsen.
"If the recovery seems to be faltering, we have to at least review our options," Bernanke told lawmakers. But he said no further action is planned for now because the economy is still growing.
Record low interest rates are still needed to bolster the economy, Bernanke said. He repeated a pledge to keep them there for an "extended period."
His comments to the Senate Banking Committee sent stocks tumbling downward. The Dow Jones industrial average had been up 20 points before he spoke. It fell as much as 160 points during his testimony, but recovered some losses to close down 109 points. Investors shifted money into the safety of Treasury bonds; the yield on 10-year Treasury notes fell to 2.86%.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. Those options include lowering the rate the Fed pays banks to keep money parked at the Fed, strengthening the pledge to hold rates at record lows and reviving some crisis-era programs, Bernanke said.
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.