Bernanke told Congress the Fed was monitoring "significant risks" to the US recovery from Europe's debt and banking crisis closely.

"The Federal Reserve remains prepared to take action as needed to protect the economy in the event that financial stresses escalate," Bernanke said in his prepared testimony.

"Despite economic difficulties in Europe, the demand for exports has held up well," he said.

His comments stood in sharp contrast to those of Fed Vice Chair Janet Yellen, who late yesterday made the case for further monetary stimulus to insure against the risk of a downturn.

Bernanke made no such suggestions, but he did tell legislators tighter fiscal policies set to kick in early next year barring congressional action "would, if allowed to occur, pose a significant threat to the recovery."