Policy makers at the Federal Reserve voted at a meeting in July to leave monetary policy unchanged, but the officials indicated a willingness to tighten up on credit if inflation worsened or the dollar weakened, according to minutes of the meeting released yesterday.
Members of the policy making group, the Federal Open Market Committee, said they would seek "to maintain the existing degree" of control over growth of the money supply.
This operating approach was adopted on an 11-0 vote at the July 7 monetary policy meeting, the last one presided over by Fed Chairman Paul A. Volcker.
Volcker, who headed the central bank for eight years, was succeeded last week by Alan Greenspan, who presided over his first monetary policy session on Tuesday. Decisions made at that meeting will not be revealed until late September.
The July 7 meeting came seven weeks after the central bank agreed to tighten credit conditions, including possibly raising the discount rate, the rate at which the Fed lends money to other banks.
The Fed meeting May 19 was held following a period in which financial markets were thrown into turmoil by fears of rising inflation and a sharp drop in the value of the dollar.
However, the increase in the discount rate never materialized as financial markets calmed and the value of the dollar stabilized.
At the July 7 meeting, the Fed said it would be willing to consider further tightening if inflationary pressures began to rise again or if the dollar started falling further.
The Fed said it was also monitoring the course of the economy and would also consider loosening credit conditions if the business expansion appeared to be faltering.
The government reported yesterday that the economy, as measured by the gross national product, rose at a moderate rate of 2.3 percent during the April-June quarter. While this was slightly lower than the originally estimated GNP rate a month ago, it was still considered a sign that the economy was expanding with no danger of an imminent recession.
The Fed seeks to allow the nation's money supply to grow at a sufficient pace to promote steady economic growth while guarding against pushing out so much money that inflation is rekindled.
Analysts said they expect Greenspan to make no immediate changes in Fed monetary policy. They said Greenspan would see no reason to make any dramatic changes because unemployment has fallen to an eight-year low of 6 percent while inflation, which had been threatening to take off, appears to be receding.
Supporting this view of inflation, the government reported yesterday that consumer prices rose a modest 0.2 percent in July, the best performance this year