Originally created 09/16/97

Poll: Interest rates to rise



NEW ORLEANS - The nation's economic forecasters aren't worried about an inflationary surge, but they still believe the Federal Reserve will raise interest rates soon to dampen any price pressures.

In a survey released Monday, forecasters for the National Association for Business Economics expressed greater concern about government spending and the education system.

A fifth of the 43 professional forecasters polled last month said the growth of government spending, especially in entitlement programs, was their chief long-term concern. Entitlement programs refer to Social Security, Medicare and other social spending, but the group did not name any programs.

Another fifth called a weak education system and a poorly prepared work force the most serious economic problem facing the United States today.

"Think about the long-term effect on economic growth if you don't have an education system to sustain a skilled work force," said Tom Davis, NABE president-elect and an economist for Motorola Inc.

The forecasters predicted the economy would grow at an average quarterly rate of 2.4 percent over the next four quarters. The survey consensus also sees continued low unemployment, averaging 5 percent this year and 5.1 percent next. The results were released by the NABE at its annual meeting in New Orleans.

The forecasters said they are confident the economy will not shift into an inflationary spiral in the near future, but they still expect the Fed to raise interest rates as a hedge against inflation.

Twenty-six of the 43 economists predicted the Fed would push up interest rates - most likely between Sept. 30 and next March - to prevent the economy from overheating, the summary said.

The Fed's next policy-setting meeting is Sept. 30.

After nudging short-term rates up one-quarter percentage point in March because of the strong first-quarter growth, Fed officials left them steady at their May and July meetings amid signs the economy had begun to moderate. Fed Chairman Alan Greenspan has warned that interest rates could rise at if inflationary signals are seen.

The business economists also predicted that inflation would remain tame, rising just 2.2 percent this year and 2.8 percent in 1998. The Consumer Price Index rose 3.2 percent last year.