Capital Briefs: Economists: Fed to Let Rates Stand Through '99

A group of bank economists predicted Wednesday that the Federal Reserve will not, and should not, raise interest rates through 1999.

Various factors-particularly the trade deficit and Asia's recession-are putting the U.S. economy in "downshift mode" that probably will make rate hikes unnecessary, said Frederick Breimyer, chairman of the American Bankers Association's economic advisory committee.

The 10-member group predicted a modest rise in unemployment and inflation over the next 18 months, plus a flattening of the economic growth rate at about 2.5%. Because of these anticipated changes in the economy, the committee warned, banks need to be cautious.

"Don't make the loan that creates the loan loss," said Mr. Breimyer, who is also chief economist at State Street Bank and Trust Co., Boston.

The Fed's monetary policy arm, the Federal Open Market Committee, next meets June 30 and July 1.

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