WASHINGTON -- The Clinton Administration supports the Federal Reserve's goal of cooling the economy to avoid a burst of inflation, a senior Treasury official said yesterday.
Alicia Munnell, assistant secretary for economic policy, said the administration does not believe the economy can grow more than 2% to 2.5% a year without triggering higher inflation. She said Treasury officials are hopeful of achieving a "soft landing," with growth in that range.
Last week, the Commerce Department estimated that the economy grew 3.4% in the third quarter. The report reinforced bond market expectations that Fed officials will tighten credit again when members of the Federal Open Market Committee meet Nov. 15.
"Soft landings are something we always look for but they're hard to find," said Munnell. But she added that the administration recognizes that the economy is now stronger than it was a year ago, creating worries in financial markets about an upturn in inflation.
"The administration is deeply committed to the control of inflation," said Munnell. She predicted the economy will slow in the months ahead as businesses cut back on inventories and as higher interest rates take hold.
Munnell's comments came during a briefing to members of the Treasury's borrowing advisory committee.
Treasury officials also disclosed that foreign holdings of U.S. debt totaled $648.5 billion at the end of August, up $26 billion since the end of last year. Total debt outstanding exceeds $4.71 trillion.