"In light of these (recent) developments, the Federal Reserve will need to consider whether the current stance of policy remains appropriate," Bernanke said in a speech at the National Association for Business Economics 50th Annual Meeting in Washington.

"The Federal Reserve will continue to use the tools at its disposal to improve market functioning and liquidity," Bernanke said.

Bernanke said "losses suffered by many banks and non-bank financial firms … has made has made investors extremely reluctant to bear credit risk, resulting in further declines in asset prices and a drying up of liquidity in a number of funding markets."

"The sluggishness of real incomes, together with tighter credit and declining household wealth, is now showing through more clearly to consumer spending," he said.

In turn, less spending slows the economic engine. "Overall, the combination of the incoming data and recent financial developments suggests that the outlook for economic growth has worsened," Bernanke said.