Federal Reserve Building, Washington DC.

Federal Reserve Chairman Ben Bernanke said on Thursday that while the most recent data suggest a "resilient" US economy, growth should slow "noticeably" this quarter and into 2008 as the housing contraction accelerates.

However, the economy is expected to recover later in 2008 and the Fed's recent rate reductions have put risks to growth and inflation roughly in balance.

"It is easy to imagine a scenario where another rate cut is called for," but would take "a very big surprise" for the Federal Reserve to consider a rate hike at the rate setting meeting on Dec. 11th, Federal Reserve Bank President William Poole said on Wednesday after a speech at Marquette University, Milwaukee, Wisconsin.

Bernanke's remarks today appear to be consistent with Poole's views.

The Fed Chairman said that since last week's Federal Open Market Committee interest rate setting meeting, at which policymakers including Poole, cut the federal funds rate by a quarter percentage point to 4.5%, "the few data releases that have become available have continued to suggest that the overall economy remained resilient in recent months," he said in prepared testimony to the Joint Economic Committee of Congress.

"However, financial market volatility and strains have persisted," he said, and investor worries about housing and its implications on the broader economy have "intensified."

Bernanke also said he sees "important" upside inflation risks, citing higher oil and commodity prices and that dollar, which has "weakened."

However, he also said that the Fed expects core inflation to stay in a "range consistent with price stability next year" with inflation expectations "reasonably" anchored. Nevertheless, he said that scenario could change should those price expectations "become unmoored."

Senator Charles E. Schumer, Chairman, Joint Economic Committee: "I think we are at a moment of economic crisis stemming from four key areas: falling housing prices, lack of confidence in creditworthiness, the weak dollar and high oil prices. Each of these problems alone would be enough of a threat to our economic well-being. But taken together, they are essentially the four horsemen of economic crisis...In particular, as I watch bank after bank write down bad investments tied to baroque financial instruments that even sophisticated investors don't understand, I fear for the stability of our financial system. I've talked about the wild wild west of subprime mortgage brokers. I'm beginning to wonder whether we have a wild wild west of unregulated financial instruments, of SIVs, and mis-rated CDOs, and other complicated investments whose values are not marked to market, or even marked to model, but to quote one Wall Street strategist, are "marked-to-make-believe."

To quote you, Mr. Chairman, the markets too want to know how much these damn things are worth, and I want to know what all of us -- the Federal Reserve, Congress, and this administration -- can do to help assuage their fears."