Federal Reserve Chairman Ben Bernanke today said the US economy was growing, despite a slowdown in housing. This increased the perceived chance of a cut in US interest rates by the end of the year.
He said the outlook for inflation was generally benign, but not without risks.
'Overall, the US economy seems likely to expand at a moderate pace this year and next, with growth strengthening somewhat as the drag from housing diminishes,' Bernanke said in remarks prepared for delivery to the Senate Banking Committee.
He said there are some indications that inflation pressures are beginning to diminish.
However, it will be some time before the central bank can be confident that underlying inflation is moderating as anticipated, he said, adding that core inflation was 'somewhat elevated.' Core inflation excludes the more volatile categories of energy and food.
The central bank chief said it was hard to forecast prices for oils and other commodities, and said they remain a key source of uncertainty to the inflation outlook.
Bernanke said the Fed's current policy stance, with benchmark interest rates at 5.25%, was likely to foster sustainable growth and gradually ebbing core inflation.
However, the market did not rule out any more rate hikes when he repeated that the Fed 'is prepared to take action to address inflation risks if developments warrant.'
