U.S. Federal Reserve Board Chairman Alan Greenspan left the door open to more interest rate cuts in the U.S. in a widely-anticipated speech at the Bay Area Council Conference in San Francisco this afternoon.

Greenspan traced the economy’s arc over the past year, indicating that September 11 appeared to derail an economic recovery. Immediately after this shock the economy was unquestionably weak, but data has lately become more mixed. “But, arguably, our economy has not been weakening cumulatively in recent weeks. In fact, indications of stabilization, similar in many respects to those observed in the period immediately preceding September 11, have been appearing with greater frequency,” he said.

Rather than calling a bottom on the economy however, Greenspan indicated that downside risks persist. “There are sound reasons for concluding that the long-run picture remains bright, and even recent signals about the current course of the economy have turned from unremittingly negative through the late fall of last year to a far more mixed set of signals recently,” he said.

“But I would emphasize that we continue to face significant risks in the near term. Profits and investment remain weak and, as I noted, household spending is subject to restraint from the backup in interest rates, possible increases in unemployment, and from the effects of widespread equity asset price deflation over the past two years.” As such, it is believed that there is room for still more rate cutting in the U.S.

Greenspan attributed the possibility of quick recovery to the power of technology to help the economy respond quickly in the face of weakening demand trends. “A possible significant contributor to this emergence of stability–if that is what it is–may be the very technologies that have fostered coincident global weakness: those that have substantially improved access of business decisionmakers to real-time information.”

Nevertheless, he remained cautious on the overall economic outlook, noting, “That impetus to activity will be short lived unless the demand for goods and services itself starts to rise. On that score, despite a number of encouraging signs of stabilization, it is still premature to conclude that the forces restraining economic activity here and abroad have abated enough to allow a steady recovery to take hold. For that to happen, sustained growth of final demand must kick in before the positive effects of the swing from inventory liquidation to accumulation dissipate.”