Federal Reserve chairman Ben Bernanke on Friday stopped short of signalling further action to boost the US recovery, but said it was critical for the economy's health to reduce unemployment.

Bernanke said the central bank had marked down its outlook for US economic growth and made clear the policy focus was still on spurring a stronger recovery, but he did not provide any fresh details on steps the Fed could take.

'It is clear the recovery from the crisis has been much less robust than we had hoped,' he said.

Bernanke's speech at an annual Fed conference here met with a mixed reception in financial markets, where some had hoped he would make a clear case for a further easing of monetary policy.

Stocks initially fell, with the blue chip Dow Jones industrial average dropping as much as 220 points, but later turned higher to trade roughly flat. The dollar and bond prices rose.

'The growth fundamentals of the US do not appear to have been permanently altered by the shocks of the past four years,' Bernanke said.

'The economic healing will take a while, and there may be setbacks along the way,' he added. 'However ... the healing process should not leave major scars.'

While expressing long-term optimism, Bernanke made plain the central bank found recent developments troubling, and he said the policy-setting Federal Open Market Committee (FOMC) would expand its September meeting to two days from one to discuss its options.

However, he also stressed that most of the burden for ensuring a solid foundation for long-term growth lay at the feet of the White House and the US Congress.

He said investor concerns over Europe's debt and political fights on the US budget had harmed growth prospects.

'Financial stress has been and continues to be a significant drag on the recovery, both here and abroad,' he said. 'It is difficult to judge by how much these developments have affected economic activity thus far, but there seems little doubt that they have hurt household and business confidence and that they pose ongoing risks to growth.'

Barclays Capital economist Julian Callow said incoming economic data would determine if the Fed moves to provide further support for the sputtering recovery. 'He was rather boxed in in terms of what he could say,' Callow said. 'The markets have been increasing pressure on him to say more, but he needs to take the FOMC with him.'

Earlier this month, the Fed said it expected to hold overnight US interest rates near zero for at least the next two years, a move that elicited a rare three dissents.

Some investors have begun to hope the central bank, which has already bought $2.3 trillion in bonds, would launch a fresh round of asset purchases, although many analysts think more modest steps, such as shifting the Fed's securities holdings into longer maturities, are more likely.

Bernanke simply reiterated language from the Fed's latest policy statement that the central bank was examining its options and was prepared to act as needed.

'Monetary policy must be responsive to changes in the economy and, in particular, to the outlook for growth and inflation,' he said. He repeated the Fed's view that easing commodity prices should bring inflation into line with the Fed's two per cent or under goal.

A weak raft of economic data have led economists to say chances of a fresh US recession could range as high as 50pc.

At the same time, Europe is strangled by a debt crisis that is undercutting growth prospects there.

In an interview with CNBC before Bernanke's remarks, Philadelphia Federal Reserve Bank president Charles Plosser said further bond purchases by the Fed would do the economy little good.

'I'm not sure it would be beneficial to the problems that we are facing,' Plosser said.

Plosser, a noted inflation hawk, was one of the officials who dissented at the Fed's August 9 meeting.

Fed officials have discussed buying more longer-term debt and selling short-term securities, an operation that could increase downward pressures on long-term interest rates without further bloating the central bank's balance sheet.