Fed Fires Guns On Inflation: News Analysis Effect of Fed Action Necessary Action New Rules A
By increasing the reserve requirements of nearly 6000 member banks, the Federal Reserve System has rolled out one of its bigger guns in the fight against inflation.</br></br>It is a relatively cumbersome weapon. As the Fed itself concedes it should be unlimbered in those situations that ÛÏwould not require re-</br></br>Bank reserves are sometimes called ÛÏhigh-poweredÛ dollars because by adding to or subtracting from the banksÛª total reserves, the Fed forces a several-fold increase or decrease in loans and demand I deposits.</br></br>Û¢	Accelerate the trend to higher interest rates. Many bankers late yesterday were already grumbling about the need to raise the prime lending rate from the current 7% per cent level.</br></br>Û¢	Stimulate further the flow of short-term capital from Europe to the United States. ÛÏThis could suck the Euro-dol-Jar market dry,Û observed Rep. Henry S. Reuss (D-Wisc.).