US Fed Chief Bernanke warns about Slow growth for "several" quarters; stimulus needed

Washington - US growth will remain weak for "several" quarters as the world's largest economy works through a financial and housing crisis that has sharply reduced spending, Federal Reserve Chairman Ben Bernanke warned Monday.

Amid fears that the US has already dipped into a recession, Bernanke told a congressional hearing that a second fiscal stimulus package could help kick-start the economy.

Congress passed a 150-billion-dollar stimulus package in the spring, offering tax rebate cheques that raised consumer spending and helped boost growth in the second quarter.

"With the economy likely to be weak for several quarters, and with some risk of a protracted slowdown, consideration of a fiscal package by the Congress at this juncture seems appropriate," Bernanke told the Budget Committee of the House of Representatives.

The US central bank head painted a depressing picture of the state of the economy in his opening statement before the committee. He said short-term lending between banks had become "essentially unavailable" as shaky financial institutions have continued hoarding cash.

Though inflation has eased amid falling oil prices, "the pace of economic activity is likely to be below that of its longer-run potential for several quarters," Bernanke said.

Stocks in the US and around the world have plummeted in the past few weeks. Bernanke said the Treasury's broad new powers to invest in banks under the 700-billion-dollar rescue plan - which has been mirrored by a number of other countries - would help restore confidence.

But he warned that "the stabilization of the financial system, though an essential first step, will not quickly eliminate the challenges still faced by the broader economy." dpa