U.S. PAYMENTS GAP TO PERSIST, EX-FED CHIEF SAYS

  The dollar will decline over the next
  two to three years, but this is unlikely to result in a
  complete reduction of the U.S. current account deficit, said
  Anthony Solomon, chairman of S.G. Warburg (USA) Inc and former
  president of the Federal Reserve Bank of New York.
      In a presentation to the Japan Society, Solomon said
  without elaboration that he expects a "significant decline in
  the dollar," within the next three years.
      "The dollar will fall more, but the current account deficit
  will stop being reduced when it reaches its structural core,"
  he said.
      Solomon described the structural core as about one-half of
  the current 150 billion dlr annual deficit. He cited several
  factors which will prevent an elimination of the deficit.
      For one thing, it is unlikely that there will be any new
  investment in those manufacturing industries that shrank when
  the dollar was at uncompetitive levels, he said.
      In addition, he said that the U.S. has an increased
  propensity to import in order to satisify consumer tastes.
      Solomon forecast inflation at 4.5 pct by year-end, but said
  it could be kept below five pct in the medium-term if oil
  prices are stable and commodity values remain low.
  

