Core CPI still "uncomfortably high" - Bernanke

Speaking before the National Italian American Foundation, Bernanke said the slowdown in US GDP growth "appears to be taking place roughly along the lines envisioned."

Earlier this year, Bernanke suggested that a slowdown in growth in the latter half of 2006 would reduce inflationary pressures and justified a pause in the Fed's rate hiking cycle. Allaying fears that such a slowdown could result in a sharp recession, Bernanke reiterated his view that "the economy is likely to expand at a moderate pace going forward."

The chairman's remarks on the risks to inflation did, however, dampen expectations that the Fed could cut rate in the near future. "A failure of inflation to moderate as expected would be especially troublesome," he said.

Noting that "substantial uncertainties surround [the Fed's] baseline forecast" for inflation, Bernanke said core inflation, which excludes energy and food, "remains uncomfortably high."

The Fed's rate setting body, the Federal Open Market Committee, meets for the last time this year on 12 December. The first meetings of 2007 are scheduled for 30 January and 20 March.