Forex News – Bernanke’s offer of support to US economy calms markets

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United States Federal Reserve chairman Ben Bernanke said in a testimony today that “the Federal Reserve is prepared to take further steps to help an economy that is close to faltering.”

In his gloomy outlook for the US economy, he acknowledged that the employment market is still weak and consumer confidence is low, and matters are made worse by the debt crisis in Europe.

Bernanke urged lawmakers not to cut spending too quickly in the short term even as they try to cut budget deficits. “An important objective is to avoid fiscal actions that could impede the ongoing economic recovery,” he said,

He asserted that the Fed’s monetary policy committee “considers inflationary pressures well under control” and given high unemployment, would be ready to “ease monetary conditions further” following the launch of a new stimulus measure in September.

“The Committee will 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,” Bernanke told the Joint Economic Committee of Congress.

The prospect of further Fed support for the economy gave US equity markets a lift after the market saw selling early in the day.

EURUSD was boosted by Bernanke’s comments to 1.3283 from 1.3169.

However speculation of further quantitative easing could weaken the US dollar as QE3 would flood the system with more dollars.