Academic journal article ABA Banking Journal

Is Soft Landing Here? Not Just Yet

Academic journal article ABA Banking Journal

Is Soft Landing Here? Not Just Yet

Article excerpt

THE ECONOMY WILL CONTINUE TO grow solidly, but at a more moderate pace, according to the American Bankers Association Economic Advisory Committee (EAC).

While higher interest rates will bring moderation, strength in employment and capital spending should ensure continued expansion, the committee said at its late June meeting in Washington, D.C.

"Despite the market's hope that a soft landing is here, the economy's momentum will prompt the Fed to pull the throttle back a bit more before activity settles," said Carl Tannenbaum, chairman of the American Bankers Association EAC and chief economist for LaSalle Bank/ABN AMRO, Chicago. "The challenge," he said, "is to control the demon of inflation while maintaining the economic paradise our nation has enjoyed for almost a decade." He added: "It is likely the Fed will raise rates by 50 basis points this summer."

The EAC predicted growth continuing at a robust rate of 4.1% for 2000 before settling to a more modest 3.3% pace in 2001. The committee believes that consumer price inflation crested during the first half of this year, at about a 3.5% annual pace, and will begin settling back. …

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