A bank economist predicted Friday that the recession will be ”short and mild,” but a Federal Reserve Board official was more cautious in forecasting when the business downturn will end.
”I hope it will be very short,” Wayne D. Angell, a Fed governor, said in an outlook panel sponsored by the Executives` Club of Chicago.
But he warned that problems in the real estate and banking industries are continuing, and he added: ”The ending points are not well defined at this time.”
Angell said that, while the Fed ”could quickly abort the recession” by rapidly easing credit and boosting the money supply, he belongs to a group on the Fed board that fears such an action could touch off a new round of inflation in the future.
”To those who are asking the Federal Reserve to do something, I reply that my camp believes the first objective of monetary policy should be that it does no harm,” he said.
The other panelist, James E. Annable, chief economist for the First National Bank of Chicago, joined those who believe that a swift victory in the Persian Gulf war will help to end the recession in the United States this spring.
”On the assumption that the war is over in 30 to 60 days, my bet is that the recession will be short and mild,” he said.
Annable said the current recession differs from others since World War II in that it was not preceded by an excessive buildup of inventories or soaring interest rates.
”The Fed has been easing and it will continue to ease,” Annable said.
He also pointed out the recession is not worldwide. Germany and Japan continue to enjoy expanding economies, he noted. Moreover, he said military spending as a result of the Mideast conflict will give the U.S. economy a boost in the short term.
Annable said he expects the gross national product to show a decline of only 1 percent over two quarters, while he expects inflation to average 3 percent this year and interest rates to decline further in the months ahead.
He also expressed a feeling that the stock market ”has bottomed” and that it will be higher at the end of 1991 than it is today.
”The bad news is that the recession, though mild, is not going to solve the problems of the real estate industry,” said Annable. ”The commercial construction field is badly overbuilt, and that will last until the mid-1990s.”
Consumer spending also is likely to grow at a slower pace in the next few years than in the 1980s, he said, because of the large amount of debt accumulated in the past decade.
