Fed Report Sets Stage for Dispute Over Growth; Central Bank Targets Slower Recovery, Lower Inflation Than Administration
The Federal Reserve has set the stage for a continuing election year argument with the Bush administration over interest rates by aiming for slower economic growth and lower inflation in 1992 than the administration is seeking.</br></br>Federal Reserve Chairman Alan Greenspan said yesterday that he expects a "robust" recovery now that the recession has ended. But after an initial rebound by the end of this year that will make up the economic ground lost during the slump, Greenspan said the central bank's top policy makers expect to provide enough money and credit to fuel an economy growing in the 2.25 percent to 3 percent range in 1992.</br></br>Bush administration economists, on the other hand, this week reiterated a forecast that calls for a similar rebound this year but with growth continuing next year at a 3.6 percent rate.</br></br>If the pace does begin to lag below administration plans, senior officials such as Treasury Secretary Nicholas F. Brady and perhaps President Bush himself could renew their frequent public statements urging the Fed to cut interest rates to boost growth. Key short-term interest rates are now about 5.75 percent, down about 2 percentage points since last fall.</br></br>In the Fed's midyear report to Congress, Greenspan told a House Banking subcommittee: "Monetary policy during the first half of the year has had two jobs, first, to help bring the economy out of recession, and second, to avoid setting the stage for the next recession, which would follow if we allowed" inflation to get out of hand. "The progress against inflation must not be lost."