G. William Miller, testifying before Congress less than 24 hours after he was sworn in as chairman of the Federal Reserve Board, said yesterday that inflation is an increasing threat to the economy.
Sounding every bit as much a central banker as his predecessor, Arthur F. Burns, Miller said that while a recent slowdown in economic growth should reverse itself, there is "less reason to be sanguine" about rising prices or the sagging internatinal value of the dollar.
He said he has put the Federal Reserve staff to work on developing a list of actions that can be taken by the government to slow the pace of inflation.
Miller also raised the possibility that the interest rates banks and savings and loan associations are allowed to pay depositors might have to be raised. Presently banks are permitted to pay no more than 5 percent and savings and loan associations no more than 5.25 percent on passbook savings accounts. The interest ceilings run up from there depending on the size of the account and the amount of time the depositor agrees to leave the money with the institution.
Miller noted that if heavy demand for money and credit should boost interest rates higher than they are currently, an increase in the interest ceilings might be needed to permit banks and savings and loans to continue to attract deposits.
Miller appeared before the House Banking Committee to present the Federal Reserve's quareterly assessment of the economy and to announce the goals it has for the growth of the money stock for the next three months.
Miller's testimony, originally scheduled for Feb. 1, was delayed by the committee, chaired by Rep. Henry Reuss (D-Wis.), until Miller was confirmed. Miller, who was nominated to the post by President Carter on Dec. 28, faced a long Senate Banking Committee confirmation hearing that spent more than five weeks delving into a questionable payment made by a divison of his Textron Corp.
Miller said that the central bank has adopted essentially the same growth targets for the money supply - currency in circulation and checking accounts - for the next 12 months that it adopted last autumn. The Fed will try to insure that the money supply grows at an annual rate between 4 and 6.5 percent.
He said that the growth rate target assumes a "deceleration of monetary expansion from the growth rates actually recorded in 1977," when the money supply grew 7.5 percent. He said such a slowdown in money growth is "necessary to ensure the ultimate achievement of reasonable price stability."
Miller noted that food and material prices have risen "substantially in recent months. And labor costs continue to raise at a relatively rapid rate. The decline in a value of the dollar on international exchanges is another cause for concern. It not only contributes to upward pressures on domestic prices but also threatens to erode business confidence here and abroad."