Ben Bernanke, the Chairman of the US Federal Reserve, told Americans yesterday not to look to the central bank to bail them out by cutting interest rates after they had made bad investments.

“It is not the responsibility of the Federal Reserve - nor would it be appropriate - to protect lenders and investors from the consequences of their financial decisions,” Mr Bernanke told delegates at an annual economics symposium in Jackson Hole, Wyoming.

His comments come amid calls from Wall Street to cut interest rates to avert a deepening credit crisis.

Equity and debt markets have plunged this summer after a rising number of American mortgage borrowers defaulted on their repayments, a trend that hit the value of mortgage-backed securities owned by banks, hedge funds and fund managers.

The sharp slowdown in the American housing market and surging number of mortgage defaults also led the White House to unveil plans yesterday to help homeowners to cope with tough lending conditions.

Mr Bernanke’s remarks marked his first public speech since the plunge in the markets forced the Fed to cut the interest rate that it charges to banks.

Kevin Logan, senior economist at Dresdner Kleinwort in New York, said: “This is tough love from Bernanke. He is signalling to the market that they [the Fed] will do what’s necessary but not today.”

He added: “Bernanke is trying to tough this one out. He is drawing a distinction between what to do for investors and what to do for the economy. Greenspan [his predecessor] felt that the two were much tighter together.”

The central banker gave warning that if present problems in the credit markets continue, it could hit the rate of US economic growth. Mr Bernanke said: “The further tightening of credit conditions, if sustained, would increase the risk that the current weakness in housing could be deeper or more prolonged than previously expected, with possible adverse effects on consumer spending and the economy more generally.”

The Fed is widely expected to cut rates by a quarter of a percentage point to 5 per cent when it meets on September 18.

A number of economists are also expecting another cut to 4.75 per cent before Christmas and have slashed their economic growth forecasts to zero for the second half of this year.

There have been calls for the Fed to cut rates before the scheduled meeting. Mr Logan explained: “The real puzzle is why the Fed does not cut rates now or why they didn’t before.

“The feeling is probably that there is not enough evidence that the economy has been affected by this and that they prefer to make rate moves at the scheduled meetings.”

In lunchtime trading the Dow Jones industrial average rallied 130 points to 13,368.70, as traders were cheered by Mr Bernanke’s remarks, as well as the promised help from the White House to help to reduce the number of future mortgage defaults.

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