WASHINGTON, Feb 14: The US economy is gaining momentum after a soft patch induced by a housing slump, but inflation remains a “predominant” concern, Federal Reserve chairman Ben Bernanke told Congress on Wednesday.

Bernanke, delivering the central bank’s semi-annual monetary policy report, unveiled a forecast for US gross domestic product growth (GDP) in a range of 2.5 to 3.0 per cent for 2007.

That is below the 3.4 per cent pace in 2006 and a notch down from last year’s forecast, but Bernanke said the economy “appears to be making a transition from the rapid rate of expansion over the preceding several years to a more sustainable average pace of growth.”

The forecast for 2008 calls for growth in a range of 2.75 to 3.0pc.

The upbeat outlook along with the renewed warnings on inflation appeared to suggest that Bernanke and his Fed colleagues are not considering rate cuts to stimulate activity and may hike rates later in the year if inflation pressures persist.

The US central bank chief said the economy does not seem to be faltering despite a severe slump in home sales, with consumer spending and other segments of the economy picking up the slack.

“The resilience of consumer spending is all the more striking given the backdrop of the substantial correction in the housing market that became increasingly evident during the spring and summer of last year,” he said in remarks prepared for the Senate Banking Committee.

He noted that the problems of the real estate sector “do not seem to have spilled over to any significant extent to other sectors of the economy.”

”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,” the Fed chief said.

But Bernanke highlighted concerns that inflation may take some time to abate, and that this is the most serious risk for the economy. But he noted that Fed policymakers are holding to their forecast for diminishing price pressures, for now.

The Fed’s official forecast calls for “core” inflation, excluding food and energy prices, to be in a range of 2.0 to 2.25 per cent for 2007. That is slightly above what economists see as the Fed's “comfort zone” of under 2.0 per cent.

The forecast calls for 2008 core inflation in a more acceptable range of 1.75 to 2.0 per cent.

“There are some indications that inflation pressures are beginning to diminish,” he said.

—AFP