SAVE MONEY ON TRAVEL DEALS

Bernanke told members of the U.S. Senate Committee on Banking, Housing and Urban Affairs in Washington that lowering key interest rates and expanded lending in recent months "have had positive effects."

However, "declining house prices, a softening labor market and rising prices of oil, food and some other commodities" present the economy with "numerous difficulties", he said.

Tighter credit and inflation of gas and food prices have lead to "restrained" consumer spending, Bernanke said.

The Fed now expects economic growth "to pick up gradually over the next two years as residential construction bottoms out and begins a slow recovery", he said.

Bernanke also said "helping the financial markets to return to more normal functioning will continue to be a top priority of the Federal Reserve", a possible indication that the Fed will hold down interest rates in the near term.

 BREAKING STORIES

U.S. discussing plans to lift FDIC cap

McCain ad budget goes negative

Obama, McCain support Fed's rate cut

FDIC insurance added to bailout debate

Obama proposes raising FDIC limit

Wildfires eat into Forest Service budget

FDIC-insured banks safe, FDIC says

Energy prices gain from financial fix

BOJ leaves interest rate unchanged

All eyes on Fed after bleak Monday

New York area business mixed in report

FDIC re-writes loan terms at IndyMac

Bernanke warns of slow economic recovery

IndyMac deposits safe, FDIC says

Mid-Atlantic manufacturing index drops

Industrial production slowed in May

Budget resolution squeaks through House

U.S. Federal Reserve expands oversight

U.S. industrial production slowed in April

May manufacturing flat in New York