San Francisco Fed Chief: Recession Over

LOS ANGELES - The recession has ended, but the recovery is "not likely to be a fast break to high growth," according to Robert Parry, president of the Federal Reserve Bank of San Francisco.

"I'm going to suggest that the recession is over," Mr. Parry said in a speech to community leaders in Boise, Idaho. But he predicted a moderate growth rate of 3% in the first year of the recovery, well below the 5.75% average for the first year of other post-World War II rebounds.

He said the Gulf War was the most important underlying factor of the recent downturn, but cutbacks in government spending, overbuilt commercial real estate markets, and tight credit from financial institutions will conspire to keep future growth in check.

Mr. Parry called the current stage "a turning point in the business cycle," and said the exchange rate of the dollar could play a key role in its outcome.

"The dollar could be a wild card for the economy this time around," Mr. Parry said. "The dollar unexpected began to rise early this year. Unless it is reversed, the 15% appreciation since February will restrain future economic growth."

Fundamental factors suggest the dollar will decline over time, he said, adding, "This is one reason this expansion could turn out to be stronger than expected."

Mr. Parry said he sees consumer price inflation at a bit over 3.5% this year and closer to 3% in 1992. He said sustaining economic growth is a key concern of the Federal Reserve Board, but that the Fed cannot lose sight of its longer-term goal of controlling and ultimately eliminating inflation.

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