However he acknowledged the presence of uncertainties in the economic outlook mainly caused by chaos in the subprime home mortgages market. This was causing “severe financial problems for many individuals and families," Mr Bernanke admitted.

“Thus far, the weakness in housing and in some parts of manufacturing does not appear to have spilled over to a significant extent to other sectors of the economy,” Mr. Bernanke said in his prepared testimony.  However it was his comments on the interest rates that caused the Dow Jones to lose points this afternoon.

Mr Bernanke said the Wall Street had wrongly assumed Fed policymakers would drop the interest rates. But he reassured consumers and investors alike there was no fear of the economy slipping into recession.

"I would make a point, I think, which is important, which is there seems to be a sense that expansions die of old age, that after they reach a certain point, then they naturally begin to end," Bernanke said. "I don't think the evidence really supports that. If we look at history, we see that the periods of expansions have varied considerably. Some have been quite long."

His predecessor Alan Greenspan has indicated there is a one-in-three chance of the economy being hit by the problems with risky mortgages as well as a drop in the housing market. Last week the Fed had decided to hold interest rates steady at 5.25 percent. However enough innuendo suggested a rate cut was a possibility in the near future.

But Bernanke said today the Fed was not siding either with a rate increase or a rate cut. He also indicated the mortgage problem seemed to be under control. "At this juncture ... the impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained," he said.

Rep. Carolyn Maloney, D-N.Y felt the Fed must not close the door for a possible rate cut. "Evidence of a slowing economy is building. And the concern is that the unemployment rate will begin to rise, if slow growth continues, which argues for easing rates," she said.

Bernanke’s testimony hit the markets hard as the Dow Jones industrial average fell 96.93 points to 12,300.36, while the Standard & Poor's 500 index was down 12.38 points to 1,417.23. Nasdaq dipped 20.33 points to 2,417.1.