The Securities Industry and Financial Markets Association’s Economic Advisory Roundtable expects the U.S. recession to last about 18 months.

The roundtable unveiled its outlook for 2009, forecasting that the recession will last through the first half of 2009, it also expects the Federal Open Market Committee will cut the target federal funds rate by 50 basis points, and it examines certain aspects of the Troubled Asset Relief Program.

“The general consensus of the Roundtable is that the U.S. economy will face its longest postwar recession, of approximately 18 months, before we see subdued growth in the second half of 2009,” said Kyle Brandon, managing director of research. “The financial market meltdown, the credit market freeze and the economic contraction have all hammered the economy in a period of uncertainty in part due to the political transition and expected regulatory overhaul. These events have so far overwhelmed the positive side of the ledger, which include falling commodity prices, aggressive central bank actions to support market liquidity and the effect of an anticipated fiscal stimulus.”

The median forecast is for GDP to fall at an annualized rate of 4.2% in the fourth quarter of 2008, resulting in full-year 2008 growth of 1.3% year-over-year. The economy is expected to continue to contract on a quarterly basis through mid-2009, with full-year 2009 GDP expected to fall 1.0%.

SIFMA reports that survey participants unanimously believe that the FOMC will cut the target Fed funds rate at this week’s meeting. The overwhelming majority are forecasting a cut of 50 basis points, while the remainder anticipate a cut of 25 basis points.

Most respondents also agreed that a government program to purchase or insure troubled assets, the original stated purpose of TARP, would have a significant impact on bank balance sheets and, to a slightly lesser degree, on credit availability, it says. Also, two thirds of respondents characterized the purchase of troubled assets as important or very important to addressing the credit crisis. Over 90% of respondents identified price transparency as a critical factor to the health of the credit markets, it adds.

IE