UPDATE 1-US recession to continue through mid-2009- SIFMA

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WASHINGTON, Dec 15 (Reuters) - The recession in the United States will continue through mid-2009, with gross domestic product for the whole year falling 1.0 percent, according to a securities industry body.

"The perfect storm of financial market meltdown, credit freeze and economic contraction are meeting head-on in a period of political transition and regulatory overhaul," the Securities Industry and Financial Markets Association (SIFMA) said in its latest economic outlook.

The Securities Industry and Financial Market Association's economic advisory round table forecast fourth quarter GDP shrinking by an annualized rate of 4.2 percent, resulting in full year 2008 growth of 1.3 percent.

"This translates approximately to an 18-month recession beginning January 2008, somewhat longer than the 16 month duration of the two longest post-war recessions," SIFMA said.

The economy has been officially declared to have slipped into recession last December. The downturn, triggered by the collapse of the U.S. housing market, has seen the unemployment rate race to 6.7 percent, the highest since 1993.

SIFMA forecast the jobless rate averaging 7.8 percent, as employers respond to the worst financial crisis since the Great Depression by slashing jobs.

It predicted the Federal Reserve would trim its benchmark overnight lending rate by another 50 basis-points to 0.50 at the end of a meeting on Tuesday and probably hold it at that level for a while, wary of disrupting money market operations.

The sharp economic downturn was likely to keep inflation pressures muted, with headline consumer inflation rate likely to brake sharply to 0.2 percent in 2009, while core CPI was seen slowing to 1.7 percent, SIFMA predicted.

"Disinflation and even deflation have become leading concerns even as the standard levers of monetary policy became ineffective in the dysfunctional credit markets," SIFMA said.

"The subsequent, even faster collapse of commodity prices and the distressed condition of financial markets make inflation a very distant worry, if at all."

(Reporting by Lucia Mutikani; Editing by Diane Craft)