Federal Reserve Chairman Ben Bernanke warned today that the financial crisis has not only darkened the country's current economic performance but also could prolong the pain. The Fed chief's gloomy assessment appeared to hint of an interest rate cut on or before the Fed’s next meeting later this month. Despite the sign of a possible rate cut, the Dow was down around 300 points midday.
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% it would mark an about-face. The Fed halted in June an aggressive rate-cutting campaign to revive the economy out of fear those low rates would aggravate inflation.