By BRIAN BLACKSTONE
January 10, 2008 12:43 p.m.

Federal Reserve Chairman Ben Bernanke opened the door to aggressive interest-rate reductions, saying downside risks to the economy "have become more pronounced."

His remarks support Wall Street's expectation that officials will lower the fed funds rate by as much as one-half percentage point when they meet at the end of this month.

"In light of recent changes in the outlook for and the risks to growth, additional policy easing may well be necessary," and officials "stand ready to take substantive additional action as needed to support growth," Mr. Bernanke said in prepared remarks to the Woman in Housing and Finance and Exchequer Club.

Mr. Bernanke's message provides clarity at a time when economic data, Wall Street and pronouncements by Fed officials have sent mixed messages about the outlook for growth and monetary policy.

Last month, the Federal Open Market Committee cut its primary instrument, the fed funds rate at which banks lend to each other, by 0.25 percentage point to 4.25%, its third-straight reduction totaling one percentage point.

It also lowered the discount rate it charges banks that borrow directly from the Fed by 0.25 percentage point to 4.75%. The discount rate has been slashed 1.50 percentage points since August in an effort to boost liquidity in strained credit markets.

Financial markets expect as much as 0.75 percentage point of additional fed funds cut by the end of March, an expectation that seemed supported by Bernanke's remarks.