In a long-awaited testimony to the Senate Banking Committee, Fed chief admits subdued growth WASHINGTON: Warning of the dual risks of a further slowdown and higher inflation, US Federal Reserve chairman Ben S Bernanke offered a gloomy assessment on Tuesday of any immediate prospect for improvement in American economic difficulties, including energy prices and instability in financial markets. In a long-awaited testimony at the Senate Banking Committee, Bernanke avoided the word "recession' in characterising the current economy, noting instead that consumer spending and exports were keeping growth "at a sluggish pace' while the housing sector "continues to weaken.' "The economy has continued to expand, but at a subdued pace,' Bernanke said. However, he added that spending for personal goods had "advanced at a modest pace so far this year, generally holding up somewhat better than might have been expected given the array of forces weighing on household finances and attitudes.' He said while the risks to the overall economy were still "skewed to the downside,' inflation "seems likely to move temporarily higher in the near term.' The Fed, Bernanke said, needed to guard against higher prices spreading throughout the economy. This mixed assessment appeared to signal that the Fed would not be lowering interest rates further in spite of the economic sluggishness, as it did earlier this year, out of concern that lower rates would spur more inflation. In June, the Fed declined to lower rates and instead suggested it might raise rates later in the year. Bernanke was especially pessimistic about any easing of energy prices, dismissing suggestions that they were being driven by speculation in futures markets. Instead, he said high energy costs reflected the markets' recognition that demand was outstripping supplies.