WASHINGTON (Reuters) - Federal Reserve Chairman, Ben Bernanke, presented his most grim assessment of the U.S. economy to the Joint Economic Committee on Wednesday morning. He warned of a likely stagnation of the economy the first half of the year.

Bernanke said a recession is possible and that policymakers are "fighting against the wind"  to steady a shaky economy, The Associated Press reported. His Capitol Hill address came amid the triple-woes of economic slumps in the credit, housing and financial areas.

Over all, the New York Times reported that Bernanke said, “it now appears likely that real gross domestic product will not grow much, if at all, over the first half of 2008 and could even contract slightly.”

Bernanke also said the Fed's attempts to restore confidenc in the credit markes had only been "somewhat" helpful of the situation and could help stimulate an economic recovery by the fall, at the earliest.

His assesment was bleak and stipulated with an admition of the how difficult it is to predict economic outlook with the current turbulence.

“The uncertainty attending this forecast is quite high and the risks remain to the downside,” he said at the committee address Wednesday morning.

His address also lacked, for the first time in months, any reference or suggesting that the Fed is ready to continue its recent string of sharp interests rate cuts -- citing concerns of inflation reducing the Fed's flixibility to lower rates. He said increased uncertainty about the inflation outlook makes it necesary to continue to monitor inflation developments carefully in the coming months.

“We expect inflation to moderate in coming quarters,” he said.

Bernanke also forecast other coming economic woes, including an expected the unemployment rate rise, shrinking payrolls and falling home construction. He also admitted that banks and other financial
institutions remained hesitant to lend, which was causing problems for the broader economy.

In the credit markets, Bernanke cited strains including corporate debt, municipal bonds, student loans and government-backed mortgages.

His outlook was not wholey pesimestic, he said “confident in our economy’s long-term prospects.”

Bernanke touched on a plan proposed by the Bush administration to overhaul the financial regulatory infrastructure, but didn't go as far as endorsing it.

“The Treasury plan is a very interesting and useful first step,” he said. “I think we all agree there is going to be quite a bit of discussion and analysis before we are ready to do major changes in our regulatory structure.”

This story was based on stories by The New York Times and The Associated Press.