Ben Bernanke, the Chairman of the US Federal Reserve, said that Barack Obama’s plans to stimulate the US economy could help recovery, but only if accompanied by a broader reform of the financial system.

Speaking today at the London School of Economics, Mr Bernanke said that the President-elect's proposals to stimulate the economy, which include a blend of tax cuts and increased government spending on large public projects, “could provide a significant boost to economic activity”.

He added: “Fiscal actions are unlikely to promote a lasting recovery unless they are accompanied by strong measures to further stabilise and strengthen the financial system.”

Interest rates in the US have already been cut to an historic low of between zero to 0.25 per cent, but Mr Bernanke said that the Federal Reserve still had other "powerful tools" at its disposal to tackle the economic crisis.

Mr Bernanke did not comment on specific parts of Mr Obama’s plans, but said that he hoped to see the US economy stabilise this year after “continued weakness” in the first quarter.

He added that the timing and strength of the recovery were “highly uncertain”.

Further capital injections may be needed to calm credit markets, despite the massive funding plans already announced, according to Mr Bernanke.

The US Fed is loaning billions of dollars to financial companies, but Mr Bernanke criticised some of the banks rescued by the US Government for taking too much risk.

He said: “It is unacceptable that large firms that the Government is now compelled to support to preserve financial stability were among the greatest risk-takers during the boom period ... In the future, financial firms of any type whose failure would pose a systemic risk must accept especially close regulatory scrutiny of their risk-taking.”

Many other industries have fallen on hard times in recent months, but none has received such generous backing from the US Government.

Mr Bernanke acknowledged that this was “unappealing” to many members of the public, but said that it was “unavoidable”.

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