Mr Greenspan called the performance of the US economy outstanding and credited American investment in productivity-enhancing equipment such as computers for the good combination of strong economic growth and low inflation.

Wall Street is on interest rate alert

"An economy that 20 years ago seemed to have seen its better days is displaying a remarkable run of economic growth that appears to have its roots in ongoing advances in technology," the Fed Chief said in testimony to the congressional Joint Economic Committee.

He said that the amount of output per hour of work, has been growing at an annual rate of around 2% since 1995, double the annual gains of the previous two decades.

He credited these gains in part to a surge in business investment in a variety of high-tech products from computers to fibre-optic cable.

Productivity is considered the crucial element in raising living standards because it allows employers to pay their workers more without triggering inflationary pressures by having to raise the cost of products.

Productivity peak

But Mr Greenspan cautioned that these productivity gains cannot go on forever.

"The growth of productivity cannot increase indefinitely," he said. "While there appears to be considerable expectation in the business community, and possibly Wall Street, that the productivity acceleration has not yet peaked, experience advises caution."

Mr Greenspan, who in 1996 worried that investors' "irrational exuberance" may have pushed stock prices too high, reminded the committee that he has warned a number of times about the dangers in believing that the world has entered some new economic era because of breakthroughs in technology.

He said: "History is strewn with projections of technology that have fallen wide of the mark,

"Despite the remarkable progress to date, we have to be quite modest about our ability to project the future of technology and its implications for productivity growth and for the broader economy."

Mr Greenspan was making the first of two appearances before the Joint Economic Committee.

His subject on Monday was technology and he is scheduled to testify on Thursday on monetary policy.

The Fed last month changed its policy bias to lean in favour of raising interest rates and financial markets have grown increasingly worried that he will announce on Thursday that the Fed will soon start raising interest rates.