Falling housing prices and weaker consumer spending are harbingers of an economic deceleration that could drop the growth rate of the gross domestic product as low as 2.5% next year, limiting inflation, Federal Reserve members said when last they met June 29. The estimates, which formed the basis for Chairman Ben Bernanke's comments to Congress on Wednesday, show that members of the Federal Open Market Committee believe core inflation will be 2% to 2.25% in 2007, down as much as three-quarters of a percentage point from 2006. "Contained inflation expectations, the abatement of upward pressure from past increases in energy and other commodity prices and the slowing in the growth of economic activity that was under way were expected to contribute to a moderation in core inflation in coming quarters," the minutes read. The Fed raised rates to 5.25% following the meeting, its 17th quarter-point hike in as many gatherings. Even with the added brake, however, some members worried that inflation might not respond quickly enough. "Participants noted a risk that the drop-back in inflation could be slower or more limited than the committee would find desirable since resource utilization was currently tight and the pickup in price increases had been broadly based rather than being limited to a few specific sectors that could be linked to energy costs," the minutes noted. A majority of the Fed's voting members believe, however, that transitory factors like rising rents and high energy prices caused core inflation to rise in the first part of the year. Both could be solved if the economy slowed down, the members reasoned. "The moderation in the economic expansion was expected to prevent pressures on resource utilization from intensifying," the minutes say. "In sum, with inflation expectations contained and unit labor costs held down by ongoing gains in productivity and modest advances in compensation, inflation was seen by most participants as likely to edge down."