The Federal Reserve chairman said today that, although the US economy appears likely to continue to expand at a moderate pace, uncertainty has increased.
Ben Bernanke said a slump in the US housing market has not spilled over to the broader economy, but that his forecast remains subject to 'uncertainties.'
Bernanke, speaking to the Joint Economic Committee of Congress, left intact his outlook for 'moderate' economic growth while noting risks from what he said was an unpredictable property market.
He repeated that inflation remains the main concern of Federal Reserve policymakers but said 'uncertainties have risen' and the Fed is seeking 'more flexibility.'
The central bank chief acknowledged the possibility of a more severe downturn in housing, as well as manufacturing, which could drag the overall economy lower. But he added that for the moment, this has not occurred.
'Overall, the economy appears likely to continue to expand at a moderate pace over the coming quarters', he said.'
He added added that the slump in housing has been the principal source of the slowdown and that 'the near-term prospects for the housing market remain uncertain.'
'The correction in the housing market could turn out to be more severe than we currently expect, perhaps exacerbated by problems in the subprime sector,' he said, referring to the growing rate of failures in mortgages to people with below-average credit histories, known as subprime loans.
He added that 'we could yet see greater spillover from the weakness in housing to employment and consumer spending than has occurred thus far.'
