The chairman of the Federal Reserve, Ben Bernanke, signaled America’s central bank is prepared to lower interest rates again even as inflation accelerates.

The Fed “will be carefully evaluating incoming information bearing on the economic outlook and will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks,” Mr. Bernanke said in testimony to the House Financial Services Committee in Washington.

Mr. Bernanke’s remarks may reinforce investors’ expectations that policy makers will lower rates further to shore up the faltering economy. While officials have expressed concern that inflation is accelerating, Mr. Bernanke indicated he shares the view of the vice chairman, Donald Kohn, view that financial market turmoil and slowing growth pose the “greater threat.” Mr. Bernanke’s testimony came as government reports yesterday showed the American expansion, now in its seventh year, is in peril. Durable-goods orders fell 5.3%, more than forecast, in January as companies cut spending. New home sales fell last month to the lowest level since February 1995 and house prices slid by a record 15% from a year ago.

“The Fed is in full risk-management mode, which means it has to prioritize financial market stability and growth over inflation,” the chief economist of Mesirow Financial Inc. in Chicago, Diane Swonk, said. “The discussion of inflation and inflation expectations, however, effectively sets the stage for a fairly quick normalization of rates once growth stabilizes.”

Lawmakers have accused the central bank of failing to protect consumers and supervise mortgage lending adequately. The chairman of the Committee, Barney Frank, a Massachusetts Democrat, said yesterday “excessive deregulation” was the “single biggest cause” of the downturn. In yesterday’s hearing, Mr. Bernanke acknowledged “mistakes in terms of regulation and oversight.”

Mr. Bernanke referred to “downside” risks for the economy four times in his testimony, and noted that data since the last Fed meeting in January pointed to “sluggish” growth. Policy choices have also become more complicated as energy and commodity prices rose in recent weeks, he indicated.

Inflation is picking up and the public’s expectations for prices may also be rising, Mr. Bernanke said. He reiterated remarks made to a Senate hearing on February 14 indicating the Fed will increasingly take account of the inflation outlook later in the year as the economy stabilizes.

“Further increases in the prices of energy and other commodities in recent weeks, together with the latest data on consumer prices, suggest slightly greater upside risks to the projections of both overall and core inflation than we saw last month,” Mr. Bernanke said.