Bernanke says U.S. stimulus plan may be appropriate

The chairman of the Federal Reserve, Ben Bernanke, warned of a possible "protracted slowdown" on Monday and said consideration of a second economic stimulus plan would be "appropriate."
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"With the economy likely to be weak for several quarters and with some risk of a protracted slowdown, consideration of a fiscal package by the Congress at this juncture seems appropriate," he said in comments to a House of Representatives budget committee.
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Bernanke said that economic recovery would depend greatly "on the pace at which financial and credit markets return to more normal functioning" and said Congress should consider ways to encourage lending in any package.
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"If Congress proceeds with a fiscal package it should consider including measures to help improve access to credit by consumers, homebuyers, businesses and other borrowers," he said in his prepared remarks.
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The speaker of the House, Democrat Nancy Pelosi, has suggested that Congress may convene after the November 4 presidential elections to pass a projected 150-billion-dollar stimulus package.
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President George W. Bush signed into law a 168-billion-dollar stimulus package earlier this year, but Senate Republicans rejected a second package last month.
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Bernanke was candid about the slowing US economy, saying consumption was falling, confidence was low and the housing market still depressed.
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"The slowing in spending and activity spans most major sectors," he said.
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He gave no firm hint of further interest rate cuts to help the economy, but said inflationary pressures were falling due to declining prices of commodities and imports.
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"If not reversed, these developments, together with the likelihood that economic activity will fall short of potential for a time, should bring inflation down to levels consistent with price stability," he said.
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On October 8, the Fed slashed its interest rates by 0.50 percentage points in a coordinated move with other major central banks around the world.
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The key federal funds rate is currently pegged at 1.5 percent. The Federal Open Market Committee holds its next rate-setting meeting on October 28-29.
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The Fed has spent weeks in crisis-management mode, using a series of weapons to combat the most severe financial crisis since the Great Depression of the 1930s.