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A forecast of growth, and puzzlement over why it's not upon us

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Frank A. Morris, one of those 12 men and women determining the nation's monetary policy, makes up his own economic charts. ``I was an economist for so long, I got used to doing it,'' says Mr. Morris, president of the Federal Reserve Bank of Boston, explaining why he doesn't give his staff the task.

Reading those hand-inked charts, the central banker predicts ``a good strong economy in the last half'' of this year and a modest pickup in the rate of inflation as the impact of declining oil prices and weak food prices passes through the economic system.

Morris, however, shares a common puzzlement with Karl Otto P"ohl, president of the Bundesbank, West Germany's central bank: Why haven't strong monetary stimulation and other favorable economic fundamentals already produced faster growth?

In Germany, Dr. P"ohl told the press here recently, the ``central bank money stock'' has been growing at an 8 percent annual rate, well above the Bundesbank's 3.5 to 5.5 percent target. That should normally boost output.

Yet, growth in the output of goods and services ran at a 2 percent annual rate in the first quarter, well below the 3.5 percent growth rate forecast.

``Rather disappointing,'' P"ohl said.

In the United States, first-quarter growth in gross national product (GNP) was just revised downward to a 2.9 percent annual rate. But there have been signs of slower growth in the current quarter.

Morris's optimism for the economy hangs on several good trends. Stock market prices are up. That means the cost to business of raising capital is down. And shareowners feel more wealthy.

With mortgage rates down, housing is booming at something like an annual rate of 2 million starts a year, rather than about 1.7 million last year. This will increase the demand for household goods as well.

The drop in the price of oil hurts oil-producing areas of the US. But it provides most Americans more income to spend on other products, notes Morris, senior member of the policymaking Federal Open Market Committee.

Further, the decline in the value of the dollar on the exchange markets should invigorate manufacturing. ``It has already started to happen,'' says Morris. Whereas an increasing trade deficit depressed the growth in GNP below the growth in total domestic demand for several years, that pattern should now be reversed.

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