US Federal Reserve (Fed) Chairman Alan Greenspan said on Thursday that the US economy seems to be on a "reasonably firm footing" with inflation under control.

"The US economy seems to be on a reasonably firm footing, and underlying inflation remains contained," Greenspan said in his semi-annual testimony to the congressional Joint Economic Committee.

He said that the US economy has "alternately paused and quickened" this year but a recent uptick in economic indicators showed the soft readings of the early spring were not signaling a more serious slowdown in the pace of the economic activity.

The White House also said on Wednesday that the US economy is expected to continue growing at a 3.4 percent rate this year, down only slightly from 3.5 percent the US government had forecasted in last December.

Meanwhile, Greenspan said that among the biggest surprises of the past year in the US economy has been the pronounced decline in long-term interest rates on US Treasury securities despite a 2- percentage-point increase in the federal funds rate.

"This is clearly without recent precedent," he said.

The yield on 10-year US Treasury notes, currently at about 4 percent, is 80 basis points less than its level of a year ago, he said. "Moreover, even after the recent backup in credit risk spreads, yields for both investment-grade and less-than-investment- grade corporate bonds have declined even more than Treasuries over the same period."

"There can be little doubt that exceptionally low interest rates on ten-year Treasury notes, and hence on home mortgages, have been a major factor in the recent surge of homebuilding and home turnover, and especially in the steep climb in home prices," Greenspan said.

Although a "bubble" in home prices for the nation as a whole does not appear likely, there do appear to be, at a minimum, signs of froth in some local markets where home prices seem to have risen to unsustainable levels, he warned.

US Fed policy-makers will meet on June 29-30 to discuss the monetary policy in the next half of this year. It is widely expected that the Fed will raise a key short-term rate, the federal funds rate, by another quarter-point to 3.25 percent at that time.

The US Fed has raised short-term interest rates eight times since June of last year and pushed the US federal fund rate to 3 percent from a forty-year low of 1 percent.

Source: Xinhua