Bernanke: Fed will take action if economy falters

JACKSON, Wyo. (AP) — Federal Reserve Chairman Ben Bernanke said today that the Fed will consider making another large-scale purchase of securities if the slowing economy were to deteriorate significantly and signs of deflation were to flare.

The Fed chief offered his most extensive thoughts yet on how to pull the U.S. economy out of a deepening slump. His remarks came 90 minutes after the government said the economy slowed sharply in the second quarter to a 1.6 percent pace.

Fears are growing that the country could lapse back into a recession. Bernanke described the economic outlook as "inherently uncertain" and said the economy "remains vulnerable to unexpected developments."

Bernanke stopped short of committing to any specific action. But he raised the prospect of another Fed purchase of securities, most likely government debt or mortgage securities, to drive down rates on mortgages and other debt to spur more spending by Americans.