Federal Reserve Board Chairman G. William Miller yesterday indicated the Carter administration's scale-down of its tax cut program would reduce pressure on the Fed to further increase interest rates to fight inflation.
"The more discipline we have on fiscal policy the more pressure we take off monetary policy," Miller said, adding this will create "more probability we will not need the same degree of restraint on monetary policy."
The Fed chairman, who had been consulted in advance on the reduction in the proposed tax cut from $25 billion to $19.4 billion, said the decrease was "a major change, a very constructive one, and one properly made under the conditions that exist now."
Miller said the major task facing the government in its economic policy "is to reduce the deficit."
The Fed chairman made his remarks to reporters after addressing the Business Council, a prestigious collection of industry leaders, which is meeting here.
"Things are looking up the dollar," said Miller, attributing the improvement in the U.S. currency's position since the end of 1977 to "fundamental actions taken on inflation and the balance of trade."
He said such actions "have been reassuring" to exchange market participants and that is why "we have seen a better tone in the dollar."