Alan Greenspan, the US Federal Reserve chairman, yesterday warned that high asset prices and growing protectionist pressures would complicate his successor's task.

Mr Greenspan, who in January retires after 18 years, was speaking at the Fed's Jackson Hole Symposium, sponsored by the Kansas City Fed.

Mr Greenspan said maintaining flexibility was the best way to deal with shocks to the economy and imbalances, including the housing market boom and the US current account deficit, which is 6 per cent of GDP and rising.

He said this flexibility meant imbalances could "be rectified by adjustments in process, interest rates and exchange rates rather than through more wrenching changes in output, incomes and employment".

Mr Greenspan warned that growing protectionist pressures were a threat to flexibility.

Global competition, he said, had been a boon for the US economy, with competition spurring innovation and new technologies. It had also made life difficult for workers, who face competition from staff in developing countries, but these concerns should be met with education and training and not with trade barriers.

Mr Greenspan said that "fear of change" had also stopped the US dealing with long-term fiscal reform, notably in Social Security.

In the past he has warned that the ageing of the US population will mean big tax rises in the absence of early reform.

"The developing protectionism regarding trade and our reluctance to place fiscal policy on a more sustainable path are threatening what may well be our most valued policy asset: the increased flexibility of our economy, which has fostered our extraordinary resilience to shocks," he said.

The rise in stock, bond and house prices and the sharp rise in household wealth in recent years had been a particularly important development, he said, contributing to the very low personal savings rate and the build-up of household debt.