Economist sees continued growth Boltz of T. Rowe Price says Fed is handling money supply well

October 13, 1995|By BILL ATKINSON | BILL ATKINSON,SUN STAFF

LEESBURG, Va. -- The economy will continue expanding throughout the year, the chief economist for T. Rowe Price Associates Inc. said yesterday.

Paul W. Boltz also said he expects the Federal Reserve Board to trim interest rates in the near future.

"We think the economy is going to be rolling right along," Mr. Boltz told a group of T. Rowe Price clients at a conference. "I don't see any pressing reason why we have to have a recession soon."

Maryland will see continued improvement, but it will lag the economies of neighboring states, he said.

"Things are perking up," Mr. Boltz said. "We have a pretty vibrant financial sector. Now, I think our science sector is coming to life."

Industrial production has been one of the drivers for the national economy, and it has "started to move up again," he said. Another important factor is the unemployment rate, which has remained steady at 5.6 percent despite consolidation in banking, defense and other industries.

Business cycles also are lasting longer, he said, so there are fewer downturns. The cycles have been stretched out because the economy is "overwhelmingly becoming a service economy," which is more stable than an industrial based economy, he said. Around World War II, about 60 percent of the nation's work force was involved in manufacturing. Today, 80 percent are in the service sector.

Mr. Boltz applauded the Federal Reserve, which has done a better job of managing the economy, he said.

"What the Fed has been not trying to do is run up the economy," he said.

He expects the Fed to reduce the federal funds rate -- for funds that banks lend to each other overnight -- to 5.5 percent from 5.75 percent, but he didn't say when.

"This is very small stuff," Mr. Boltz said. "These small moves have a nice psychological effect."

He warned the audience that buying a home won't be the foolproof investment it has been in recent years because adults in their mid-20s, who he referred to as the "baby bust generation," aren't getting married and having children.

"The rate of family formation has slowed down dramatically," he said. "We are not going to have anything like the baby boom impact on housing until 2005."

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