Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: TUESDAY, March 20, 1990                   TAG: 9003202378
SECTION: BUSINESS                    PAGE: B-5   EDITION: EVENING 
SOURCE: Associated Press
DATELINE: WASHINGTON                                 LENGTH: Medium

ANALYSTS FORECAST LOWER INTEREST RATES

Members of the Shadow Open Market Committee said they believed a variety of consumer and business loans would decline in coming months, reflecting a sluggish economy and declining inflationary pressures.

The economists said banks' prime lending rate, the benchmark for many business and consumer loans, should drop from 10 percent to 9.5 percent or perhaps as low as 9 percent by summer.

Fixed-rate mortgages, which are about 10.25 percent, will fall to 9.8 percent by midyear and remain below 10 percent for the rest of 1990, they predicted.

The panel forecast that the federal funds rate, a bellwether interest rate for judging the impact of Fed actions, will dip from 8.25 percent to 7.5 percent by midyear.

Various business and consumer rates have been rising since the first of the year, with the government's 30-year bond jumping from an average of 7.9 percent in November and December to around 8.5 percent currently.

Those rates should fall back to 8 percent, the economists forecast, and remain there through 1991.

The shadow committee was upbeat on the prospects that the economy will be able to avoid a recession this year although the forecast called for economic growth to remain sluggish, reflecting previous credit-tightening on the part of the Federal Reserve.

Inflation, which jumped sharply early in the year because of severe winter weather, will begin moderating, with consumer prices expected to rise at a slower pace than in 1989.

The shadow committee meets twice a year to assess actions of the Federal Reserve, whose chief policy-setting body, the Federal Open Market Committee, will meet next week.