Mosbacher Says Lower Interest Rates Needed : Economy: The Commerce Secretary says the Federal Reserve needs to ease credit to help prevent the country from entering a recession.

WASHINGTON — Secretary of Commerce Robert A. Mosbacher said Sunday that interest rates should be lowered to help keep the already-fragile economy from falling into a recession.

“I think we have a slow-growth period here, and we can keep it from going into recession, but easing interest rates would certainly help a lot,” Mosbacher said in a taped interview broadcast Sunday.

Some economists say the sharp rise in oil prices since the Iraqi invasion of Kuwait will force industry into a slowdown that could cause a recession.

“We think they (the Federal Reserve) should lower rates,” Mosbacher said on ABC’s Business World.

The Federal Reserve, the politically independent central bank, can control U.S. interest rates.

Most economists predict that the Fed will keep rates steady until it sees clearer signs that the economy, now in its longest peace-time expansion on record, is heading down.

The Fed’s main policy-making body, the Federal Open Market Committee, met last week in private to chart its policy for the next six weeks.

Economists said the group likely decided to keep interest rates steady.

The Fed is worried that the sharp rise in oil prices will fuel inflationary pressures, which would be worsened by a cut in interest rates.

For the most part, the central bank has held credit steady in a bid to control inflation.

It eased its grip slightly last month to offset what Chairman Alan Greenspan said was overly tight lending by U.S. banks.

Mosbacher also said Sunday that a free-trade agreement with Mexico is a priority now that the United States needs to find new oil sources due to the Gulf crisis.

“A free-trade agreement with Mexico is extremely important now. We will accomplish it soon,” he said.

“Mexico . . . is willing to give us all the extra oil they have but . . . 100,000 barrels a day is all they talk about, which is not much in the total mix. We lost over 4 million barrels a day worldwide.”