Greenspan warns economic weakness not yet over

The US Federal Reserve chairman has warned of "considerable uncertainties" in the States' economic outlook, saying the current period of slow growth has not ended.

Alan Greenspan said there was still a threat that business activity could weaken even further.

He added that an absence of inflationary pressures had left the central bank with plenty of room to cut interest rates further if needed.

In a dinner speech to the Economic Club of New York, he said: "The period of sub-par economic growth is not yet over, and we are not free of the risk that economic weakness will be greater than currently anticipated, requiring further policy response."

He did not use the word "recession," but his prepared remarks clearly signaled that a possible recession remained a threat to the economy.

The Fed has already cut interest rates five times this year in the most aggressive easing move ever carried out during Mr Greenspan's nearly 14 years as head of the central bank.

The moves have reduced the federal funds rate by 2.5%, driving borrowing costs for millions of American consumers and businesses to the lowest level in seven years.

Noting these moves, Mr Greenspan said, "Our front-loaded policy actions this year should be providing substantial support for a strengthening of economic activity later this year."

But he indicated that concerns about greater-than-expected weakness were likely to persist for "several quarters".

Signaling that the Fed was prepared to cut rates further, he said he could detect no signs that inflation was threatening to get out of control, adding that the economic slowdown that began last summer was helping to hold down prices.