From testimony by Federal Reserve Chairman Paul Volcker before the House Committee on Banking, Finance and Urban Affairs July 21:

Of central importance, there has been continuing evidence of restraint and discipline on costs and wages in much of American industry, offering the prospect of lower rates of inflation in the months ahead. Over time, that must be an absolutely essential element in maintaining our international competitiveness as well as in restoring domestic stability after the bulge in prices this year.

At the same time, it would be nonsense for me to claim that all is safely and securely on path. The remaining risks and problems are apparent.

Even the otherwise satisfying fall in the unemployment rate this year implicitly has a discouraging aspect. Outside of manufacturing, the statistics suggest productivity growth is quite dismal. . . .

But no error of measurement can entirely explain away that our private saving, in historical or in international context, remains so low, or that our federal deficit remains so large, or that we, the putative leader of the Western world, are so dependent on other people's capital. Despite the better news on this year's federal deficit, some projections of future deficits assuming current programs are being raised rather than reduced, and the political impasse over doing something about it remains. In the circumstances, the Gramm-Rudman-Hollings targets are threatening to become pie in the sky.

The already slow growth in other industrialized countries appears to have slowed further this year, working against the adjustments needed in trade and current account positions. . . . And in that environment the dangers of protectionist trade legislation and a breakdown in the servicing of international debts are enlarged.