Stocks and bonds jumped after Ben Bernanke laid out a fundamentally benign analysis of the US economy in his twice-annual testimony to Congress yesterday.

The Federal Reserve chairman painted a picture of recovering growth, moderating inflation and reduced economic risks that evoked memories of the “Goldilocks” economy of the late 1990s – so-called because it was neither too hot nor too cold.

Mr Bernanke struck a temperate tone on inflation, reiterating the Fed's view that inflation was still a bigger risk than growth, but offering no suggestion that it was preparing the ground for a further rate hike.

Instead, he dropped a heavy hint that rates may stay on hold at 5.25 per cent for some time, declaring “the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing of core inflation”.

The absence of more hawkish language was greeted with relief by investors, who had been troubled by recent talk from some Fed officials. Mr Bernanke's testimony also showed the Fed remained mindful of the continuing risks to growth from the housing market.

The S&P 500 index rose about 0.5 per cent to 1,454 in the immediate aftermath of Mr Bernanke's comments, while Treasury bonds also moved higher. The dollar slipped as the probability of interest rate increases receded.

The Fed chairman told US senators that the central tendency of individual forecasts was for growth of between 2.5 per cent and 3 per cent this year, and 2.75 per cent and 3 per cent next year.

In the UK, Mervyn King, Bank of England governor, made it clearthat pricing pressures had not retreated in Britain, even though inflation fell to 2.7 per cent in January from a high of 3 per cent in December.