Carolyn Kaster / AP
Federal Reserve Board Chairman Ben Bernanke pauses before giving a semiannual report to the Senate Banking Committee on Tuesday.
By NBC News.com staff and wire reports
Federal Reserve Board Chairman Ben Bernanke said the U.S. economy has lost some speed?in the first half of the year, but he offered no clues about which steps?the Fed might take to get?jobs, real estate, manufacturing and consumer spending back on track.
Bernanke, in remarks prepared for testimony Tuesday before the Senate Banking Committee, said the Fed was prepared to act to aid the?economy, but that's as far as?his remarks went about a topic investors were eager to hear more about.
"Reflecting its concerns about the slow pace of progress in reducing unemployment and the downside risks to the economic outlook, the Committee made clear at its June meeting that it is prepared to take further action as appropriate to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability," Bernanke's statement said.
Investors had been?hoping Bernanke would signal another round of bond purchases is in the offing. The purchases seek to push down long-term interest rates and encourage more borrowing and spending. The first two rounds triggered powerful rallies in the U.S. stock market.
The economy was already sputtering when the Fed's policymaking committee last met June 19-20. At that meeting, the Fed decided to extend a program that shifts its bond portfolio to try to lower long-term interest rates.
Minutes of the June meeting show that Fed officials were open to taking further action ? but were divided over whether the economy needs help now.
Since then, the government has reported that job growth slowed sharply in the April-June quarter ? to 75,000 a month from 226,000 a month from January through March. The unemployment rate stayed at 8.2 percent in last month.
More dismal news arrived Monday. Retail sales fell in June for the third straight month, the government reported. The International Monetary Fund shaved its estimate for global and U.S. growth for this year and next. And the IMF warned that Europe's financial crisis and a potential budget crisis in the United States could slow world growth even further next year.
Bernanke told lawmakers recent deterioration in the labor market suggests the nation's 8.2 percent jobless rate will come down all too gradually, admitting for the first time that the softness could not be explained away by purely seasonal factors.
Committee Chairman Tim Johnson, D-S.D., questioned Bernanke about his knowledge of the Libor rate-fixing scandal after it emerged last week that Treasury Secretary Timothy Geithner, then head of the New York Fed, was aware of problems in the setting of interbank rates in early 2008.
Johnson asked if Bernanke could tell the American people what the Fed knew, when did it know it and what the Fed did about it.
Bernanke gave a detailed response, beginning with?that the Federal Reserve Bank of New York had first heard about the possible issue through a phone call from a Barclays trader in April of 2008 in which the trader said he thought Barclays was under-reporting its rate. He said Geithner briefed top U.S. regulators about Libor rates on May 1, 2008.
He said there was a substantial response by the N.Y. Fed to let authorities know what the Fed had heard regarding problems with the Libor rate, which affects a wide range of debt, including mortgage rates and student loans.
"There was a substantial response from" the Fed, Bernanke told lawmakers.
Going forward, Bernanke said he'd like to see some changes in the Libor system. "I would like to see additional reforms to the Libor process, assuming that Libor will continue to be a benchmark for financial contracts," Bernanke said.
Bernanke repeated his warning to lawmakers about the importance of developing a credible long-term plan to reduce U.S. government debt levels while avoiding sharp spending cuts and tax hikes in the near-term. He highlighted concerns about a looming "fiscal cliff" that would likely send the economy into recession unless Congress acts.
"The most effective way that the Congress could help to support the economy right now would be to work to address the nation's fiscal challenges in a way that takes into account both the need for long-run sustainability and the fragility of the recovery," his statement said.
In addition to uncertainty related to fiscal policy, the economy is being restrained by tight borrowing conditions for some businesses and consumers, Bernanke said.
Bernanke said the Fed remains in close contact with European authorities, and is focused on making sure the U.S. financial system remains resilient to financial shocks.
"Europe's financial markets and economy remain under significant stress, with spillover effects on financial and economic conditions in the rest of the world, including the United States," he said.
Reuters and The Associated Press contributed to this report.
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