U.S. businesses cut their forecasts for economic growth for this year and 2006, but believe expectations of higher inflation will keep the Federal Reserve on a tightening path, a survey released on Monday showed. The National Association for Business Economics said its panel of 50 forecasters trimmed its growth outlook for 2005 and 2006 from three months ago, taking the consensus for both years to 3.4 percent growth from the 3.6 percent forecast in February. "The panel's revisions were likely colored by a spate of weak data reported for February and March that signaled a loss of forward momentum," NABE said in a statement. "The NABE panel also sees higher inflation that will prompt more restraint from the Federal Reserve, which is expected to raise the funds rate to 4 percent by early next year," said Carl Tannenbaum, chair of the survey committee and chief economist at LaSalle Bank in Chicago. The survey consensus called for a 2.5 percent increase in the Consumer Price Index excluding food and energy in 2005, up from a 2.3 percent forecast three months ago. The panel also projected a sharp acceleration in unit labor costs from 2004 to 2005 due to slowing productivity growth. "With compensation per hour expected to rise by 4.2 percent this year, labor costs could place some upward pressure on inflation," NABE said. The downgrade to the growth forecast for 2005 was nearly fully accounted for by a weakening in expectations on net exports. In addition, a 3.8 percent decline in the dollar on a broad trade-weighted basis was expected in 2005.