Bernanke speaks; Dow drops

WASHINGTON (AP) - Federal Reserve Chairman Ben Bernanke warned Tuesday that the financial crisis has not only darkened the country's current economic performance but also could prolong the pain.

The Fed chief's more gloomy assessment appeared to open the door wider to an interest rate cut on or before Oct. 28-29, the central bank's next meeting, to brace the wobbly economy.

Bernanke said the Fed will "need to consider" whether its current stance of holding rates steady "remains appropriate" given the fallout from the worst financial crisis in decades.

If the Fed does lower its key rate from 2 percent it would mark an about-face. The Fed in June had halted an aggressive rate-cutting campaign to revive the economy out of fear those low rates would aggravate inflation. Since then, financial and economic conditions have deteriorated, while record-high energy prices have calmed, giving the Fed more leeway to again cut rates.

Many believe the country is on the brink of, or already in, its first recession since 2001.

"The outlook for economic growth has worsened," Bernanke said told the annual meeting here of the National Association for Business Economics.

Shortly after 3 p.m., the Dow Jones industrials were down 286.65 to 9,668.85, one day after the Dow dropped below the 10,000 mark for the first time in four years.