Federal Reserve Chairman Ben Bernanke has warned that the outlook for the US economy is 'unusually uncertain'.
However, he said that the central bank could step in to bolster a faltering recovery.
Mr Bernanke told US lawmakers that the world's largest economy would see only 'moderate growth, a gradual decline in the unemployment rate, and subdued inflation over the next several years.'
Underlining the severity of the crisis, he warned private-sector hiring was still growing at 'a pace insufficient to reduce the employment rate materially'.
His comments kicked off two days of hearings in Congress, which is deeply divided over how to deal with high unemployment and a stuttering recovery.
With the unemployment rate running at 9.5% and amid fears of a looming double-dip recession, Mr Bernanke came under pressure to further stimulate the recovery.
Responding to those demands, he said the Fed was 'prepared to take further policy actions as needed.'
'If the recovery seems to be faltering, then we will at least need to review our options', he added.
His comments mark a rapid turnaround for the central bank, which until recently had focused on how to wind down crisis measures that have left the Fed holding more than a trillion dollars in assets.
The Fed has little room to cut already historically low interest rates and concerns about the soaring US deficit likely would make buying up more assets deeply unpopular.
But Mr Bernanke insisted the Fed could act if necessary.
'We do still have options', he said, outlining four measures that could help stimulate growth, including buying new assets and lowering selected interest rates.
But he indicated any action was unlikely until it becomes clear that the economic recovery is not sustainable or self-propelling.
'We are going to continue to monitor the economy closely and continue to evaluate the alternatives that we have', he said.
'If the recovery is continuing at a moderate pace, the incentive would be less.'
