Greenspan warns about risks in transition to slower growth

WASHINGTON (AP) --Federal Reserve Chairman Alan Greenspan expressed satisfaction Tuesday that the rate of economic growth is slowing to a more sustainable pace, but he warned of the dangers posed to the economy from unexpected shocks.

Greenspan specifically mentioned the sharp plunge in stock prices and the possibility this could cause a cutback in consumer and business spending. He also said rising tensions in the Middle East could cause oil prices to surge unexpectedly.

Greenspan's remarks, delivered to a banking conference in New York, were the firmest signal yet that the central bank is switching its chief concern from fighting inflation by raising interest rates to worrying that its credit tightening has gone too far and could prompt an outright recession.

"In periods of transition from unsustainable to more modest rates of growth, an economy is obviously at increased risk of untoward events that would be readily absorbed in a period of boom," Greenspan said.

The Fed has raised interest rates six times, beginning in June 1999, in an effort to slow the booming economy to a more sustainable pace in order to keep inflation in check.

Responding to those rate increases, economic growth slowed abruptly to an annual rate of just 2.4 percent in the summer, less than half the sizzling 5.6 percent pace of the spring.