Ben Bernanke says Fed ready to act if crisis intensifies He said last year's increases in household spending have been sustained and that falling energy prices should help offset slow income growth for Americans. He also said that inflation should stay at or below 2pc, within the central bank's comfort zone. And despite Europe's problems, too, demand for US exports "has held up well." But the economy remains frail, households and businesses deeply cautious, the housing market still depressed, and unemployment stubbornly high. Moreover the economy remains vulnerable to two potential shocks: the eurozone crisis and the year-end "fiscal cliff." The eurozone turmoil has already strained global financial markets, and it has pushed a cloud over US consumer and business confidence, he said. "The situation in Europe poses significant risks to the US financial system and economy and must be monitored closely," he warned. European policymakers have taken a number of actions to address the crisis, but more will likely be needed to stabilize euro-area banks, calm market fears about sovereign finances, achieve a workable fiscal framework for the euro area, and lay the foundations for long-term economic growth. The other looming threat is the legislation in place that could both raise taxes for Americans and force a drastic cut in government spending at the year's end, moves that economists say could drive the country back to recession if not changed. "The so-called fiscal cliff would, if allowed to occur, pose a significant threat to the recovery," he said.