A group of senior bank economists predict the U.S. economy will remain "relatively strong" this year but will begin to slow down in 1989.
However, strong levels of capital investment indicate there is "little chance" of a recession any time soon, the experts added."We foresee little chance of recession in the near future," said Milton Hudson, chairman of the economic advisory committee of the American Bankers Association, which released the forecast.
"Current, reasonably strong economic conditions in other industrial economies strengthen the panel's conviction that recession will be held at bay."
The 15-member group released what it called its mid-year economic forecast after meeting in Napa.
Among the other predictions in the group's report: The nation's output of goods and services will grow by a moderate 3.1 percent in 1988 and 1.7 percent in 1989.
Slower growth was seen in "most components of GNP next year, including exports, capital spending, consumer spending and inventory accumulation."
Inflation is also expected to rise, with consumer prices predicted to increase 4.5 percent this year and "moderately above" 5 percent in 1989.
The Federal Reserve Board is expected to respond to a rise in inflation by tightening interest rates, a move that, although "prudent," is almost certain to slow growth and increase consumer borrowing costs, according to an ABA economist.
For the average consumer, that means "his car loans and his other borrowing costs go up," said Robert H. Dugger, chief economist for the ABA.
He added the nation's banks will likely find it harder to post profits as their own borrowing costs rise.
Higher interest rates, along with continued hefty levels of personal debt, are expected to prompt consumers to trim spending in 1989.
For the U.S. dollar, the outlook appears to one of continued downward pressure, economists said.
Economists noted that the U.S. trade deficit has improved as a result of the dollar's decline against most major world currencies over the past two years.
But they said that the nation's continuing "enormous trade deficit" indicates a further drop in value may be required.
"Improved exports and indications of greater U.S. competitiveness suggest that the dollar may have declined sufficiently, but the enormous trade deficit gives us a contrary signal," Hudson said.