Federal Reserve Chairman Mr Alan Greenspan said today the US economy has turned the corner toward vigorous growth but that policy-makers can be patient about interest-rate rises, though not forever.
"Last year appears to have marked a transition from an extended period of subpar economic performance to one of more vigorous expansion," Mr Greenspan told the House of Representatives Financial Services Committee.
"Looking forward, the odds of sustained robust growth are good, although as
always, risks remain."
The Fed chief warned of both potential long-term and short-term risks from failing to get huge government deficits under control.
"Chronic concern" about a possible spike in energy prices was another economic danger, he said, adding that for Fed policy-makers, a continuing worry was that their policy could become "improperly calibrated" to economic developments.
Treasury bond prices rose on the Fed chief's emphasis on policy patience.
Mr Greenspan said record federal budget deficits could create problems "in the relatively near term" unless a convincing plan for ratcheting them down was put in place. "Should investor become significantly more doubtful that the Congress will take the necessary fiscal measures, an appreciable backup in long-term interest rates is possible," he said.
He said inflation appeared to be "in a range consistent with price stability," which he called notable in light of the dollar's decline against other currencies.
Mr Greenspan said the fall in the dollar would ultimately help narrow the gaping US current account gap, a comment that sent the dollar lower on foreign exchange markets.