Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, November 12, 1994 TAG: 9411140065
SECTION: BUSINESS PAGE: A6 EDITION: METRO
SOURCE: ASSOCIATED PRESS
DATELINE: WASHINGTON LENGTH: Medium
Economists representing interests from labor unions to top corporations Friday accused the Fed of pursuing an ill-advised monetary policy by fighting a phantom inflation threat to appease wealthy bond traders on Wall Street.
``Monetary policy in this country is controlled by bond traders who live in high-rises and are completely out of touch with reality,'' charged Jerry Jasinowski, president of the National Association of Manufacturers, a large business lobbying group.
``There is no evidence that the U.S. economy is about to overheat, and any further raise in interest rates will simply stifle a steadily growing economy,'' he said at a forum where 12 prominent economists and business executives urged the Fed to hold off on further rate hikes.
Federal Reserve Chairman Alan Greenspan and other inflation hawks on the Fed have talked about setting zero inflation as a Fed goal, but this view has been heavily criticized by liberal Democrats in Congress. They accuse Greenspan and his colleagues of being overly worried about inflation at the expense of economic growth and jobs.
There is a widespread belief that the central bank will raise interest rates for a sixth time this year when its policy-setting group, the Federal Open Market Committee, meets Tuesday.
Jasinowski was on a panel of economists who argued that the central bank is failing to recognize that changes in the global economy and in U.S. labor markets made it less likely that inflation was about to get out of control.
Among those urging the Fed to cease raising interest rates were Preston Martin, former vice chairman of the Fed when Paul Volcker was chairman; James D. Robinson III, former head of American Express; and Donald P. Hilty, former chief economist of Chrysler Corp.
Lawrence Chimerine, chief economist at the Economic Strategy Institute, a business-backed think tank in Washington, said that long-term interest rates have risen faster since February, when the Fed started its rate increases, than at any other time in U.S. history.
``Any further ratcheting up of interest rates really runs the risk of overkill and a recession,'' he said.
As part of the campaign to convince the Fed to stop raising interest rates, a coalition of labor unions, farm and consumer groups announced Friday it will stage a protest rally Tuesday outside the Fed during the closed-door Open Market Committee meeting.
Financial markets widely expect that the Fed will vote to increase the federal funds rate, the interest banks charge each other on overnight loans, by one-half percentage point to 5.25 percent.
by CNB