Treasury Department officials yesterday denied that the Reagan administration is engaging in a new round of "Fed-bashing" to deflect blame for a rash of unfavorable economic indicators, including a report due today that may show unemployment increased in October.
Some administration sources said it appeared that Treasury Secretary Donald T. Regan was striking out right before the election -- initially without White House approval -- against the Federal Reserve Board's anti-inflation policies to blame the Fed for any slowdown in the economic expansion.
The renewal of criticism of the Fed began after the government reported that gross national product for the third quarter this year was revised downward from a 3.6 percent rate of growth to 2.7 percent. In addition, the government's major gauge of future economic activity declined for three consecutive months, an indicator to some economists of fragile economic conditions ahead.
Several administration sources said that, based on other economic data, they believed the civilian unemployment rate for October, to be released this morning, may show an increase from 7.4 percent to about 7.5 percent.
A Treasury Department spokesman said officials had known for some time that the unemployment rate might show an increase. However, the spokesman denied that Regan was saying anything out of the ordinary about the Federal Reserve.
"Nobody's out to bash the Fed," the spokesman said. But he said Treasury officials "are beginning to ask the question, 'What's going on?' "
What Regan and Treasury Undersecretary Beryl Sprinkel have publicly complained about this week is slower growth of the money supply in recent weeks, which monetarists believe leads to slower economic growth.
Yesterday, the Fed reported that the basic money supply -- M1 -- fell $2.5 billion in the week ended Oct. 22 to just $1.7 billion above the low end of the Fed's target ranges. Analysts said that the slow growth in M1 -- which consists of currency and checking accounts -- would probably lead the Fed to loosen its tight grip on credit and also would help reduce interest rates.
M1 was at a seasonally adjusted average of $544.7 billion in the week ended Oct. 22, compared with $547.2 billion the previous week. In the last 13 weeks, the money supply averaged a 2.2 percent rate of gain.
The Fed has targeted money growth between 4 percent and 8 percent.
Regan, in a speech on Monday, urged the Fed to ease monetary policy, which he described as "a little on the tight side." At a press conference in New York yesterday, Regan said the Fed "could be a little more accommodative." He said he wasn't concerned that a recession was on the horizon, but that the 2.7 percent growth rate in output during the third quarter was "a definite slowdown in the economy by anybody's definition."
On Wednesday, Sprinkel told reporters, "We think there is plenty of room for some easing of monetary policy." He said the current rate of growth in the money supply was not enough to foster continued economic expansion. Sprinkel reiterated those remarks yesterday.
Administration officials were at first surprised by Regan's remarks, sources said, because the administration had attempted to curb criticism of the Fed after a concerted campaign earlier this year made financial markets jittery. Analysts said market participants feared that if the Fed eased its policy at that point, inflation would accelerate again.
However, no action was taken against Regan for fear of making it appear to voters that administration officials were divided, sources said. The Treasury spokesman said Regan had not cleared his remarks on Monday with the White House, but that there were no repercussions from them.
The criticism this time is much more muted, but is still in contrast to statements Regan had made since the spring. For example, this summer the Republican platform called for an end to the Fed's "destablizing actions." Regan defended the Fed then, saying such language was unwarranted.
When asked about Fed policies, Regan and Sprinkel earlier had either deferred comment or said they had no problem with what the central bank was doing.