Bernanke: Fed ready to act if stresses escalate (by Greg Robb)

WASHINGTON (MarketWatch) - The Federal Reserve stands ready to act to protect the financial system and the economy in the event that financial stresses from the European crisis escalate, Fed Chief Ben Bernanke said Thursday. In testimony prepared for delivery to the Joint Economic Committee of Congress. Bernanke stuck to his April forecast that growth will continue at a moderate pace. He said the recovery had been bolstered by consumer spending, as consumers had more money to spend given the drop in gasoline prices. Business caution continued to restrain the economy, he noted. Bernanke said some of the apparent slowing in economic data, including last Friday's weak jobs number, might be due to unusually warm weather this past winter, which may have brought forward some activity. There have been a few encouraging signs in the housing market, he noted. The Fed's ultra-low interest rate policy is justified given high unemployment, subdued inflation and "the presence of significant downside risks," he said.