WASHINGTON -- Federal Reserve Vice Chairman Alan Blinder vigorously defended his views on unemployment and inflation Thursday, telling the Mortgage Bankers Association that reports of a disagreement with other board members are inaccurate.
Mr. Blinder said recent news accounts misstated the context of a speech on employment issues that he gave at a Federal Reserve conference in Wyoming.
Those articles reported that Mr. Blinder gives more weight in monetary policy decisions to unemployment than does Fed Chairman Alan Greenspan. They also questioned whether a rift was developing between the two.
Mr. Blinder, who scrapped plans to speak about the role of the central bank in a changing economy to address this issue, said nothing he said in Wyoming conflicts with the views of Mr. Greenspan.
Rather, he said, he told the conference that the central bank does have short-term control over employment rates. But, those short-term gains come at the expense of inflation, he added.
The gains also don't last, Mr. Blinder said, remarking that in the long run, monetary policy has no impact on the employment level.
"Inflation has to, by default, take primacy because that is what we can
control in the long run," Mr. Blinder said.
He said Mr. Greenspan oftens makes a similar observation, but reverses the order. In Mr. Greenspan's formulation, the Fed cannot control long-term employment levels but can affect shortterm rates.
These views, regardless of their order, are shared by the other governors and by nearly all economists, Mr: Blinder said.
"I meant what I said and said what I meant," Mr. Blinder told the crowd, which was evenly split between mortgage bankers and reporters.
Mr. Blinder said his Wyoming speech simply stated the central bank's congressional mandate to maintain price stability and maxi-n mum employment.
On that front, Mr. Blinder the central bank appears to be doing a good job.
He said he expects the economy to continue to grow between 2.5% and 3%, and for employment to remain steady. He also said he does not see any inflationary pressures on the horizon.
He said the economy responded positively to the Fed's earlier tightening and that the diffenence between short-term and long-term rates is returning to historical norms.
People at the Washington conference of the Mortgage Bankers' board of governors felt Mr. Blinder got his message across.
Joe K. Prickett, the trade group's president-elect, described Mr. Blinder's comments as insightful. He also said the vice chairman succeeded in clarifying his views on the relative imporlance of inflation and unemployment in monetary policy.
However, Herbert B. Tasker the group's immediate past presdent.said that while he appreciated the fact that Blinder wanted to correct the record, he wished the Fed official had spent more time speaking about housing issues.
