The corporate executives attending the business council meeting in historic Williamsburg said they were relatively optimistic about the outlook for Asia. But they also said there were enough uncertainties to convince Fed policymakers to hold rates steady.

"I think the general feeling is that rates should continue to be controlled very carefully," said John Stafford, chief executive and president of American Home Products Corp. "There is no sign as far as I can see of inflation."

Some of the Asian countries are "still in very bad shape" and the long-term picture remained unclear, he said at a news conference at which the prestigious business group released its semi-annual economic outlook and a survey of its members.

"The Japanese situation still hasa long way to go and could be difficult, it still has a lot of problems," Stafford said.

US officials have been pressing Japan to move quickly to implement its proposed economic stimulus package and to do more to deregulate its economy and open its markets up to more imports from troubled Asian neighbours as well as the rest of the world.

AlliedSignal Inc chairman and chief executive Lawrence Bossidy said Japan's economic woes could have a have a long-term impact on the region and the US economy. Japan is the United States' third largest trading partner after Canada and Mexico. The business executives said they are expecting a substantial increase in the US trade deficit because of the Asian crisis. US exports to Asia are falling while imports are rising.

Eastman Kodak Co chairman George Fisher said he agreed with forecasts of a US trade deficit this year of $300 billion. "If that really happens obviously there will be no wage pressures, there will be no price pressures and at 20,000 jobs per billiondollars of exports... it could mean four million jobs out of the US economy," Fisher said. "That is going to raise some very interesting pressures in the United States I think."

The Business Council released a survey which showed that not one of the 84 members who responded thought the Fed should raise interest rates. They also overwhelmingly said that Congress should approve an administration request for $18 billion to help replenish International Monetary Fund coffers depleted by bailouts of Indonesia, South Korea and Thailand.

A separate report, released by top corporate economists who serve as technical consultants to the council, which has more than 200 active and retired members, forecast slower US economic growth by the end of the year.