The White House and U.S. Federal Reserve chairman Ben Bernanke both threw their support behind a stimulus package Thursday to prevent the slumping U.S. economy from sliding into recession.

Federal Reserve Board chairman Ben Bernanke pauses while discussing the near-term economic outlook during testimony Thursday in Washington before the House budget committee.
(Dennis Cook/Associated Press)

"Fiscal action could be helpful in principle, as fiscal and monetary stimulus together may provide broader support for the economy than monetary policy actions alone," Bernanke told a Congressional committee.

He wasn't specific about the kind of economic stimulus that he felt was necessary, except to say that the timing and design of any package would be "critically important."  

"To be useful, a fiscal stimulus package should be implemented quickly," so that it would encourage spending over the next 12 months, he said.

As Bernanke was speaking, the White House said for the first time that it would support government intervention to prop up the economy.

"The president does believe that over the short term, to deal with the softening of the economy, that some boost is necessary," Bush spokesman Tony Fratto said.

Fratto said all options are being considered, but would not be more specific. Bush is expected to speak about his ideas for a stimulus package on Friday. Talks with Congressional leaders are underway.

Bernanke repeated that the federal reserve was "prepared to act in a decisive and timely manner" to counter economic and financial stability.

Financial markets are expecting that the federal reserve will slash its key lending rate by half a percentage point on Jan. 30, and some observers think it might even cut rates before that scheduled meeting.

It has already cut rates by a full percentage point since September when economic signposts pointed to a slowdown as the U.S. housing market entered a severe slump and credit conditions worsened.

Recent U.S. economic indicators have been largely negative — retail spending has fallen, housing starts are at multi-year lows, foreclosures are way up, unemployment has risen, and stock markets have been selling off.

Bernanke told committee members Thursday that he felt that the U.S. economy would slow down this year but would manage to avoid going into recession.   

(With files from the Associated Press)