HALTING U.S. INFLATION

Press, Volume LXXXVII, Issue 26362, 5 March 1951, Page 7

HALTING U.S. INFLATION

Plan For Issue Of New Bonds

Bae. 9 pm.) WASHINGTON, Mar. 3. Hie United States Treasury and the Federal Reserve Beard toright announced a settlement of their differences over the way to halt inflation. The plan calls for the issue by ' (he Treasury of thousands of miiHons of dollars’ worth of a new type of non-marketable bonds, tearing more interest than the old type. Hope was expressed that banks would exchange these bonds for certain outstanding Treasury issues. The new bonds cannot be cashed in until maturity, and thus place a brake on inflationary tendencies. The new bonds, bearing 2| per cent interest, will be offered in exchange for outstanding 24 per cent Treasury bends maturing between 1967 and ■- A strenuous argument has been going on between the Secretary of the treasury (Mr John Snyder) and a majority of the Federal Reserve Open Market Committee, which has been

sipporting Government bonds at par fey standing ready to buy them when Mcetsary. Federal Reserve men and many seanomists sought to change this support policy, saying it tended to increase inflation. Tney argued that, if take could depend on cashing in their tends at par or better, whenever they denied, it meant that huge sums were available for inflationary lending. They advocated stopping support operations, and letting the bonds find their own level in the market; but, if the bonds decreased in value, it would ■ean in effect an increase in interest ntes. Mr Snyder opposed letting the bonds •crease in value, one of his reasons orog that the Government’s interest casts would increase by more than U00.000.D00 dollars a year. The new agreement offers what afeials hope will be a successful way «t of this impasse. By offering more interest, the Government hopes to eneourage banks and other financial ■BHutions to hold Government secur«ei over a long period, thus steriliser large sums which otherwise would add to inflationary tendencies.