Treasury Advises Fed How To Steady Monetary Growth: Fed Advised on Money Policy
The Reagan administration, in its first major statement on monetary policy, yesterday urged the Federal Reserve Board to stop paying attention to the level of interest rates and begin concentrating on one rather than several measures of the money supply. Treasury Undersecretary Beryl Sprinkle advised the Fed to allow its discount rate to vary more freely with market rates.</br></br>Sprinkel gave detailed technical advice to Fed Chairman Paul Volcker on how to achieve the steadier, slower money growth which both Reagan officials and the Fed support. The FedÛªs offical response yesterday was ÛÏno comment.Û</br></br>Sprinkel emphasised in testimony before the Joint Economic Committee that the Fed was an independent agency, and that the administration did not want to change that. Over the last few months the Fed has done a good job of conducting monetary policy he said. But he made no bones about his view that monetary policy at times in the past has been too erratic and too centered on controlling interest rates.</br></br>He said that he had spoken to Volcker about his suggestions, but he refused to tell the committee of the chairmanÛªs response. The UndersecretaryÛªs testimony had been cleared with the Council of Economic advisers, the Office of Management and Budget, and Treasury Secretary Donald T. Regan, Sprinkel said.</br></br>Although the administration does not expect significant progress towards lowering inflation this year, Sprinkel told the JEC, there could be a drop to single-digit inflation by the end of this year.