Economy weakens, but Fed stands pat

Federal Reserve Chairman Ben Bernanke told Congress on Wednesday that even though the economic recovery has weakened, the Fed plans no new steps now to bolster it.

Bernanke said the Fed would consider action if matters worsened.

His comments to the Senate Banking Committee sent stocks tumbling. The Dow Jones industrial average had been up 20 points before he spoke. It fell as much as 160 points during his testimony, but recovered some losses to close down 109 points. Investors shifted money into the safety of Treasury bonds; the yield on 10-year Treasury notes fell to 2.86 percent.

“The markets are more paranoid than the Fed is about the economy’s health,” said David Resler, chief U.S. economist at Nomura Securities. Investors wanted to hear a strategy “that will make a second dip a very remote possibility.”

Associated Press