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

DATE: THURSDAY, June 29, 1995                   TAG: 9506290058
SECTION: BUSINESS                    PAGE: B-8   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

BANKS: DON'T WAIT FOR RECESSION

Alan Gayle, chairman of the American Bankers Association's economic advisory committee, said a majority on the panel favors a prompt rate cut, even though it does not see a recession looming.

``If we wait to see the whites of the recession's eyes, the Fed will have waited too long,'' said Gayle, who is with Crestar Bank in Richmond, Va.

Gayle said seven members of the committee believe Fed action to lower rates as early as next week is ``likely and appropriate.'' Four members dissented, and one was undecided.

The central bank's policy-making Federal Open Market Committee is scheduled to meet July 5-6 amid widespread signs of a dramatic economic slowdown. Analysts have been puzzling over statements by Fed Chairman Alan Greenspan, who has said there could be a mild recession but that holding the line on inflation is still the Fed's main job.

The Fed boosted the rate banks charge each other for overnight loans in seven stages during a one-year stretch ending Feb. 1. Since then, the rate has remained at 6 percent as Fed officials review evidence on where the economy is headed.

The American Bankers Association panel said in its semiannual report it believes the economy barely grew during the second quarter that ends Friday, expanding at less than a 1 percent annual rate. The group forecast that growth would be around a 2 percent rate in the second half of 1995 and pick up modestly next year.

The economy grew 4.1 percent last year, including a 5.7 percent rate in the last three months of the year. It slowed to a 2.7 percent rate in the first three months of 1995.

A recession is usually defined as two consecutive quarters of declining growth.

``The economy has downshifted and has ground a few gears in the process,'' Gayle said. ``The upturn is in its fifth year, and the economy is getting tired.''

The panel also forecast that inflation would stay below 3.5 percent and employment would remain close to 6 percent through next year.

Gayle said panel members believe the greater risk is that growth will be less than predicted, particularly if there is unexpected weakness in exports and the Fed's interest rate increases have a delayed impact.