Volcker: Deficits Keep Rates High
Federal Reserve Chairman Paul A. Volcker has told Congress that if it wants lower interest rates, it will have to appreciably reduce current and prospective federal budget deficits and not depend on action by the monetary authorities.</br></br>Volcker, in written answers released yesterday to questions posed earlier this month by the House Banking Committee, said that he could not provide lower interest rates in return for the administration and Congress fashioning a down payment on reductions in the budget deficit.</br></br>A bipartisan group of White House and congressional representatives is scheduled to meet today to hammer out a package of revenue increases and budget cuts to reduce the deficit by at least $100 billion during the next three years. Larger deficit reductions would come later.</br></br>Volcker also said that ÛÏdespite interest rates that seem to me too high for the long-term health of the economy, and assuming inflation remains under control, we are in fact seeing rapid economic growth currently."</br></br>Some members of Congress and administration insiders have expressed concern that the Fed is keeping money supply growth too tight to accommodate an economic expansion. President Reagan and Treasury Secretary Donald T. Regan met with Volcker last week, but both denied their intent was to exert pressure on the Fed chairman to ease monetary policy, particularly before the November election.