WASHINGTON — A worsening short-term outlook for the U.S. economy suggests that growth has stalled and may even contract in the first half of this year, Federal Reserve Chairman Ben Bernanke told Congress on Wednesday, sending a strong signal that a recession may have arrived.

"It now appears likely that real gross domestic product will not grow much, if at all, over the first half of 2008 and could even contract slightly," Bernanke told the Joint Economic Committee.

Translation: The U.S. economy may be in recession.

That's usually defined as two consecutive quarters of negative growth, although recessions are called after the fact by the National Bureau of Economic Research, which measures recession as a protracted slowdown in a wide range of business activities.

Bernanke's testimony was the strongest evidence yet that the economy may have slipped into what a majority of mainstream economists now expect to be a mild recession. The Fed chairman expects economic activity to strengthen over the second half of the year as steep interest-rate cuts and a fiscal stimulus package passed by Congress with tax rebates to consumers start to be felt.

Whether the economy already has fallen into its first recession since 2001 — and many economists believe it has — the housing debacle and other economic woes are a major concern for homeowners, job losers and investors. That means they're a concern to Congress and the presidential contenders, too.

The Fed and the White House have been thrust into crisis-management mode.

Hoping to limit damage, the Federal Reserve has been slashing interest rates since the start of the year in an effort to get people and companies spending again. "We are fighting against the wind," Bernanke said, "at least offsetting significantly the headwinds coming from these financial factors."

But he didn't offer a clear signal about the Fed's interest-rate intentions from here on.

Still, economists believe the Fed probably will drop its key rate again at its next meeting at the end of this month. Some analysts predicted the Fed's key rate would fall as low as 1.50 percent this year, from the current 2.25 percent.

Bernanke said that by 2009, growth should return to or above a "sustainable pace," buttressed by a stabilization of housing activity.

Not all housing economists agree. The chief economist of government-sponsored enterprise Freddie Mac, Frank Nothaft, said last week that he didn't expect a recovery in housing sales and prices until 2010.

On Wall Street, stocks initially dropped after the Fed chief's remarks, then fluctuated through the day before ending moderately lower. The Dow Jones industrials lost 45.44 points to finish the day at 12,608.92.

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Contributing: Jeannine Aversa, Associated Press