His closely-watched appearance on Capitol Hill, known as the Humphrey-Hawkins testimony, comes just as the world's top economy has entered a record 107th month of economic expansion, marked by booming growth and — as yet — tame inflation.

But Greenspan and his fellow policymakers on the Federal Open Market Committee are worried that things may not stay that benign forever. The U.S. labor market is getting tighter by the month, threatening to drive up wages and prices. And there is no sign of a slowdown in consumer spending, the engine behind the economy's red-hot growth of 5.8 percent late last year.

Trying to keep a lid on inflation, the Fed has already raised rates four times, by a total of one percentage point, since June 1999. But so far, neither consumers nor firms seem to have paid much attention to those moves. Thus, analysts expect Greenspan to signal that it's time for another nudge.

"I think he'll say that this economy is growing too fast and it would be our responsibility to do something about it," said James Annable, chief economist at WingSpanBank.com. "But in this kind of environment, where we do not have any clear signs of problems yet, that's a clear recipe for gradualism."

And gradualism, in the market's language, would mean another quarter-point rise in the overnight federal funds bank lending rate, currently at 5.75 percent, which sets the standard for borrowing costs throughout the United States and beyond.

Most analysts bet on yet another quarter-point rise in that rate when Fed policymakers meet again in May, barring a noticeable slowdown in the booming U.S. economy by that time — which few, if any, expect to materialize.

Key to the monetary policy equation will be Greenspan's evaluation of recent U.S. productivity gains. Productivity, or output per worker, rose sharply at the end of last year as information technology made the American workplace ever more efficient, helping to raise output without driving up costs.

"We've seen very strong productivity growth in the last two quarters, but it's not clear what the economy's true speed limit is," said Lynn Reaser, chief economist at Bank of America Asset Management Group in Jacksonville, Fla.

While the powerful Fed chief has repeatedly extolled the virtues of that technological change, he has also appeared cautious whether such strong productivity gains will continue.

Monetary Challenge

"Our challenge in monetary policy is to foster, as best we can, the financial conditions that will allow this economic expansion and technological revolution to continue as long, and as vigorously, as possible," Greenspan said last month.

Anything more than a modest rate rise right now might well unsettle financial markets. While Greenspan has made no secret of his view that U.S. stock prices may be overvalued, he is in no rush to talk them down.

At the same time, should investors perceive Greenspan as being too positive about the economic outlook, they may drive up stock prices even more, fuelling consumer spending.

"He has to be careful not to give the stock market too much impetus on the upside, and at the same time not to aggravate any kind of correction that might be going on," said Reaser.

"He needs to walk a very fine line here," she added.

Greenspan's typically even-handed approach may help him justify the Fed's strategy to lawmakers, some of whom have lambasted rate rises at a time when inflation is still low.

Greenspan's appearance at 10 a.m. (1500 GMT) Thursday may well be the last time he gives Humphrey-Hawkins testimony before the Banking Committee of the House of Representatives.

The 1978 act, named after the two lawmakers who sponsored it, made the Fed accountable to Congress. It expired last year, but was extended to include this month's testimony.

Greenspan will repeat his formal remarks before the Senate banking panel on Feb. 23. Both appearances will include a detailed question-and-answer session with lawmakers.