Federal Reserve Chairman Alan Greenspan told Congress on Wednesday that the U.S. economy entered 2005 in good shape, but warned and that inflation is something policy-makers must continue to guard against.

Greenspan, delivering the Fed's twice-a-year economic outlook to lawmakers, struck a fairly positive tone about the economy.

"All told, the economy seems to have entered 2005 expanding at a reasonably good pace, with inflation and inflation expectations well-anchored," Greenspan said in prepared testimony before the Senate Banking Committee.

But he tempered his optimism by warning that the relatively calm economic conditions of recent decades must not be taken for granted.

"History cautions that people experiencing long periods of relative stability are prone to excess," he said. "We must thus remain vigilant against complacency."

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