Wall Street banks curb economic growth forecasts

A street sign stands outside the New York Stock Exchange on August 19, 2011.

WASHINGTON (Reuters) - Wall Street banks lowered their outlook for U.S. economic growth due to concerns over the European debt crisis, oil prices, regulatory uncertainties and "continued disarray in Washington," according to a financial industry survey released on Tuesday.

The survey, which included bankers from Morgan Stanley, Wells Fargo Securities and Citigroup, forecast that the U.S. economy will grow at a rate of 2.2 percent this year, down from a previous forecast of 3.1 percent.

Several bankers said that U.S. financial markets and the economy were "greatly exposed to the risk of contagion from a systemic event arising from Europe."

The survey was released by the economic advisory roundtable of the Securities Industry and Financial Markets Association.

European debt problems, uncertainty over U.S. fiscal policy and lawmakers' general inability to look at long-term budget trends were most often cited as risks to the economic forecast.

Republican and Democratic lawmakers have repeatedly clashed over how to rein in the United States' massive public debt, with the latest congressional debt reduction panel failing to craft a plan to reduce the U.S. deficit.

Economic growth for 2011 is seen at 1.8 percent, down from a previous forecast of 2.5 percent, the roundtable said, noting that the outlook was considerably weaker than mid-year 2011.

The Wall Street bankers forecast that the policy-setting Federal Open Market Committee would not change its current interest rate target of between 0 to 0.25 percent earlier than mid-2013.

(Reporting By Rachelle Younglai; Editing by Kenneth Barry)