In testimony before Congress this morning, Federal Reserve Chairman Ben Bernanke said the outlook for the U.S. economy has worsened and it could endure a “period of sluggish growth” before picking up later this year, the Associated Press reported.

In remarks to the Senate Banking Committee, he said the double hit of the housing and credit crises has greatly strained the economy. Hiring has slowed and consumers are expected to tighten their spending further as they pay high energy prices and watch the value of their homes deteriorate.

As a result of these dangers, the Fed “will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks,” Bernanke said. He indicated that the central bank would likely continue to lower a key interest rate, which along with the $168 billion economic stimulus package signed into law by President George Bush yesterday could help the United States avoid recession.

In a span of just eight days in January, Federal Reserve policy-makers cut the federal funds rate by 1.25 percentage points, the biggest one-month rate reduction in 25 years, and economists believe they will cut rates again at their next meeting in March.