The Federal Reserve Chairman Mr Alan Greenspan has said an improving US economic tempo should soon generate a jobs revival, but mounting budget deficits pose a serious long-term threat.
Mr Greenspan signalled interest rates are likely to remain low for some time since there is no sign that companies are making price rises stick.
"In these circumstances, monetary policy is able to be more patient," Mr Greenspan said, adding a standard warning that "no central bank can ever afford to be less than vigilant about the prospects for inflation."
At its last policy-setting meeting on October 28th, the Fed kept its key federal funds rate target at a 45-year low of 1 per cent and said it could remain there for a considerable period, a position that Mr Greenspan's remarks Thursday only bolstered.