He acknowledged that disruptions in markets stemming from a slumping housing market and a sharp rise in delinquencies from subprime loans could hurt the overall economy. Those
distortions would affect the Fed's thinking, he said.
President Bush, meanwhile, outlined steps to help struggling subprime mortgage borrowers. Bush, speaking at the White House an hour after Bernanke, offered assistance for homeowners with subprime mortgages to avoid default via changes to the tax code.
The Fed chairman said economic data show the U.S. economy continued to expand moderately into the summer, in spite of sharp declines in housing markets.
However, he noted the ground had since been shifted by events in financial markets, lifting the degree of uncertainty under which the Fed would have to chart policy.
"In light of recent financial developments, economic data bearing on past months or quarters may be less useful than usual for our forecasts of economic activity and inflation.
"Consequently, we will put particularly close attention to the timeliest indicators, as well as information gleaned from our business and banking contacts," he said.