A group of top bank economists on Wednesday predicted the economy will grow 2.5% this year despite global economic troubles.
Commercial lending will rise 10% this year and 8% in 2000, and consumer credit will grow 6% in 1999 and 5% next year, the American Bankers Association's Economic Advisory Council predicted.
"The U.S. economy survived significant shocks last year and still turned in an unexpectedly strong performance," said Wayne Ayers, chief economist at BankBoston and chairman of the council. "We expect that momentum to carry into 1999, but fade somewhat in the second half of the year."
The Federal Reserve Board will maintain the Fed Funds rate at 4.75% next year, the group said.
Conventional 30-year mortgage rates will seesaw between 6.61% and 6.63% this year, and the consumer price index will hit 2.1% in the first and second quarters before rising to 2.2% in the third and 2.3% in the fourth quarter.
Carl Tannenbaum, chief economist at LaSalle Banks/ABN Amro, said the biggest threat to the economy would be a drastic stock market correction which shatters consumer confidence. "The real risk isn't the loss in wealth from a stock market correction but a change in consumer perception," he said.