WASHINGTON — The Federal Reserve is ready to lower interest rates again to brace the wobbly economy even as zooming oil prices spread inflation, Chairman Ben Bernanke signaled to Congress yesterday.

Bernanke is fighting to keep the economy afloat after mighty blows from the housing and credit crises, while trying to contain inflation.

For now, the priority is shoring up the economy, Bernanke suggested in an appearance before the House Financial Services Committee. Many experts believe the economy is on the verge of a recession, if not already in one.

"The economic situation has become distinctly less favorable" since the summer, the Fed chief told lawmakers.

The housing slump has worsened, credit problems have intensified and the job market has deteriorated. Bernanke said that has made consumers and businesses cautious about spending and investing, further weakening the economy.

The country should prepare for "sluggish economic activity in the near term," Bernanke said.

The Fed is widely expected to cut rates at its March 18 meeting and perhaps again in April.

Concern is growing about stagflation, when stagnant growth combines with rising inflation, last seen in the 1970s.

Were energy prices to continue to rise at a sharp clip — something the Fed does not expect — inflation would spread and growth would be further restrained, Bernanke said. That would be a "very tough situation," he added.