Mumbai: Alan Greenspan, former chairman of the US Federal Reserve, has warned the US central bank to be more careful about stoking inflation, even as the Federal Open Market Committee is expected to announce a cut in interest rates.

"It''s very clear that the trade-offs between inflation and growth have altered," he said in an interview with CNBC Television. "The Fed has to be more careful about inflation now than it did when I was chairman."

He said the probability of a US recession was now slightly more than a third, after he earlier in the year put the chances at one-third, The Wall Street Journal reported in its online edition.

Greenspan said there was a "very large" inventory of unsold, newly built homes putting pressure on builders to sell them quickly, the Journal reported, citing an interview with him.

As a result, "we have the capability of far bigger price declines," which will pinch home equity, lead to more defaults on sub prime mortgages and pressure consumer spending, Greenspan said, according to the Journal.

Earlier, speaking in London, he said the turmoil in credit markets was an "accident waiting to happen", and has also warned of much higher UK inflation in future years.

Inflation would rise above 3 per cent on a regular basis, putting pressure on interest rates, and the UK housing boom would soon come to an end, he said.

He said it was too early to say if the current financial crisis would be more damaging than that seen in 1998.

Greenspan will be launching a harshly critical attack on President George W Bush''s economic competence in his memoir to be published on 18 September.

Greenspan''s 531-page book has lambasted the Bush administration''s claims of economic proficiency at a time when the markets are deeply unsettled. He has contrasted big-spending Bush, vice-president Dick Cheney, and the Republicans with former president Bill Clinton, whom Greenspan clearly admires.

He writes that Bush''s failure to curb spending was "a major mistake" and that Republican congressmen were "feeding at the trough". "The Republicans in Congress lost their way," he says. "They swapped principle for power. They ended up with neither. They deserved to lose (the 2006 congressional election)."

Greenspan told the Journal he was "fairly close" to former President Bill Clinton''s economic advisers, but, "the next administration may have the Clinton administration name but the Democratic Party ... has moved ... very significantly in the wrong direction." He cited its populist bent, especially its skepticism of free trade. Clinton''s wife, Sen. Hillary Clinton, is the Democratic presidential front-runner.
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