Federal Reserve Chairman Ben Bernanke said Tuesday that he expects the U.S. economy will advance at a moderate pace over coming quarters despite the slowdown in the housing market.
"On average, over coming quarters, we expect the economy to advance at a moderate pace, close to or slightly below the economy's trend rate of expansion," said Bernanke via satellite to an international monetary conference in Cape Town, South Africa.
The U.S. economy grew at an annual rate of 0.6 percent in the first quarter of 2007, the worst showing since the final quarter of 2002. Over the past four quarters, it has increased at an average rate of about 2 percent.
However, Bernanke maintains a hopeful outlook due to many positive signals.
"As expected, we have also seen a gradual ebbing of core inflation, although its level remains somewhat elevated," he said.
"Despite recent increases in the prices of crude oil and gasoline, energy prices overall are below last year's peak; the rate of increase in shelter costs seems likely to slow, although the timing remains uncertain," said the Federal Reserve chief, adding that the long-run inflation expectations, as derived from both surveys and market-based measures of inflation compensation, have remained contained.
He also noted that the adjustment in the housing sector is still ongoing, but "the slowdown in residential construction now appears likely to remain a drag on economic growth for somewhat longer than previously expected."
"Thus far, however, we have not seen major spillovers from housing on to other sectors of the economy," he said.