clarinews@clarinet.com (02/02/90)
WASHINGTON (UPI) -- Slower economic growth is on the horizon this year but the threat of a recession is unlikely, a panel of bank economists said Thursday. The Economic Advisory Committee of the American Bankers Association, concluding a two-day assessment of the nation's economy, forecast a meager expansion during the first half of the year and higher, but ``subpar'' growth in the second half. The panel of 13 economists projected economic growth of only 1.8 percent this year, well below the 3.3 percent growth forecast by the Bush administration in its preparations of the fiscal 1991 budget. Economic growth is expected to improve to 2.5 percent next year, the economists said. The panel said inflation would remain above 4 percent during the year, with a temporary rise above 5 percent during in early 1990. ``This combination of slow growth and stubborn inflation is not optimal but is liekly to prevail through 1990,'' said Kathleen Cooper, the committee's chairman and chief economist at Security Pacific National Bank in Los Angeles. Cooper said the bank economists ``strong support'' the Federal Reserve's policy of progressively lowering inflation ``even though this may require a level of growth below the economy's long-run trend.'' The economists said the current uptick in long-term U.S. interest rates, which was sparked by renewed inflation concerns and higher Japanese rates, will subside by the end of the first quarter. Cooper said the decline in interest rates will be moderate because of lingering concerns about inflation. Also forecast was a U.S. trade deficit of about $110 billion and a slight weakening of the dollar against the yen. The economists encouraed the Federal Reserve to reduce its monetary growth targets by one-half of a percentage point.