Bernanke says Fed ready to do more to aid economy

Reuters

WASHINGTON (Reuters) - The Federal Reserve is prepared to take further steps to help a fragile economic recovery held back by a weak job market and financial stresses in Europe, Fed Chairman Ben Bernanke said on Tuesday.

"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 said.

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Given a anemic employment growth that has depressed consumer confidence, Bernanke urged lawmakers not to cut spending too quickly in the short-term, even as they grappled with trimming the budget deficit over the long term.

He said government belt-tightening was likely to prove a significant drag on the world's largest economy, which averaged less than 1 percent annualized growth in the first half of the year.

"A(n) important objective is to avoid fiscal actions that could impede the ongoing economic recovery," he said.

Bernanke said European financial strains posed "ongoing risks" to U.S. economic growth, saying they had already dampened the mood of households and businesses.

Stressing that higher inflation earlier in the year had not become ingrained in the economy, Bernanke argued price pressures will remain subdued for the foreseeable future.

(Reporting by Pedro Nicolaci da Costa and Mark Felsenthal; Editing by Neil Stempleman)