Federal Reserve Chairman Ben Bernanke told Congress on Tuesday that stabilizing the financial markets is a top priority for the Fed, as a weak housing market, tight credit and rising oil prices threaten the U.S. economy.
"In general, healthy economic growth depends on well-functioning financial markets," Bernanke said in his semi-annual Monetary Policy Report to the Senate Banking Committee. "Consequently, helping the financial markets to return to more normal functioning will continue to be a top priority."
Bernanke warned that the economy faces risks from a further economic slowdown and inflation.
He said the economy is still expanding — but sluggishly, amid numerous difficulties. He said strains in financial markets are continuing to create economic challenges.
Bernanke testified that balancing inflation and growth risks presents the Fed with a significant challenge. He said the Fed will have to be particularly alert to containing inflation expectations.
Bernanke gave no clear signal of what action the Fed will take on interest rates. Pressure has grown for the Fed to consider raising interest rates after cutting them by 3.25 percentage points — to 2 percent — since mid-September.
Bernanke said various emergency steps the Fed has taken — most recently, opening its discount window to housing finance giants Fannie Mae and Freddie Mac — have partially mitigated the strains in financial markets, but he said they remain "under considerable stress."
From NPR and wire reports
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