INSTANT VIEW: Bernanke says 2nd stimulus likely needed

NEW YORK (Reuters) - U.S. Federal Reserve Chairman Ben Bernanke told Congress on Monday that another wave of government spending may be needed as the economy limps through what could be an extended period of subpar growth.

Separately, the Conference Board's index of Leading Economic Indicators unexpectedly rose for the first time in five months.

KEY POINTS: * It was the first time that Bernanke had explicitly endorsed a second stimulus package. * Bernanke said Congress should consider including measures to improve access to credit, but did not specify what form they ought to take. * He said there were some encouraging signs that steps taken so far to unfreeze credit markets were helping, but it was too soon to assess their full effects.

COMMENTS:

CHRIS RUPKEY, CHIEF FINANCIAL ECONOMIST, BANK OF TOKYO/MISUBISHI, NEW YORK:

"Stocks liked the idea of a second round of stimulus. Bernanke was kind of downbeat in his outlook, seeing weakness for the next several quarters. The testimony was a little on the bleak side. Bernanke's suggestion that considering additional fiscal stimulus would be appropriate was welcome.

"The testimony anchors the case for a 50-basis-point cut in the federal funds rate next week. We have the weakest financial market conditions since the Great Depression. You could lower the federal funds rate at least to the 1 percent level it was at during the 2003 deflation scare. There is no reason to keep fed funds rate above the level that got us out of the last recession. The downside risks are pretty great."

OMER ESINER, SENIOR CURRENCY ANALYST, RUESCH INTERNATIONAL,WASHINGTON:

"For the most part, he's (Bernanke) echoing recent comments by recent Fed speakers. It's noteworthy that he did seem to throw his support behind further fiscal stimulus, which could come in the form of either tax cuts or a stimulus package from the government. So we're seeing a little bit of a reaction to those comments. That's the one noteworthy change I am seeing from recent comments. He did seem to suggest that there've been some encouraging signs in credit markets, which is I think consistent with what we've seen in term of Libor and the narrowing of credit spreads. He's definitely painting a pretty bleak outlook for the U.S. economy and that certainly would tend to boost risk aversion. But I think those comments were mitigated somewhat by his assessment that credit conditions are improving a little bit and also his seeming support of fiscal stimulus."