Posted by Tom Davie

"Overall, the U.S. economy seems likely to expand at a moderate pace this year and next, with growth strengthening somewhat as the drag from housing diminishes," Bernanke told the Senate Banking Committee as he delivered the central bank’s semiannual monetary policy report.

Bernanke said the downtrodden U.S. housing market was demonstrating tentative signs of stabilization, but that did not mean the economy was now set to roar ahead.

"Even if housing demand falls no further, weakness in residential investment is likely to continue to weigh on economic growth over the next few quarters," he remarked.

He also said it was hard to know how far the U.S. housing slowdown had yet to run and warned the sector’s woes could turn out to be greater than the Fed currently expects.

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