The head of the U.S. central bank, Ben Bernanke, said Thursday that Europe's financial woes could spread across the Atlantic and harm the U.S. economy.
Europe's economic problems have already slowed U.S. exports, hurt business and consumer confidence, and put pressure of American financial markets and institutions, Bernanke said.
"The situation in Europe poses significant risks to the U.S. financial system and economy and must be monitored closely. As always, the Federal Reserve remains prepared to take action as needed to protect the U.S. financial system and economy in the event that financial stresses escalate," he said.
The Fed chairman did not outline any specific actions during his remarks to a key congressional committee.
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The U.S. central bank cut interest rates to nearly zero a couple of years ago in a bid to make it easier for companies to borrow the money needed to expand and hire more people.
The Fed has also tried to cut longer term interest rates with two massive purchases of bonds. Many stories in the financial press have been speculating that a third round of such "quantitative easing" might be in the works, but Bernanke offered no specifics in Thursday's prepared remarks.
Bernanke again told lawmakers that government spending needs to be cut over the long term, but warned them that cutting too much too soon could hurt the economic recovery.
He predicted the U.S. economy, which is the world's largest, will continue growing at a "moderate" pace this year.