Federal Reserve chairman Mr Ben Bernanke acknowledged the economy has slowed but offered no hint the US central bank is considering any more stimulus to accelerate growth. He also warned members of Congress who might be planning aggressive budget cuts that they have the potential to derail the recovery if cuts in government spending take hold too soon.

A recent spate of weak economic data, capped report showing anemic job creation last month, had renewed speculation the Fed might again come to the economy's aid.

Mr Bernanke gave no such indication but did say the recovery was fragile enough to warrant keeping in place the extraordinary monetary support the Fed has already provided.

Speaking to a banking conference, the Fed chairman said that while he expects the economy to strengthen in the second half of the year, the job market bears close monitoring. He said that "The economy is still producing at levels well below its potential. Consequently, accommodative monetary policies are still needed."

Mr Bernanke repeated his view that a spike in US inflation, while worrisome, should prove fleeting as commodity prices moderate. In addition, weak wage growth and stable inflation expectations should help keep prices down.

On the budget, Mr Bernanke call for a long term plan for a sustainable fiscal path but warned politicians against massive short-term cuts in spending. He said that "A sharp fiscal consolidation focused on the very near term could be self defeating if it were to undercut the still fragile recovery.”

He said that "By taking decisions today that lead to fiscal consolidation over a longer horizon, policymakers can avoid a sudden fiscal contraction that could put the recovery at risk.”

(Sourced from Reuters)