The Fed chief's remarks appeared to reinforce the view of Wall Street investors and economists that the Fed probably will lower interest rates again on Dec. 16, its last regularly scheduled meeting this year. The Fed's key rate is now at 1 percent.
Although the Fed has ratcheted down rates and taken a flurry of unprecedented actions to arrest the worst financial since the Great Depression, deep problems remain. Credit still is not flowing normally, hobbling the U.S. economy.
All the information thus far "tells me that the economy is now in a recession," Sandra Pianalto, president of the Federal Reserve Bank of Cleveland, said in a speech in Ohio on Friday.
"At the moment, the signs point to a recession beyond just a 'garden variety' downturn," she said. "The length and severity of the recession will depend on how quickly credit markets return to normal."
The remarks by Bernanke and Pianalto come as President George W.
Bush and other world leaders descend on Washington for an extraordinary summit to explore options for economic relief and develop plans to prevent a repeat of the type of housing, credit and financial crises now endangering the world economy.
Speaking to reporters after the central banking session, Bernanke didn't believe the summit would result in a "convergence of policy." Instead, he predicted some cooperative efforts that "could be more effective than working alone."
European Central Bank President Jean-Claude Trichet said recent meetings with global leaders in Brazil showed "what lessons could be drawn from the current turbulences" and called current efforts to stabilize financial markets "a work in progress."
Many avenues presented in recent weeks need to be pursued, he said.
"I think under stress, it's exactly like X-raying a body," Trichet said. "You see things you hadn't seen normally. So under intense pressure, we see much more the strengths and weaknesses. In Europe, in a number of domains, we should certainly take advantage of this situation to improve cooperation."
On the U.S. economic front, American consumers are reeling under a raft of stresses, a government report out Friday showed. Rising unemployment, shrinking nest eggs and falling home values have made consumers less inclined to spend.
The Commerce Department reported that retail sales dropped by 2.8 percent in October, the largest amount on record. That broke the old record - a 2.65 percent decline - in November 2001, following the terrorist attacks.
The retail sales report was just the latest piece of news showing the economy got off to a dismal start in the final quarter of this year.
The nation's unemployment rate zoomed to 6.5 percent in October, a 14-year high, the government reported last week.
That is reinforcing analysts' predictions that the economy is continuing to shrink in the current October-December quarter. The economy contracted in the third quarter as consumers sharply cut back on their spending. If economic activity in the fourth quarter declines, it would satisfy one classic definition of a recession.
That is, two straight quarters of shrinking economic activity.
The epic proportions of the current financial crisis along with the global economic slowdown have been an occasion for unprecedented international policy coordination, Bernanke said.
Most notably, the Fed and other major central banks on Oct. 8 joined together to slash interest rates, the first coordinated action of this type in the Fed's history. "The coordinated rate cut was intended to send a strong signal to the public and to markets of our resolve to act together to address global economic challenges," Bernanke said.
The Fed also has set up new programs to supply billions of dollars to other central banks - in exchange for those countries' currencies - to help ease heavy demand for dollars in many countries.
"The recent sharp deterioration in conditions in funding markets left some participants outside the U.S. without adequate access to short-term dollar financing," Bernanke explained.
In mid-October, the Fed eliminated limits on the sizes of these so-called "swap" arrangements with the European Central Bank, the Bank of England, the Bank of Japan and Switzerland's central bank.
Although these and the central banks' other actions have helped ease some stresses, financial markets remain under "severe strain," Bernanke said.