by Calculated Risk on 8/22/2008 10:00:00 AM

[T]he financial storm that reached gale force some weeks before our last meeting here in Jackson Hole has not yet subsided, and its effects on the broader economy are becoming apparent in the form of softening economic activity and rising unemployment. Add to this mix a jump in inflation ... and the result has been one of the most challenging economic and policy environments in memory. Fed Chairman Bernanke, Aug 22, 2008

Fed Chairman Ben Bernanke at the Jackson Hole Symposium: Reducing Systemic Risk

On Inflation:

In view of the weakening outlook and the downside risks to growth, the Federal Open Market Committee (FOMC) has maintained a relatively low target for the federal funds rate despite an increase in inflationary pressures. This strategy has been conditioned on our expectation that the prices of oil and other commodities would ultimately stabilize, in part as the result of slowing global growth, and that this outcome, together with well-anchored inflation expectations and increased slack in resource utilization, would foster a return to price stability in the medium run. In this regard, the recent decline in commodity prices, as well as the increased stability of the dollar, has been encouraging. If not reversed, these developments, together with a pace of growth that is likely to fall short of potential for a time, should lead inflation to moderate later this year and next year. Nevertheless, the inflation outlook remains highly uncertain ...
emphasis added

This is about as pessimistic as a Fed Chairman can be on the economic outlook.