Fed Reportedly Reins In Greenspan On Interest Cuts

April 08, 1991|By New York Times News Service

With a rift at the Federal Reserve Board over whether lower interest rates are needed to help the nation out of recession, the central bank's policy-makers have curtailed the authority of the chairman, Alan Greenspan, to reduce rates on his own, high government officials said over the weekend.

The reduced authority means, in effect, that Mr. Greenspan must now work harder to justify interest-rate cuts that he wants to make during the six-week intervals between the meetings of the Federal Open Market Committee, the policy-making body of the Federal Reserve.

The debate over interest rates has taken the form of an argument over whether Mr. Greenspan, in reducing short-term interest rates sharply since early January, went beyond the authority granted to him by his colleagues on the Open Market Committee.

Supporters of Mr. Greenspan's actions invoke years of tradition to defend his right to act on his own.

But despite the talk about whether Mr. Greenspan exceeded his authority, seven of the Federal Reserve policy-makers said in interviews that the heart of the debate is really over this question: Is the recession ending or is the nation in for many more weeks of hard times?

"Any time people at the Fed become disgruntled with policy or uncertain about it, there is a tendency to focus on procedure," said Wayne D. Angell, a Federal Reserve governor.

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