Word: growth
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Dates: during 1980-1989
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...economists forecast that the U.S. gross national product, after adjustment for inflation, will grow a poky 2.3% in 1989, down from an estimated 2.8% last year. The economy will slow as the Fed's tightening grip on the money supply pushes up interest rates. At a growth rate of about 2% or less, most economists think the U.S. can expand without getting out of balance. "This is a slowdown the Fed can be happy with," says David Wyss, chief financial economist for Data Resources...
...that pace keeps up, the Fed may boost interest rates to restrain growth. Says Sinai: "The Fed has already tried to introduce a mild dose of tightening to slow the economy. But it just isn't working so far." Interest rates have been steadily climbing since March. The federal funds rate, which is the interest that banks charge one another on overnight loans, has increased from 6.5% to nearly 9.5% during the past nine months. Economists polled by TIME estimate that the prime lending rate will climb from its current 10.5% to 11% by June but will end the year...
...real bind right now. It is going to have to walk a tightrope. And if it doesn't act soon, the financial markets will lose confidence." Says Melton: "In principle, this can be done with such awe-inspiring precision that the economy slows down to a growth rate of exactly 2% and inflation starts to slow. But as a practical matter, it rarely works out." If credit is too tight, the resulting interest- rate run-up could trigger a recession. And if the Fed allows inflation to quicken, the markets will grow panicky and the dollar could grow shakier...
...extension to the economy as a whole, are the U.S. budget and trade deficits. While the trade gap fell to an estimated $135 billion in 1988 from $170 billion the previous year, some economists fear that it will not keep narrowing at anywhere near that pace because the growth of U.S. exports will slow this year. According to this view, the dollar will have to take a real plunge if the trade gap is to be narrowed much further. This would make American-made goods less expensive for foreign consumers. Recently, the trade deficit has been declining only slightly, falling...
BUSINESS: The economy will have no joyride in '89. Growth will slow, and the chance of a recession will increase...