ALAN GREENSPAN last night prepared American consumers and world markets for the possibility of sharper than expected rises in US interest rates.

The Federal Reserve Chairman said that America was enjoying a broadly based, jobs-rich expansion, and put investors on notice that he may yet push US rates up more aggressively than markets expect. “Not only has economic activity quickened, but the expansion has become more broad-based and has produced notable gains in employment,” he told the Senate Banking Committee.

The dollar jumped and US Treasury bonds slipped as Mr Greenspan used tougher than predicted testimony to make clear that he believes America can cope with faster rate rises if they are needed. “Our economy appears to have prepared itself for a more dynamic adjustment of interest rates,” he said.

He suggested that a recent slowing in consumer spending was a blip due to “transitory factors” such as higher oil prices and “should prove short-lived”. But on Wall Street, shares clung to early gains, closing 55.0 points up at 10,149.10, as Mr Greenspan also indicated that rates might still rise only at the “measured pace” previously pledged by the Fed. He also noted a “protracted shortfall” in business investment and business caution, reflected in strong hiring of temporary staff.