NEWPORT, R.I. -- Federal Reserve Board Governor Lawrence Lindsey said he is sticking with his predictions of 3% inflation and a 3% real rate of economic growth in 1993.
In a speech last week, Mr. Lindsey said he sees no reason to change his January inflation projection, despite the recent increases in cost-of-living indicators.
He also said the unemployment rate for the fourth quarter of 1993 should be 6.7%, which is down from the current level of 7%. He made the comments after speaking at a bankers' conference sponsored by Wright Investors' Service of Bridgeport, Conn.
Regarding April's increase in the consumer price index, Mr. Lindsey said, "Whenever inflation rears its ugly head, it should be cause for concern." But he added, "Our long-term job is getting inflation down to something that approaches price stability."
He didn't say exactly what level constitutes stability, but said it is not necessarily zero. "We're awfully close" to price stability now.
On economic growth, Mr. Lindsey called the rate of increase in gross domestic product steady, sustained, but moderate" and said recent auto sales numbers were encouraging.
Mr. Lindsey said imposition of a value-added tax, which some suggest as a way to reduce the federal deficit, "would be a serious mistake. It makes the conduct of monetary policy very, very difficult -- and creates the potential for an inflationary spiral."