"If only a small percentage of businesses choose to add to their inventories as a hedge, the effect on production will be insignificant," Greenspan said. "However, should a large number of companies want to hold even a few extra days of inventories, the necessary, albeit temporary, increase in production [or imports] to accommodate such stock building cold be quite large.

"Bottlenecks could develop, and market pressure could build," he said in text prepared for delivery to the President's Council on Year-2000 Conversion.

But Greenspan also characterized as virtually non-existent the threat that the US will suffer massive computer failures due to Y2K.

"The probability of a cascading of computer failures in mission-critical systems is now negligible, given the testing that has been done, the backupplans that are in place and the great adaptability and ingenuity of the American worker," Greenspan said.

Greenspan said he is increasingly confident the US financial sector is prepared for the date change, though he conceded that small glitches may occur.

"The good news is that evidence is becoming more persuasive that our electronic infrastructure will be ready for the century date change," he said.

Although the banking system and ATM providers are about as prepared for Y2K as they can be, we cannot realistically expect perfection over the New Year's holiday any more than at similar periods in years past." "Moreover, while systems may fail as they have in the past, these failures never have resulted in broader and persistent -- that is, systemic -- breakdowns in our economy," Greenspan said. "Notwithstanding, it is at least conceivable that, as a consequence of our current dependence on computers, some Y2K-related failures could have noticeable effects on the economy." Against that backdrop, the Fedchief cautioned against consumers to make only modest cash withdrawals at the end of the year.