Two Federal Reserve Board governors said Friday that there should be no letup in vigilance against inflation.
Despite the report last week of a mere 0.1% rise in consumer prices in May, Fed Governor Wayne Angell said in a speech in Switzerland that inflation is still too high and monetary policy should be geared to zero inflation.
And in a television interview, Governor Lawrence Lindsey said inflation is "going the wrong way."
Mr. Lindsey has upped his price-increase forecast for 1993 to 4% from the 2.7% he forecast in January.
While he did not comment specifically on whether the Fed views the current inflation rate as unacceptable, Mr. Lindsey said the central bank should continue to strive long term for an inflation rate lower than the recent 3.5% to 4.0% range.
Mr. Lindsey also said President Clinton's economic package, currently moving through Congress, "won't have much effect on inflation."
Inflation Rise |Unacceptable'
"I could live with [an inflation rate of] one-fourth of 1% as being almost okay," Mr. Angell, who is regarded as a vehement anti-inflation hawk, told members of the Swiss American Chamber of Commerce.
He added that "4% is not okay, 3% is not okay, 2% is not okay ... I would find it unacceptable for inflation to go back up."
Like Mr. Lindsey, Mr. Angell would not specifically discuss the latest news on consumer prices. He said that the 3.1% year-to-year inflation rate reported for May is "a lot better than 3.5% but not as good as 2.5%."
Growth Is Goal
Appearing on Cable News Network, Mr. Lindsey said inflation is "something we're going to have to look at.... The Federal Reserve is committed to keeping inflation down not for its own sake, but because it is important for long-term economic growth for this country.
"When you have inflation come back, it penalizes saving, it penalizes investing, it makes long-term planning more difficult," Mr. Lindsey added. "So, we need to keep inflation down because it's good for long-term economic growth."
Asked whether 3.5% inflation is acceptable, Mr. Lindsey said, "It's a lot better than 12%, which we had at the end of the 1970s, but let's take 4% inflation. That means prices have doubled in 18 years. Long term that's simply too fast a rate of price increases."
Easing Seen Unneeded
In more general statements about the economy, Mr. Angell told the business executives in Lugano that the U.S. recovery is as buoyant as any previous one and does not need a further loosening of monetary policy.
He said he is optimistic about the outlook for the U.S. economy and said, "We are now very effective competitors in manufacturing - many might say too competitive in regard to the current exchange value of the dollar."
Mr. Angell said employment growth is giving the U.S. economy a recovery that many countries would envy, though some industries are taking more time than others to turn around.