San Francisco Fed Chief Predicts Slower Economic Growth

U.S. economic growth is probably headed for a "noticeable slowdown," the president of the Federal Reserve Bank of San Francisco said in remarks prepared for delivery Friday.

Stock market declines and higher risk premiums for borrowers "could put a sizable damper on consumer spending and business spending," Robert Parry said.

That spending slowdown, combined with weaker economic growth abroad, poses an increased threat to U.S. economic growth, he said.

Mr. Parry was scheduled to speak to the San Francisco Bay Area Chapter of the Appraisal Institute.

Investors, seeking ways to reduce their exposure to economic and financial risk, are moving their money into U.S. Treasuries and out of the stock market, Mr. Parry said.

In addition, he said, many lenders are apparently reducing risk by withdrawing from the market, which is raising the risk premium for virtually all borrowers and raising interest rates for riskier borrowers.

These factors plus weaker economic growth among many U.S. trade partners add up to increased risk in the outlook for the domestic economy, Mr. Parry said. The "most likely outcome is a noticeable slowdown" in real gross domestic product growth, he said.