British Prime Minister Gordon Brown, left, talks with U.S. Federal Reserve chairman Ben Bernanke during a meeting Tuesday at 10 Downing Street in London. (Shaun Curry/Pool/Associated Press)

Expect governments to buy more bad corporate bonds and guarantee the debt of more troubled financial institutions in an effort to boost global economic growth, said the head of the U.S. central bank in a major speech on Tuesday in the U.K.

Ben Bernanke, chairman of the U.S. Federal Reserve Board, told a London audience that the U.S. Congress, his own organization and other governments have engaged in all sorts of policies to help ailing financial institutions, loosen up credit markets and boost a slumping world economy.

But, more still needs to be done, he said in his first major policy speech since early December.

"With the worsening of the economy's growth prospects, continued credit losses and asset markdowns may maintain for a time the pressure on the capital and balance sheet capacities of financial institutions. Consequently, more capital injections and guarantees may become necessary to ensure stability and the normalization of credit markets," Bernanke said.

"The world today faces both short-term and long-term challenges. In the near term, the highest priority is to promote a global economic recovery," he said.

Firing all its bullets

In the past numbers of months, the U.S. Federal Reserve has reduced its own target interest rate essentially to zero, a move designed to improve credit conditions but one which has not sufficiently lowered longer-term borrowing costs.

The American central bank also has injected billions in new capital through various means, including the purchase of high-quality commercial paper and the lending of cash using mortgage, student and car loans as collateral.

"The virtue of these policies in the current context is that they allow the Federal Reserve to continue to push down interest rates and ease credit conditions in a range of markets, despite the fact that the federal funds rate is close to its zero lower bound," Bernanke said.

Lowering the longer term interest rate is crucial in order to facilitate capital investment by companies, experts said.

The moves by the central bank and a variety of governments probably helped keep many industrialized economies afloat, Bernanke said.

While some sort of recovery is inevitable, however, the key policy concern is getting economies on the growth faster than the current trajectory, he said.

Piercing the policy fog

The problem now, Bernanke noted, is that consumers and companies need to understand why the Federal Reserve is doing what it is doing in order for that strategy to work properly.

But, because the central bank's strategy — commercial paper purchases and the like — is so arcane, getting people to comprehend the Federal Reserve's plans is a challenge, Bernanke said.

"One important tool is policy communication. Even if the overnight rate is close to zero, the committee should be able to influence longer-term interest rates by informing the public's expectations about the future course of monetary policy," he said early in the address to the London School of Economics.

Later on, however, Bernanke admitted that, outside of the well-understood policy of cutting interest rates, Americans have a hard time understanding the rest of the Federal Reserve's strategy.

"The lack of a simple summary measure or policy target poses an important communications challenge," Bernanke said.