Fed chief: US recovery is 'close to faltering'

The US Federal Reserve is ready to take further steps to support the American economy as the recovery is "close to faltering", its chairman Ben Bernanke said yesterday.

The comments come less than a month after the Federal Reserve, the country's central bank, announced a $400bn (£260bn) move to put downward pressure on long-term interest rates in a bid to boost the world's largest economy.

"The economy is close, the recovery is close to faltering," Mr Bernanke told Congress.

"We need to make sure that the recovery continues and doesn't drop back and that the unemployment rate continues to fall downward."

Mr Bernanke said the Federal Reserve's policy-setting Open Market Committee would "continue to closely monitor economic developments and is prepared to take further action as appropriate to promote a stronger economic recovery in the context of price stability". He also warned about the potential impact of a disorderly Greek default as it would lead to a "huge amount of financial volatility globally".

"We are kind of innocent bystanders here," he said, referring to the US's role in the crisis. "The problems are not really economic, they are political, because what they are trying to do is find solutions acceptable to 17 different countries."