Federal Reserve Chairman Alan Greenspan delivered an optimistic take the U.S. economy’s long-term prospects today. However, he cautioned that the inflation outlook has become more uncertain.

The recent hurricanes are going to hurt U.S. economic growth in the near term and add to inflationary pressures, “but the economic fundamentals remain firm and the U.S. economy appears to retain important forward momentum,” Greenspan said in prepared remarks before the Joint Economic Committee. It was his first testimony before the U.S. Congress since since July.

“The longer-term prospects for the U.S. economy remain favorable. Structural productivity continues to grow at a firm pace, and rebuilding activity following the hurricanes should boost real GDP growth for a while. More uncertainty, however, surrounds the outlook for inflation,” he said.

The Fed has raised rates 12 straight times since June 2004. Earlier this week, it lifted the federal funds rate to 4%.

Financial markets widely expect the Fed to raise rates by another quarter percentage point in December and to keep raising rates early in 2006.

Greenspan issued a warning on the potential for a pickup in inflation, saying the recent suppression of cost growth and world inflation “at some point, will begin to abate” and “gradually end.”

As for energy prices, natural-gas supplies “appear to be sufficient” to meet near-term demands, however, a colder-than-average winter would stress the market and prices will “likely remain vulnerable” to spikes until the spring, Greenspan said.