Fed's Heller Backs Commodity Link In Monetary Policy
WASHINGTON -- Federal Reserve Board Governor Robert Heller said he favors tying international monetary policy to a broadly based "basket" of commodity prices, a move that is endorsed by many supply-side economists.</br></br>Mr. Heller's remarks provide fresh evidence that he can be counted among the Fed's supply-siders, who have been gaining strength as more board members have been appointed by President Reagan.</br></br>The comments also underscore the increasing importance the Fed is placing on commodity prices now that the central bank has deemed money-supply figures a poor guide to policy. Another Fed governor, Wayne Angell, also has said he would use commodity prices as a primary benchmark.</br></br>Fed Chairman Paul Volcker pays considerable attention to commodity prices as an indicator of general inflation trends. But the Fed chief has questioned whether policy "rules," such as a commodity standard, are workable.</br></br>Many supply-siders -- who generally emphasize stimulating output rather than managing demand -- argue that the Fed should tighten credit when prices of gold and other commodities are rising and loosen credit when such prices are falling.