Federal Reserve Chairman Ben Bernanke, as well as minutes of the most recent Fed meeting, signaled that policy makers may consider lowering rates amid the continuing financial crisis, especially now that inflation risks appear to be declining.

Speaking to the National Association of Business Economists, Bernanke said, "The combination of the incoming data and recent financial developments suggests that the outlook for economic growth has worsened and that the downside risks to growth have increased.”

At the same time, he said, factors such as decreasing oil prices “should lead to rates of inflation more consistent with price stability.”

"In light of these developments, the Federal Reserve will need to consider whether the current stance of policy remains appropriate," he said.

Lower rates help stimulate borrowing and lending, but also fuel inflation, so the Fed tries to maintain a careful balance in the rate level to keep everything in moderation.

Minutes of the Sept. 16 Federal Open Markets Committee meeting, released Tuesday, backed up Bernanke's words, stressing that while it didn't seem a rate cut was called for at that time, one could be coming in the near future. 

"Some members emphasized that intensifying financial strains led to a significant worsening of the growth outlook, a policy response could be required; however, such a response was not called for at this meeting," the minutes said.

The Fed funds rate stands at 2.0%, with the most recent change being a quarter-point cut from 2.25% on April 30. The current rate-cutting cycle started with a half-point cut on Aug. 17, 2007, and has brought it down from 5.25%.

Bernanke said in his NABE speech that global markets are under “extraordinary stress,” and that the Fed is looking for more ways to reduce funding pressures. He also said that the Fed would begin this week using its authority to pay interest on bank reserves, which will allow officials to "better control the federal funds rate" by setting a floor in it.

He also praised Congress’s passage of the $700 billion economic-rescue plan, saying that it would be “to everyone’s benefit." 

Bernanke noted to NABE that negotiations regarding the purchase of Wachovia (WB) by either Wells Fargo (WFC), Citigroup (C) or a combination of the two are “ongoing.”