JACKSON HOLE, Wyo. (AP) -- Chairman Ben Bernanke is proposing no new steps by the Federal Reserve to boost the economy while hinting that Congress may need to act to stimulate hiring and growth.
Bernanke said Friday that while record-low interest rates will promote growth over time, the weak economy requires further help in the short run. He is speaking at an annual economic conference in Jackson Hole, Wyo.
His speech follows news that the economy grew at an annual rate of just 1 percent this spring and 0.7 percent for the first six months of the year. Only slightly healthier expansion is foreseen for the second half.
Bernanke said he's optimistic that the job market and the economy will return to full health in the long run.
Stocks fell lower after the speech was released. The Dow had been down about 78 points, about 0.7 percent, shortly before 10 a.m. The loss quickly extended to 145 points.
In his speech, Bernanke left open the possibility that the Fed will take further steps to strengthen the economy. He said its September meeting will be held over two days instead of just one to allow for a "fuller discussion" and that the Fed "is prepared to employ its tools as appropriate to promote a stronger economic recovery."
Congress has been focused on shrinking budget deficits and seems unlikely to back any new spending to try to energize the economy. A plan lawmakers passed this month means annual deficits are expected to be reduced by $3.3 trillion over the next decade through spending cuts.
The Fed chairman said long-term deficit reduction is necessary. But he emphasized that future economic health could be jeopardized if hiring and growth are not strengthened now.
"Fiscal policymakers should not ... disregard the fragility of the current economic recovery," he said.
Bernanke also was critical of Congress' handling of this summer's battle over raising the debt ceiling. He said it disrupted the economy, and another episode like that could have long-term negative consequences.
Analysts noted the lack of new proposals in Bernanke's speech.
"He essentially hit the ball over to fiscal authorities and said, `There's only so much we can do,"' said Aneta Markowska, senior U.S. economist at Societe Generale.
But she said the extension of the Fed's September meeting to two days might suggest something new could be unveiled.
"Maybe that's a subtle signal they might announce something," Markowska said.
Bernanke's speech comes at a critical moment for the economy. Some economists worry that another recession might be near. A big reason is consumer spending has slowed. Home prices are depressed. Workers' pay is barely rising. Household debt loads remain high.
All that, compounded by Europe's debt crisis, has spooked the stock markets and unnerved consumers. That's why many have looked with anticipation to the Fed to do more. It has already kept short-term interest rates near zero for 2 1/2 years. And earlier this month, it said it would keep them there through mid-2013.
"I'm a little fearful that there are a lot of expectations built in that I don't think Bernanke can deliver on," said Jack Ablin, chief investment officer at Harris Private Bank.
To promote growth, Bernanke said the government must pursue tax, trade, and regulatory policies that encourage economic health.
The approach of this year's Jackson Hole conference raised expectations. In last year's speech, Bernanke signaled that the Fed might unveil a Treasury-buying plan to help lower long-term rates. In November, the Fed announced a $600 billion such program. The bond purchases were intended to lower long-term rates, lift stock prices and spur more spending.
Immediately afterward, stock prices started rising and continued up until May, when they leveled out. Even counting the past month's 12 percent drop in the Dow Jones industrial average, the Dow remains about 12 percent above its close the day before Bernanke spoke last August.
Still, critics, from congressional Republicans to some Fed officials, have raised concerns that the Fed's Treasury purchases could ignite inflation and speculative buying on Wall Street, while doing little to aid the economy.
Others have wondered whether any further lowering of long-term rates is needed. Investors seeking the safety of U.S. debt have forced down the yield on the 10-year Treasury note to 2.18 percent -- a full point lower than it was when the Fed completed its Treasury purchases about two months ago. Yet the economy is still sputtering.
The Congressional Budget Office this week estimated that the unemployment rate will hover around 8.5 percent when President Barack Obama seeks re-election next year. And it predicts that unemployment will stay above 8 percent through 2013.
That continued weakness is why many speculated that the Fed would still embark on some new plan to help the economy. They note that while inflation has risen, it's still within the Fed's target range.
Many economists note, however, that the economy's main problem is not that interest rates are too high. They say the main problem is that consumer spending remains too weak. So businesses feel little incentive to hire, expand and invest.
Until demand for goods and services steps us, the Fed may have limited ability to strengthen the economy.
Crutsinger reported from Washington. AP Business Writer Daniel Wagner contributed to this report.