The chairman of the Federal Reserve says the bank sees a high degree of uncertainty in the US economic outlook and is worried that strains in financial markets may lead to broader problems.
Ben Bernanke made the remarks in a speech to a business group in Charlotte, North Carolina.
He said the Fed was carefully monitoring 'mixed' economic data, with a depressed housing sector, strong labour market and consumer spending 'on the soft side'.
Bernanke said the central bank's economic outlook has been 'importantly affected over the past month by renewed turbulence in the financial markets' as well.
That turbulence has 'partially reversed' the market improvements of September and October and created tighter financial conditions which have the 'potential to impose additional restraint on activity in housing markets and in other credit-sensitive sectors'.
Bernanke said the Fed would be paying particular attention to how the financial market strains might hurt the rest of the economy, and would have to be 'exceptionally alert and flexible' in dealing with the unusual economic uncertainty.
As usual, Bernanke made no explicit comment on the Fed's next step on monetary policy. But his remarks echoed the words of vice chairman Donald Kohn on Wednesday in a speech that Wall Street interpreted as a signal the interest rate setting Federal Open Market Committee (FOMC) was likely to cut rates at its December 11 meeting.
