Bernanke said economic growth would be slow for the rest of the year [AFP]

Bush on Tuesday said: "We must ensure they can continue to provide access to mortgage credit during this time of financial stress.

On Sunday, the US government announced a plan giving the companies, who underpin trillions of dollars in home loan, access to Federal Reserve credit and a temporary increase, pending congressional approval, of their lines of credit from the US treasury.

Bush said: "I urge members to move quickly to enact the plan in its entirety, along with a good oversight legislation that we have recommended for both Fannie Mae and Freddie Mac."

Inflation jump

Earlier, Ben Bernanke, the Federal Reserve chairman, had told congress that the fragile US economy was facing "numerous difficulties'' including persistent strains in financial markets, rising joblessness and housing problems.

Bernanke, who was testifying before the senate banking committee, sounded another warning that rising prices for energy and food were increasing inflation risks.

The situation, he said, poses "significant challenges" for Fed policymakers as they try to chart the best course for keeping the economy growing, while making sure inflation does not dangerously flare up.

He said all the economy's problems, including slumping home values, threatened to make people feel less wealthy and less inclined to spend in the months ahead, representing "significant downside risks" to economic growth.

Fannie Mae and Freddie Mac underpin trillions of dollars in US home loans [AFP]

Bernanke said that over the rest of this year, the economy will grow "appreciably below its trend rate" mostly because of continued weakness in housing markets, high energy prices and tight credit conditions.

 
Inflation has remained high and "seems likely to move temporarily higher in the near term," he said.

Before Bernanke delivered his twice-a-year comprehensive economic assessment to congress, the Labour department reported wholesale prices had jumped 1.8 per cent in June.

That left inflation rising over the past year at the fastest pace in more than a quarter of a century.

Bush upbeat

Despite Bernanke's remarks, Bush expressed confidence in the US economy, saying the country would emerge "stronger than ever before" from its current slump.

Bush said: "We're going through a tough time, but our economy is growing, consumers are spending, exports continue increasing and American productivity remains strong.

"We can have confidence in the long-term foundation of our  economy, and I believe we will come through this challenge stronger than ever before."

The president advised people to conserve and be wise about how they use gas and energy in the current economic climate. 

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