Ben Bernanke, the Chairman of the US Federal Reserve, cheered American and world markets last night when he signalled that it was ready to take aggressive action to bolster American prospects and fend off recession.

In a doveish speech in Washington that was hailed on Wall Street, Mr Bernanke said that a worsening outlook for the US economy meant that the Fed must be “exceptionally alert and flexible”, and ready to act.

“In light of recent changes in the outlook for, and the risks to, growth, additional policy easing may be necessary,” he said. “We stand ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks.”

The soothing remarks reinforced Wall Street’s expectations that the Fed will cut US interest rates again at its next meeting at the end of the month, with economists arguing that the odds on a half-point rate reduction had now risen substantially.

Mr Bernanke’s words also came amid fresh evidence yesterday that America is sliding into a recession as a number of retailers, including Macy’s, the world’s biggest department store, and clothing retailers, such a Ann Taylor, admitted much lower than expected sales over the key Christmas holiday period. US shoppers were not lured to malls despite deep discounting.

Target, the discount retailer, said yesterday that like-for-like sales had fallen 5 per cent during December and cautioned that fourth-quarter profits would be lower than the year before.

Macy’s reported a 7.9 per cent fall in like-for-like sales during December, representing a sharper than expected decline – Wall Street had forecast a 6.5 per cent slide.

Elsewhere, JC Penney admitted that its like-for-like sales were down 7.5 per cent over the same period.

Ken Perkins, president of Retail-Metrics LLC, a research company in Massachusetts, said: “Overall, the holiday season was dismal. Consumers are definitely feeling the pain.”

Consumer spending contributes the lion’s share to US economic growth with a large chunk derived from retail sales. While Wall Street is still waiting for official statistics for fourth-quarter US growth, some economists are predicting that America has already slipped into a recession with consumers hit by the housing slowdown, tightening credit conditions and the surging cost of food and fuel.

Although Wal-Mart – the world’s biggest retailer – reported a better than expected 2.4 per cent jump in like-for-like sales, it had been expected to benefit from a slowdown, given that consumers tend to trade down when their finances deteriorate and the retailer has launched a number of new ranges to appeal to Middle America ahead of the forecast recession.

Marked down

Decline in like-for-like sales in December at United States retailers

Ann Taylor — 9.4 per cent

Macy’s — 7.9 per cent

JC Penney — 7.5 per cent

Gap — 6 per cent

Target — 5 per cent

Nordstrom — 4 per cent

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