G. William Miller, stressing that the fight against inflation may go on for years, said today that the Federal Reserve System will continue its efforts to dampen inflation and maintain a stable dollar in currency markets.
Miller, the chairman of the agency that oversees the nation's banking system and monetary policy, said that inflation could remain a persistent problem for "five, six or seven years."
But he said government policies were determined to deal with the problem in a long-term campaign and pledged that the Fed would continue its policy of "sustained restraint" on financial markets.
In recent months, the Fed has been forcing up interest rates in money markets with the dual objective of slowing inflation by reducing demand for credit and stemming the decline of the dollar in international markets by attracting dollars back to the United States.
Today, the dollar held firm on money markets, but gold was sharply lower.
Speaking at a seminar on financial markets, Miller told an audience of several hundred businessmen that the Fed would continue to use its resources and acquire more, if needed, to continue its defense of the dollar in international currency markets. The seminar was sponsored by the Conference Board, a nonprofit business research and education organization.
Miller declined to speak about specific interest rate or monetary goals, in line with the Fed's policy of secrecy about current market maneuvers. In comments with reporters after the luncheon, Miller said he was not necessarily signaling a change of policy, or a new round of interest-rate tightening, by his comments on the need for continued restraint on credit markets.
But he said the country is facing unprecedented challenges to its economic and financial systems from inflation, which has become deeply rooted over the past dozen years. It will take a long and determined effort to overcome inflation now, he said.
Miller also referred to new pressure on the dollar in recent weeks because of concern over turmoil in Iran and a cutoff of its oil supplies. But he called it an "external event," which "doesn't shift to any significant degree our fundamental dollar policy."
The dollar generally had strengthened on currency markets after a Nov. 1 joint announcement by the Federal Reserve and White House of a dollar defense program that included pressure for higher interest rates and international agreements to purchase dollars if needed.
Miller estimated that the 18-month decline of the dollar before last November's action contributed about one percentage point to the U.S. inflation rate. He predicted that delayed effects of that decline will continue to aggravate inflation pressures this year.
In Tokyo, the dollar rose to 199.15 yen from 197.85 at Friday's close and rose to 199.40 in New York. Tokyo markets were closed Monday for a holiday.
In Frankfurt, the dollar rose to 1.8635 marks from 1.8528, in Zurich to 1.67425 Swiss francs from 1.66705, in Paris to 4.2750 francs from 4.25375, in Milan to 839.70 lira from 834.80, in Brussels to 29.8250 Belgian francs from 29.6650 and in Amsterdam to 2.01475 guilders from 2.0020.
In London the pound eased to $2.0035 from $2.004.