Federal Reserve Chairman Ben Bernanke said on Wednesday that despite a number of risks to both growth and inflation, the U.S. economy will expand at a more sustainable pace of growth.

"Economic growth in the United States has slowed in recent quarters, reflecting in part the economy's transition from the rapid rate of expansion experienced over the preceding years to a more sustainable pace of growth," he said in testimony to Congress ' Joint Economic Committee.

"As the inventory of unsold new homes is worked off, the drag from residential investment should wane," he said. "Consumer spending appears solid, and business investment seems likely to post moderate gains."

He also noted that a robust world economy will continue to provide opportunities for U.S. economy this.

"Outside the United States, economic activity in our major trading partners has continued to grow briskly. The strength of demand abroad has helped to spur strong growth in U.S. real exports, which rose about 9 percent last year," he said.

The crumbling housing market has been a major factor behind the slowdown in the U.S. economy. Bernanke said the near-term prospects for the housing market remain uncertain.

"The correction in the housing market could turn out to be more severe than we currently expect, perhaps exacerbated by problems in the subprime sector," he warned.

"Moreover, we could yet see greater spillover from the weakness in housing to employment and consumer spending than has occurred thus far," he said, adding the possibility that the recent weakness in business investment will persist is an additional downside risk.

"Developments in subprime mortgage markets raise some additional questions about the housing sector," he said.

Bernanke also explained that last week's change in the Federal Reserve's policy statement, which hinted of future rate moves, was done to achieve more leeway. "We are looking for a bit more flexibility," he said.

The Federal Open Market Committee has left its target for the federal funds rate unchanged, at 5-1/4 percent, since last June.

"To date, the incoming data have supported the view that the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing in core inflation," said the U.S. Central Bank chief.