Strong Dollar Pushes Fed Policy Full Circle: Fed's Policy Comes Full...
When Federal Reserve Chairman Paul A. Volcker was appointed in 1979, one of the major problems facing him was a declining dollar. This week the Federal Reserve Board lowered its discount rate at least partly because of its desire to weaken the dollar. Policy has come full circle.</br></br>8. Feldstein, warned this week that ÛÏmany experts now forecast that the trade deficit for 198:1 will rise to the unprecedented level of $75 billion, about twice this yearÛªs level and three times the level of 1981.Û</br></br>A higher dollar helps .American consumers, because it makes imported goods cost less. But it hurts companies and workers who make products either for export or for which there is strong competition from imports, he-</br></br>States are concerned about the dollarÛªs strength this year. One is that, at present exchange rates, American industry is finding it very hard to compete with foreigners.</br></br>The trade deficit has ballooned in recent months as exports to the rest of the world have declined and imports have climbed. President ReaganÛªs chief economic adviser. Martin cause it depresses sales of American-made goods and raises demand for foreign products. The deteriorating trade balance has acted as a significant brake on the economy during this recession and has ÛÏbecome a crucial swing factor in the outlook for 1988 and 1984,Û economist Alan Greenspan commented recently.