Monetary Policy: Has It Eased?
If Arthur Burns has his way, the Federal Reserve Board will continue to follow a moderately restrictive monetary policy until the present inflation ÛÓwhich he still considers the No. 1 economic problemÛÓhas been eliminated.</br></br>The FRB chairman is known to feel that such a money policy should be accompanied by a moderately restrictive fiscal policy, but that wage controls should be allowed to die out quickly, to be replaced by a Wage Price Review Board with only voluntary powers.</br></br>In Burns* assessment, according to those who know his views, the recent drop in short-term interest rates is not the product of a significant change in Fed policy.</br></br>Treasury bill yields have dropped to less than 7 per cent from a peak of about 9 per cent in early September and, last week, major banks reversed the upward march of the prime lending rate, cutting it from 10 to 9% per cent.</br></br>But the Fed is anxious to convey the notion that neither its policy nor the course of interest rates is likely to show a further dramatic change.