Volcker Calls Economy's Pause Temporary: Volcker Upbeat on Growth
Federal Reserve Chairman Paul A. Volcker yesterday said that he believes the current pause in the economic expansion likely is temporary and that the Fed will supply enough money and credit to keep the economy growing "in an orderly way.Û</br></br>Volcker, in his first speech since well before the election, told a New York audience, "A sharp slowing in growth for a time during an expansion period is in fact historically common, typically related to temporary imbalances in inventories following a period of rapid accumulation and temporary fluctuations in consumption. Something of that sort seems to be at work this fall.</br></br>"Continuing growth in income and employment and relatively strong investment plans are reassuring signs for the future,Û the Fed chairman said. "The decided decline in interest rates as the growth rate has slowed should help support both housing and investment, and the related easing of pressures on bank reserve positions by the Federal</br></br>Most short-term market interest rates have dropped more than 2 full percentage points since the first of September. After the Fed last week cut its discount rateÛÓthe rate it charges on loans it makes to financial institutionsÛÓfrom 9 percent to 8Vz percent, market rates fell again.</br></br>Because lower rates affect economic activity only with a lag, there are as yet few signs of any pickup. Many forecasters now expect that the gross national product will rise no faster this quarter than the 1.9