The Federal Reserve Board took a modest first step yesterday toward dismantling some of the formal credit restraints it imposed March 14 by ending a 3-percentage-point surcharge on loans to large banks that were borrowing too frequently.
The measure had been designed to keep major banks from escaping the credit restraints by taking advantage of their access to the Fed. The device avoided any increase in the discount rate, which would have crimped smaller banks.
The discount rate -- the interest rate that the Fed charges on loans to member banks -- remains, as it was before the March 14 credit-tightening moves, at 13 percent. The surcharge was lifted effective this morning.
The announcement marked the first formal move by the Fed to lift any of the credit restraints it imposed on March 14 and was a confirmation that monetary authorities now believe last winter's speculative fever has broken.
However, analysts cautioned it was too soon to say how quickly the Fed might relax the other credit restraints it imposed in the March 14 package, including higher reserve requirements for banks and restrictions on credit card issuers.
The Fed has been allowing interest rates to drop sharply in recent days in recognition of a falloff in demand for business loans and a slowdown in the growth of the nation's money supply.
However, Fed officials are known to be reluctant to dismantle the restraint program too quickly, even in the face of the current recession, for fear of reviving inflationary psychology.
The move came as, separately, a House banking subcommittee rejected President Carter's request to triple the size and scope of the Council on Wage and Price Stability -- another key element in his March 14 anti-inflation plan.
The panel also rebuffed, by resounding voice vote, a proposal by liberals to give Carter standby authority to impose wage-price controls. The White House had strongly opposed the provision.
The subcommittee's action yesterday was something of a setback for the administration. Carter had sought to beef up the wage-price council's monitoring efforts in an attempt to bolster his image as an inflation-fighter.
The full House Banking Committee is expected to ratify the subcommittee action this morning. On Monday, the Senate Banking Committee voted to grant Carter's entire request. A compromise is expected in House-Senate conference committee.
Carter met privately with his top economic advisers in a luncheon session yesterday, but aides said the group only reviewed the current economic outlook and did not make any new policy decisions.
Many economists now are predicting that the recession will prove more severe and longer than the administration officially has forecast. At the same time, however, the inflation rate seems likely to ease substantially.
Key administration officials have indicated privately they believe the president should stick to his March 14 budget-cuting proposals, even though the recession appears to be underway. Carter still is eschewing any tax cut.
The administration's unwillingness to shift gears appeared to place further strains on its relations with organized labor, drawing another public blast from the AFL-CIO -- but still no outright split.
AFL-CIO President Lane Kirkland told the federation's high-level executive council yesterday Carter's budget-balancing proposals were counter-productive and said workers should bargain for wage-boosts "as forcefully as possible."
At the same time, however, Kirkland stopped short of disavowing the "national accord" with the administration that labor leaders agreed to last autumn, saying Carter's program was "the only game in town" and he would continue to play it.
Meanwhile, the Federal Home Loan Bank Board reported mortgage rates soared to record levels in early April, but have begun to ease some in response to the onset of the recession.
Yesterday's action by the House banking subcommittee would authorize $9.8 million for the council's fiscal 1981 budget, rather than the $25 million budget Carter had requested.
Carter had hoped to use the extra money to expand the council's staff -- to 650 persons, from the some 250 now on the books. However, the subcommittee's proposal would forestall any such increase.
Separately, the wage-price council issued a report contending that the voluntary guidelines program had trimmed between half and three-quarters of a percentage point from the inflation rate since the program has been in effect.
The document, based on a study by council staffers, said the imposition of voluntary pay standards appear to have reduced the rate of increase in wages by 1.8-to-2 percentage points.