Bernanke Signals Rate Cut

By JEANNINE AVERSA – 5 hours ago
WASHINGTON (AP) — Federal Reserve Chairman Ben Bernanke has warned Congress that the country is in for a period of sluggish economic growth given the housing bust and credit crunch.
He sent a fresh signal Wednesday that the Fed will lower rates yet again to brace the teetering economy.
The Fed chief also told a House committee that the economic situation has become "distinctly less favorable" since last summer.
THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.
WASHINGTON (AP) — Federal Reserve Chairman Ben Bernanke is giving Congress a fresh assessment of the country's economic health, which has been pummeled by a housing bust, a credit crunch and soaring energy prices.
Back-to-back appearances on Capitol Hill were scheduled to begin Wednesday for Bernanke, who is facing his biggest challenges yet in his two years at the Fed's helm.
Bernanke, testifying before the House Financial Services Committee, was expected to signal another cut in a key interest rate, despite fresh evidence that inflation is picking up. Since September, the Fed has been lowering its key rate, which now stands at 3 percent. Economists are predicting another reduction at the Fed's next meeting, on March. 18.
The government reported Tuesday a sharp increase in wholesale prices. That followed a big increase in prices paid by consumers.
At the same time, the economy is losing speed, raising the specter that stagflation is brewing. That's a dreaded mix of stagnant economic activity, rising prices, lagging wages and higher unemployment — something the country hasn't seen since the 1970s.
The Fed's mission is to nurture economic growth, while keeping inflation under control. With fears growing that the economy is headed for a recession — if it hasn't toppled into one already, the Fed has been focusing on shoring up the economy through interest rate reductions.

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