The Council on Wage and Price Stability endorsed higher interest rates on small savings accounts yesterday, saying such a change not only would be fair to the little depositor, but anti-inflationary as well.
Federal financial-regulators have proposed four new types of accounts that would raise interest above current passbook rates of 5 percent of 5 1/4 percent. Though they stop short of paying the 9.5 percent yield now offered on deposits of $10,000.
In supporting the increase, the COWPS said that, although the porposals represent a relatively minor change, they would be "a step in the right direction." At the same time, the council made clear its goal is removal of all ceilings.
"Elimination of interest-rate ceilings may encourage savings and investment and discourage consumption, and thus could have an anti-inflationary impact," the COWPS statement read.
Meanwhile, in New York last night, Federal Reserve Board Chairman G. William Miller said he favored phasing out federal ceilings on the amount of interest banks and other savings institutions can pay on savings deposits.
Speaking to a Columbia University dinner, Miller said he would couple the interest ceiling phase-out with elimination of state usury laws on mortgages and the introduction of mortgage loans whose interest rates are not fixed but vary with the rate of inflation. Miller said such changes should take place over the next five to 10 years.
The four new proposals are:
A five-year certificate with a maximum rate based on, but lower than, the rate on five-year U.S. Treasury certificates.
A "rising rate" certificate on which interest rates would increase the longer it is held.
A "bonus" certificate paying 1/2-percent moe interest per year.
A certificate of up of four years with no minimum deposit.
The proposals have been criticized by the banking industry as too costly.
COWPS recognizes this situation, but argues that the banks "probably could pass through the least part of the cost increase to new borrowers, though in the short run the banks probably would have to absorb some of the additional costs." It adds that banks would be permitted-not required-to offer the new rates.