The US economy has hit a "soft patch" because of corporate scandals, falling stocks and heightened global political risks, Federal Reserve chairman Mr Alan Greenspan said today.
"The economy, as such, is not evidently significantly out of balance," the Fed chief said during questioning at an appearance before Congress's Joint Economic Committee.
"We don't have the usual weaknesses that presage an economy going down in a cumulative manner," he said. "What we do have is a very large degree of uncertainty."
Mr Greenspan also downplayed the prospects for deflation, a general slide in prices that saps economic activity by creating a vicious spiral where consumers defer purchases in expectation of still-lower prices. "We have seen no evidence at this point that we are close to or in danger with respect to deflation," Mr Greenspan said.
But he added the central bank would keep a wary eye out for deflationary pressures. "We cannot allow that to creep up on us unseen," he said.
