WASHINGTON — 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.
The recovery, which showed signs of strengthening earlier this year, is losing momentum. And fears are growing that it could stall.
Consumers have cut spending. Businesses, uncertain about the strength of their own sales or the economic recovery, are sitting on cash, reluctant to beef up hiring and expand operations. A stalled housing market, near double-digit unemployment and an edgy Wall Street shaken by Europe's debt crisis are other factors playing into the economic slowdown.
Bernanke downplayed the odds that the economy will slide back into a "double-dip" recession. But he acknowledged the recovery is fragile. He is trying to send 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.
With little appetite in Congress to provide a major new stimulus package, more pressure falls on Bernanke to keep the recovery going.
Bernanke said the debt crisis in Europe, which has rattled Wall Street, played a role in the Fed's "somewhat weaker outlook." Although financial markets have improved considerably since the depth of the financial crisis in fall 2008, conditions have become "less supportive of economic growth in recent months," he explained.
As a result, Bernanke said progress in reducing the nation's unemployment rate, now at 9.5 percent, is expected to be "somewhat slower" than thought. Unemployment is expect to stay high, near 9 percent, through the end of this year under the Fed's forecast.
High unemployment is a drag on household spending, Bernanke said, although he believed both consumers and businesses would spend enough to keep the recovery intact. Bernanke also said that the housing market remains weak and noted that the overhang of vacant or foreclosed houses is weighing on home prices and home construction.