The president of the Federal Reserve Bank of Boston said yesterday the credit controls program was having little effect on consumer spending and predicted the program would be phased out gradually.
Frank Morris told a meeting of state treasurers from the Northeast that "if it weren't for the psychological aspect of it we would chuck it overnight." "
The Federal Reserve Board, in coordination with the Carter administration, already has phased out part of the controls program, and sources close to the central bank had indicated further abandonment of the program later this month after Fed Chairman Paul A. Volcker returned from a visit to China. Volcker returned to Washington yesterday.
Morris told the Saratoga Springs, N.Y., gathering that the current restraint in consumer spending was the result of the recession and not the credit controls program. "I don't think removal of the program is going to produce a big upsurge in consumer spending," Morris said.
He said consumers were not spending because many of them already were carrying a large debt load and were afraid of losing their jobs in the recession.
Morris predicted the economy would be "slack" through most of 1981 and would not begin to approach full employment until some time in 1982.
A member of the Federal Reserve's powerful Open Market Committee, Morris said the board's Oct. 6 policy of concentrating on monetary reserves and the money supply rather than interest rates was working "beautifully."