Federal Reserve Chairman Ben Bernanke said Friday that the problems in the nation's financial markets persist and still threaten the economy.
Bernanke said that the financial woes, coupled with record oil prices and the weakening economy, had created "one of the most challenging economic and policy environments in memory."
In prepared remarks at a conference in Jackson Hole, Wyo., Bernanke also said he is encouraged by the recent oil price decline, which may signal that inflationary pressures are on the wane.
"Although we have seen improved functioning in some markets, the financial storm that reached gale force some weeks before our last meeting here in Jackson Hole has not yet subsided," Bernanke said.
"Its effects on the broader economy are becoming apparent in the form of softening economic activity and rising unemployment," he added.
Bernanke's comments seem to signal that the central bank will keep its key interest rate at 2%, rather than raise it an attempt to keep prices in check.
"The commentary tells me that rates are on hold until they see some blue skies through this financial storm," said John Silvia, chief economist for Wachovia.
