Federal Reserve Board Chairman Paul A. Volcker predicted yesterday that inflation will abate visibly later this year -- but only after several more months of continued sharp price hikes.
At a news conference in Houston, Volcker told reporters that "the prospects are bright for lower prices this year," at the same time, he warned: "Don't expect miracles right now."
The Fed chairman's remarks were among his more optimistic in recent weeks. Volcker did not elaborate on his predicitions. But he did say relief should come after the first or second quarter of the year.
Most economists are forecasting that consumer prices will rise by 10 or 11 percent this year, following an estimated 13 percent jump in 1979. They, too, are expecting the improvements to come in the second half.
Volcker said earlier that continued spending by consumers has changed established economic relationships and made inflation more difficult to counter, at least with traditional economic weapons.
The Fed chief told reporters that "people for the first time in this country really have become convinced that there's going to be inflation and it's better to buy now than later."
At the same time, he praised American workers for showing "a certain common sense" in keeping wage demands moderate. Volcker said boosting wages sharply now would only worsen inflation.
The Fed chief's remarks came as, separately, board member Henry C. Wallich said the recent steep rise in gold prices is only as "sideshow" that "doesn't require any immediate action" by the United States or other major nations.
Wallich said in an interview with Dow Jones News Serivce the run-up is merely a reflection of worldwide uncertainty, and "we already knew that without looking at the price of gold."
He also said there isn't any point in reversing the Treasury's decision last autumn to stop selling gold right now. The United States earlier had sold some of its gold stock to help calm the gold market.
Meanwhile, Treasury Secretary G. William Miller yesterday renewed his suport for faster depreciaton write-offs for business, but said the legislation should be delayed until a more "appropriate" time.
In a speech before a White House small business conference, Miller said the version of the depreciation bill now before Congress "has some defects," but essentially represents a good idea.
He also indicated the Treasury is exploring proposals that would allow more rapid depreciation by altering existing accounting procedures. Miller did not elaborate on this, however.
President Carter is expected to avoid any form of tax cut proposal in his budget Jan. 28, but officials are studying faster depreciation and other options in case the recession proves worse than expected.