The Federal Reserve is prepared to take further steps to help an economic recovery that is "close to faltering", Fed chairman Ben Bernanke said on Tuesday.

Citing anemic employment, depressed confidence and financial risks from Europe, Bernanke urged lawmakers not to cut spending too quickly in the short term even as they grapple with trimming the long-run budget deficit.

He also made clear the Fed -- the US central bank -- stands ready to ease monetary conditions further following its launch of a new stimulus measure in September.   

"The (Fed's policy-setting Open Market) Committee will continue to closely monitor economic developments and is prepared to take further action as appropriate to promote a stronger economic recovery in the context of price stability," Bernanke told the Joint Economic Committee of Congress.   

His language was the firmest indication yet that the Fed may take further steps to prevent a weakening US economy from stumbling back into recession. Financial analysts over the past week increasingly have warned that economic contraction is a considerable and mounting risk.

The prospect of further Fed support for the economy provided support to US stocks, which pared earlier losses sustained on the darkening outlook in Europe amid fears of a Greek default.

Bernanke said government belt-tightening was likely to prove a significant drag on the world's largest economy, which averaged less than 1 percent annualized growth in the first half of the year. - Reuters