Federal Reserve Chairman Ben Bernanke said America's central bank is ready to provide fresh support for the economy if a debt-related financial crisis in Europe escalates. But he stopped short of hinting at any immediate new efforts by the Fed to inject new monetary fuel into the US economy.

"[The Fed] stands ready to do whatever is necessary to protect our financial system," Mr. Bernanke said at a hearing of Congress's Joint Economic Committee Thursday morning.

Bernanke said US policymakers can do little to affect whether Europe steers toward resolving its crisis.

Instead, he framed the Fed's job as responding to conditions at home, including a recent weakening in job creation, and watching Europe for signs of ripple effects on things like US financial conditions and exports. He said events there – including upcoming elections in Greece, which could signal whether that nation is likely to exit the euro currency area and trigger worry about a wider eurozone breakup – could influence the already-fragile economic recovery for American workers.

What could the Fed do to spur the US economy?

One possibility that Bernanke said the Fed would examine at its next policy meeting, scheduled for June 19 and 20, is a new round of "quantitative easing" – bond purchases by the Fed. With the Fed already setting short-term interest rates near zero percent, buying Treasury bonds is a strategy by which the Fed has tried to reduce long-term interest rates and encourage investors to buy other assets such as stocks. Bernanke said past rounds of quantitative easing have worked, including by buoying the stock market.

But some lawmakers questioned whether the economy would have much to gain from a third round of quantitative easing. And with long-term Treasury yields already near record lows, Bernanke acknowledged that some financial analysts see "diminishing returns" from new efforts along that line.

In fact, Bernanke used the hearing to call on Congress to do its part in strengthening growth. The major channel to do that, Bernanke said, would be to resolve questions about future tax rates in both the short and medium term. In the short term, the expiration of tax cuts on Dec. 31 represents a "fiscal cliff" that would impose a sharp blow to consumer spending if unaddressed, he said.

But the Fed chairman added that, even as Congress tries to avoid squeezing the economy in the short run, lawmakers also need to set credible plans to control budget deficits over the next decade or more.

Some questions at the hearing focused on what the Fed could do if events in Europe caused a flareup of financial-market distress.

Bernanke said the "main tool" would be to support banks by standing ready to make emergency loans to solvent banks against collateral they provide. That could help prevent a financial panic from spreading, based on fears that a recession in Europe would ripple through the global banking system and cause a credit freeze-up.

He also said the Fed is keeping careful watch on US banks, monitoring their exposure to Europe.

Bernanke said European nations have ample economic resources to resolve concerns about large government debts. The big hurdle, he said, is the political challenge of agreeing on debt-control and growth strategies among 17 disparate nations in the currency union.

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The central bank's mandate from Congress is to pursue monetary policy that keeps inflation stable while maximizing employment.

As the Fed's policy committee prepares to meet, inflation appears fairly tame, but the pace of job creation has cooled. Bernanke said that an earlier spurt of job growth may have reflected "catchup" as employers made up for the outsized layoffs that occurred during the recession. He said that if such a catchup period is now over, then future job gains may be harder to come by unless economic growth speeds up.