Greenspan: Rates Will Stay Low as Long as Necessary

Low interest rates have benefited households, Greenspan said. The net worth of households is estimated to have risen 4.5% in the first half of the year, faster than personal incomes.

The recently passed tax cuts will provide a considerable lift to disposable incomes, Greenspan said.

Businesses remain guarded, he said, however: "A pervasive sense of caution reflecting, in part, the aftermath of corporate governance scandals appears to have left businesses focused on strengthening their balance sheets and, to date, reluctant to ramp up significantly their hiring and spending."

Greenspan noted the favorable productivity trend of recent years, but conceded there is a dark side to it. "One consequence of these improvements in efficiency has been an ability of many businesses to pare existing workforces and still meet demand," he said. The unemployment rate rose in June to 6.4%.

The Fed expects GDP growth of 2.5% to 2.75% this year, below previous forecasts of 3.25% to 3.5% growth. The economy grew 1.4% in the first quarter this year.