THE VIRGINIAN-PILOT
Copyright (c) 1997, Landmark Communications, Inc.
DATE: Saturday, January 18, 1997 TAG: 9701180498
SECTION: BUSINESS PAGE: D14 EDITION: FINAL
SOURCE: BY BILL BASKERVILL, ASSOCIATED PRESS
DATELINE: RICHMOND LENGTH: 40 lines
An annual inflation rate of around 3 percent is ``just not good enough,'' the president of the Federal Reserve Bank of Richmond said Friday.
``We gradually need to move the underlying rate of inflation from somewhere around 3 percent to down toward 2 percent and at some point below 2 percent and hold it there over the long haul,'' J. Alfred Broaddus said.
``We need to go for all the marbles,'' he told a breakfast meeting of commercial bankers. ``Three percent is just not good enough.''
The rate of inflation rose 2.6 percent in 1996, matching the 1994 increase that was the lowest rate since a 1.5 percent increase in 1965.
The lack of inflationary pressure meant the Fed was able to hold interest rates in check last year.
Broaddus refused to comment on Fed chairman Alan Greenspan's expression of concern last month about ``irrational exuberance'' in stock markets, which sent markets tumbling from Tokyo to New York.
The economic expansion during the 1990s is ``still going on and most people expect it to continue, and that is the result we want,'' Broaddus said. But he said the Fed ``is going to have to watch it closely for inflation.''
The Fed's Open Market Committee, which meets eight times a year to set policy, is next scheduled to convene on Feb. 4 and 5. Broaddus is a voting member of the committee.
Broaddus said the news media tend to focus on short-term monetary policy. ``What really matters is that the Fed have a clear long-term monetary policy to contribute to strong growth,'' he said.
``The economy is doing remarkably well,'' Broaddus said. ``The trick is to lay a foundation for long-term expansion.''
Inflation rose by 3 percent in 1995 and analysts said it was remarkable to see such an improvement last year, given that the economy was finishing up its sixth year of expansion.
KEYWORDS: INFLATION RATE VIRGINIA