Former Federal Reserve Chairman Alan Greenspan suggested at a private dinner yesterday that short-term U.S. interest rates may need to rise further, a person briefed by a participant at the meeting said.

The person, who declined to be identified, said Mr. Greenspan told about a dozen clients of Lehman Brothers Holdings Inc. in New York that low long-term rates were limiting the Fed’s ability to manage the economy. Homeowners are borrowing more against the value of their homes to finance spending, the person said.

For the Fed to gain traction in its efforts to keep the economy from overheating, it may need to raise short-term rates more, Mr. Greenspan went on to suggest, according to the person, who’s seen a summary of the meeting by one of the participants.

Mr. Greenspan didn’t say how high rates would climb, the person said.

The Fed raised its target rate by a quarter point to 4.5% on January 31, Mr. Greenspan’s final day at the central bank after almost two decades at its helm. The 3 1/2 percentage-point cumulative increase in the federal funds target rate since June 2004 was the biggest of his tenure, surpassing a 3 1/4-point jump in 1988-89.

A spokesman for Lehman in New York, Kerri Cohen, declined to comment. Mr. Greenspan’s office in Washington declined to comment.

Shorter-maturity U.S. debt fell after financial news network CNBC reported earlier yesterday that Mr. Greenspan may have “made some very bullish comments on the economy.” The yield on the two-year Treasury note rose 3 basis points to 4.63%. The dollar extended an advance against the euro, reaching a one-month high.