Greenspan Says Fed Keeping Close Watch For Deflation Signals; Action May Be Necessary; Economic data are weak, but with fog of war lifted, 2nd half could be better.(A)

Byline: JOSEPH GUINTO

Federal Reserve Chairman Alan Greenspan said Wednesday the economy is not in imminent danger of deflation. But he also vowed the Fed stands ready to fight a cascade in prices if one comes.

Greenspan, appearing before Congress' Joint Economic Committee, gave a mixed reading on the U.S. economy. He said growth in the current quarter may be "soft," but a pickup in the second half of the year is possible.

Much of what Greenspan said on the economy is well-known. But the talk of deflation was not.

The Fed's Open Market Committee noted the risks of a continued slowdown in inflation at its May 6 meeting, where it chose to …