Ben Bernanke, the chairman of the US Federal Reserve, warned US legislators today that the economy could soon lurch into crisis if it failed to tackle the rising costs of the country's ageing population.

In written testimony for the Senate Budget Committee, Mr Bernanke said: "Unfortunately, economic growth alone is unlikely to solve the nation's impending fiscal problems.

"We are experiencing what seems likely to be the calm before the storm."

Mr Bernanke said that current projections showed that the ratio of government debt relative to gross domestic product could soar from 37 per cent today to 100 per cent in 2030.

His comments dismayed investors, who had earlier welcomed data revealing an increase in the construction of housing and jobless claims hovering at an 11-month low as consumer prices rose only modestly last month.

US consumer prices rose 0.5 per cent in December, slightly higher than expectations of 0.4 per cent. The core rate, excluding food and energy prices, was in line with forecasts of a 0.2 per cent rise.

Energy prices rose 4.6 per cent after falling for three consecutive months.

In mid-morning trading, the Dow Jones industrial average fell 20.75, or 0.16 per cent, to 12,556.40.

Bonds fell, with the yield on the benchmark ten-year Treasury note rising to 4.80 per cent from 4.78 per cent late on Wednesday. The dollar was mixed against other major currencies, while gold prices rose.

Crude oil prices fell 29 cents to $51.95 on the New York Mercantile Exchange, as energy traders positioned themselves ahead of the US Energy Department’s weekly inventory report, which is expected to show increases in gasoline and heating oil stocks.

Explore Economics

• Pre-Budget Report 2008

• Budget 2009

• World Economic Forum

• The Times MPC

Times Recommends

• C&G axed - 1,660 jobs to be lost
• UK house prices rise 1.1% as buyers return
• Mixed reaction to US banks repaying bailouts