WASHINGTON -- Short-term interest <
rates are likely to drift higher over the next year or so as the economy continues to plod ahead and inflation picks up slightly, according to a survey of business economists released yesterday.
The quarterly forecast issued by <
the National Association of Business Economists calls for a 4% rate on three-month Treasury bills this year, with rates rising to 4.8% in 1993. The rate on three-month bills last week fell below 3.75% before this week's sell-off triggered by fears of higher oil prices.
Thirty-year Treasury bonds will <
hold steady at around 8% this year and in 1993, the association's panel of 44 forecasters said in the survey. Long bonds yesterday were bringing yields of 7.90%.
Joseph Duncan, vice president of <
the association and chief economist for The Dun & Bradstreet Corp., told reporters at a news briefing that although he does not rule out another cut in short-term rates by the Federal Reserve, the panel expects little change in the economy and rates over the next 12 months.
"I think the story on interest <
rates is that there is no story," he said.
On Wall Street, there is renewed <
talk about short-term rates rising, following signs that Federal Reserve policymakers have dropped their bias in favor of lower rates on evidence the recovery will hold.
"We're probably not going to slip <
back but we're probably not going to see much of a drive upward either," said William Griggs, managing director of Griggs & Santow Inc.
"The story is that the long end is <
going to be proved right. There is an inflation problem, and this steep yield curve makes sense," said Mr. Griggs. "It's not just a matter of Treasury and corporate supply but also a general, fundamental issue of an underlying inflation rate of around 4%."
He predicts short-term rates will <
rise 100 basis points in the next six to nine months.
The business economists' latest <
forecast calls for U.S. growth to average 2.5% in 1992 and reflects the widespread view that the revised estimate for first quarter growth due out Friday will be up from last month's advance reading of 2%. Growth in 1993 is expected to be 3%.
The economists call for inflation <
to remain relatively well-behaved, with consumer prices increasing 3.2% this year and 3.6% in 1993. Last year, prices rose 4.2%.
Mr. Duncan did not attach much <
importance to reports that Saudi Arabia is backing an increase in world oil prices by $3 per barrel. As a practical matter, an increase of 6 or 7 cents per gallon in retail gasoline prices "doesn't have much impact" on consumer prices, he said.
Even though the bond market <
was jolted by the idea of a shift in Saudi policy, it remains to be seen how events play out in the world oil market and what happens to Russian oil production, said Mr. Duncan.
The business economists said <
they expected the federal budget deficit this year to reach a record $350 billion before subsiding to $320 billion in 1993. Over half of those surveyed said they did not favor additional government spending to try to spur the economy.
"There's nothing that could be <
done in Washington to stimulate growth," said Mr. Duncan. Even if Congress passed a new economic package this week, the chance it would have any effect by the November election "is virtually nil," he added.
More evidence that the recovery <
is continuing came yesterday when the Commerce Department reported that new orders for durable goods jumped 1.4% in April. The gain was the fourth straight monthly advance and larger than analysts expected.
The four-month string of gains <
was the first since orders rose six months in a row in the period from February to July in 1987, a Commerce spokesman said.
However, the rise in orders was <
not widespread and came on big increases in the volatile defense and transportation sectors. Orders for primary metals and electronic equipment fell. Excluding defense, orders edged up only 0.2%, and excluding transportation, orders slipped 0.2%.