Bernanke: Fed will take action if economy falters

Federal Reserve Chairman Ben Bernanke says 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.

Bernanke’s remarks, prepared for delivery to a conference here, 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. The Fed chief stops short of committing to any specific action. He raises 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.

Bernanke describes the economic outlook as “inherently uncertain” and says the economy “remains vulnerable to unexpected developments.”