Only 'moderate' US growth ahead: Bernanke

US Federal Reserve chief Ben Bernanke on Wednesday forecast a moderate surge in growth later this year, but said the Fed is ready with new stimulus measures if the economy continues to stall.

Giving a mixed view of the US economy to lawmakers, the central bank chairman recognized that growth had hit speed bumps in recent months.

With the negative impacts of higher oil prices and Japan's earthquake disaster largely over, he said he expected the economy to pick up speed.

But he said the Fed remained poised to act in either direction  -- tightening policy if it sees growth and inflation picking up, or loosening if growth slumps further.

He meanwhile warned of "major crisis" if Congress does not raise the government's cap on borrowing to be able to continue servicing domestic and foreign obligations, including debt payments.

A default on US debt -- envisioned by the Treasury as possible after August 2 -- "would throw shock waves into the entire global financial system," Bernanke said in a hearing in the House of Representatives.

And if the US slashes spending in order to keep up debt payments, he forecast a possible downturn that would resemble the severe recession of 2008-2009, when millions lost their jobs.

"It would no doubt have a very adverse effect very quickly on the recovery," he warned.

Hours after he spoke, ratings agency Moody's warned of a possible downgrade of the US debt rating citing the "rising possibility" that politicians will not reach a deal to raise the debt ceiling on time.

In semi-annual testimony to Congress, Bernanke said that the inflation pressures of the first half of 2011 were transitory and should ease.

Given the near-stall of the second quarter, the Fed expected to keep its ultra-low interest rate policy in place "for an extended period," he said.

Bernanke said the economy should pick up speed to achieve a full-year expansion of 2.7-2.9 percent -- after a first-half pace that economists say could be below 2.0 percent.

"The recent weaker-than-expected economic performance appears to have been the result of several factors that are likely to be temporary," he said.

But, reflecting apparent disagreement among the Fed's top policymakers and analysts over the economy's trajectory, his forecast was cautious

The Fed sees "at least some part of the first-half slowdown as persisting for a while," he noted.

That includes slow growth in consumer spending, the effects of the tightening of spending by authorities at all levels of government, and the still-depressed housing sector.

On the other hand, he said, the "apparent" stabilization of oil and commodity prices "should ease the pressure on household budgets."

He also said there were "bright spots" in the economy in the export sector and the investments that businesses are making in equipment and software.

His remarks came after several weeks of bad data on the economy that have pushed share prices down and dimmed projections of growth for the second half.

After last Friday's data showed that few jobs were created over the past two months, and figures on Tuesday showed a widening trade deficit in May, the private group Macroeconomic Advisors cut its estimate of second quarter growth to a snail-like 1.6 percent, after the tepid 1.9 percent pace of the first quarter.

Bernanke said the Fed was ready to step in with new stimulus measures if the economy remained slack.

Two weeks after the end of its $600 billion (Dh2.20tr) bond-purchase program, or quantitative easing dubbed QE2, Bernanke told members of Congress that a new such effort could be launched, and other measures be taken.

"The possibility remains that the recent economic weakness may prove more persistent than expected and that deflationary risks might reemerge, implying the need for additional policy support," he said.

But economists interpreted his mixed remarks as falling more on the side of optimism.

"Most of his testimony was devoted to a discussion of just why growth is likely to pick up in the second half of the year, thereby obviating the need for further easing," said Ian Shepherdson of High Frequency Economics.