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 SEATTLE, Dec. 4 /PRNewswire/ -- Stating that the economy has moved "basically sideways" since Labor Day, the president of the Federal Reserve Bank of San Francisco said today he expects to see a rebound to moderate growth in 1992.
 Addressing the Seattle Chamber of Commerce, Robert T. Parry said demand for goods and services was weak in the third quarter. He added that changes in inventories were responsible for overall moderate growth of less than 2 percent in that quarter.
 "Both the timing and the source of the (third-quarter) growth have raised some doubts about whether it will continue," said Parry. However, easing moves by the nation's central bank over the past 18 months are a fundamental factor working to stimulate underlying demand and pave the way for moderate expansion of the economy in 1992, he added.
 Because underlying inflation is on a downward trend, Parry said the Federal Reserve has greater latitude to react to weakness in the economy.
 "As I hope our policies over the past year and half have demonstrated," said Parry, "we are working hard to help the economy move into a recovery phase. I believe our efforts ultimately will pay off. I think we stand a good chance of seeing an expansion next year. The recovery from the recession is not going to be a 'fast break' to high growth, but instead it will be a period of moderate growth."
 Parry said factors dampening the possibility of a more robust recovery in 1992 are actions taken to deal with budget deficits leading to cutbacks in government spending and, in many instances, higher taxes; a huge "overhang" in commercial real estate which may take years to work down high vacancy rates; and "unusual weakness in business lending at commercial banks."
 On the inflation front, Parry was heartened by its steady downward trend. "We are beginning to see meaningful reductions in underlying inflation which are key to long-term control of inflation," he said. "Overall, I wouldn't be surprised to see consumer inflation come in at 3.5 percent or lower this year and next, (marking) significant progress from the 4.5 to 5.5 percent core rate of consumer inflation in recent years."
 Turning to the economy in the state of Washington, he said it is not growing as rapidly as it has over the past two years because of the national recession, defense cutbacks, and constraints on the production of logs and lumber due to environmental issues and the slowdown in home-building nationally.
 "These factors aren't enough though, to change Washington's fundamentally bright longer-term outlook," said Parry. "The state would share in a resurgent national economy, and the strong migration and international trade patterns of a couple of years ago will become important forces in a recovery for Washington."
 -0- 12/4/91
 /CONTACT: Ron Supinski of Federal Reserve Bank of San Francisco, 415-974-3231/ CO: Federal Reserve Bank of San Francisco ST: California IN: FIN SU:

DB -- SF002 -- 9307 12/04/91 15:02 EST
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Publication:PR Newswire
Date:Dec 4, 1991

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