U.S. will tighten money supply

Press, 28 February 1981, Page 19

U.S. will tighten money supply

PA Washington The United States Federal Reserve Board announced that it is tightening money and credit growth targets in 1981 and warned that if inflation does not abate, the United States’ economy will be further squeezed. The board’s chairman (Mr Paul Volcker) gave the administration of President Ronald Reagan a general endorsement for its new economic programme on spending and tax cuts. "The new administration is clearly aware of (economic) realities and has set forth a. programme of action. It has seized the initiative in moving from opportunity to practical policy,’’ Mr Volcker told the Senate Banking Committee.

He said that the Central Bank is tightening by | of one percentage point . its growth target for the nation’s basic money supply — MIA and MIB — wh:?h includes cash in circulation and all kinds of cheque accounts. “The new target ranges imply a significant reduction in the monetary growth rates,” Mr Volcker said. Mr Volcker also said that the Federal Reserve has decided not to change its present operating techniques that monitor and control money and credit despite sharp criticism about the volatile changes in the money supply and interest rates last year. Much of that criticism has come from advisers closq to President Reagan.