Bernanke says Fed would supply further stimulus if needed

Federal Reserve Chairman Ben Bernanke says the central bank is prepared to provide additional stimulus if the current economic lull persists. Delivering his twice-yearly economic report to Congress, Bernanke laid out three options the central bank would consider. Bernanke says the Fed could launch another round of Treasury bond buying, the third such effort since 2009. It could cut the interest paid to banks on the reserves they hold as a way to encourage them to lend more. The Fed could also be more explicit in spelling out just how long it planned to keep rates at record-low levels. That would give investors confidence about the Fed’s efforts to continue supporting the economy. Stocks jumped after Bernanke signaled the Fed’s willingness to take more steps to boost the sluggish economy. The Dow Jones industrial average rose 139 points in early-morning trading, and broader indexes gained. Bernanke maintained that temporary factors, such as high food and gas prices, have slowed the economy. He says those factors should ease in the second half of the year and growth should pick up. But if that forecast proves wrong, he said the Fed is prepared to do more. “The possibility remains that the recent economic weakness may prove more persistent than expected and that deflationary risks might reemerge, implying a need for additional policy support,” Bernanke told the House Financial Services Committee on the first of two days of Capitol Hill testimony.