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Greenspan hails U.S. economy but warns of threat from Asia

Federal Reserve Chairman Alan Greenspan Tuesday hailed the remarkable performance of the U.S. economy but warned that "storm clouds" coming out of Asia carried unusually high uncertainty about the future.

Delivering his semi-annual economic report to Congress, Green-span indicated that the central bank was content for the time being to leave interest rates alone and see how developments unfold.He termed the current economic expansion, which will enter its eighth year next month, an "exemplary performance" with inflationary pressures falling last year despite the fact that the unemployment rate dropped to the lowest sustained levels since the late 1960s.

Before Greenspan delivered his testimony, the government reported that inflation at the beginning of this year was well under control, with consumer prices remaining frozen in January, the first time in four years that retail prices have not risen.

Greenspan told a House banking panel that how developments unfold in 1998 and whether the central bank is forced to alter monetary policy will depend to a large extent on how the aftershocks of the Asian currency crisis impact the U.S. economy.

"The outlook for total spending on goods and services produced in the United States is less assured of late because of storm clouds massing over the Western Pacific and headed our way," he said.

Analysts said Greenspan's comments left them convinced the Fed had no intention, for now, of touching short-term interest rates.

"It leaves them still watching and waiting to see what develops," said economist Robert Dederick of Northern Trust Co. in Chicago. "That's what they've been doing, and that's what they're going to continue to do."

Greenspan said that the U.S. trade deficit can be expected to increase as the plunge in Asian currency values makes it tougher for U.S. exporters to sell their products into these markets while at the same time Asian goods become cheaper in U.S. markets.