Ben Bernanke’s testimony yesterday in front of congress is being taken by Wall Street as a signal that the Fed is prepared to continue to lower interest rates.

According to Bloomberg, traders now see a one-in-five chance of a half-point reduction in the benchmark rate, to 1.75 percent, at the April 29-30 Fed meeting.

Bernanke told congress yesterday that the Fed is “ready to respond to whatever situation evolves,” and referred to “considerable stress” in markets.

New York Fed President Timothy Geithner said yesterday that policy makers must “continue to act forcefully.”

“Today, with progressive calls for action in the face of the credit crisis, the Fed’s tentacles are potentially reaching directly into the credit and securities markets,” says Ed Bugos in The Daily Reckoning.

“This week alone, the headlines are rife with news of its “sweeping” new powers under Treasury Secretary Hank Paulson’s ‘plan.’”

“The Federal Reserve is in the midst of another historic interest rate-cutting campaign. Its official policy stance is that it recognizes the inflation risks, but worries more about growth, so it will inflate to sustain ‘growth.’”

“Expect a continued erosion of the US dollar as interest rates are lowered further to avert depression and as inflation subsequently morphs into hyperinflation,” says John Browne in Today’s Financial News.