Caution at the Federal Reserve Clinton appointees: Greenspan, Rivlin and Meyer will foster president's centrist image.

February 26, 1996

IN ONE OF THE most profound economic moves of his administration, President Clinton has structured a Federal Reserve Board that is very likely to continue the restrained monetary policy of recent years.

His new appointees -- budget director Alice Rivlin and St. Louis economist Laurence Meyer -- are regarded as kindred spirits of Fed chairman Alan Greenspan, who fulfilled expectations in the financial community by getting a third term in his powerful post.

The new board will be taking over at a moment when the nation is experiencing a "growth recession," one in which expansion of the gross domestic product is barely above zero. This has led to rising complaints that the Greenspan-led Fed acted too late in starting to lower short-term interest rates last July after doubling them to 6 percent over the previous 17 months. Statistics showing GDP growth of only 0.9 percent in 1995's final quarter put pressure on the Fed to make further rate cuts -- an expectation pushing stock prices to new heights.

While the president favors "serious debate" aimed at pushing annual growth targets into the 3.5 percent range in light of technological developments, the Fed historically has preferred bTC 2.2 to 2.5 percent to keep inflation under control. Mr. Clinton's new appointments hardly further the cause of higher growth.

Originally, he had hoped to name Felix Rohatyn, a pro-growth New York financier, as Fed vice chairman but when Senate Republicans rebelled he settled for the more conservative Ms. Rivlin. She has been a fervent deficit hawk in the administration, an advocate of fiscal policy leading to a balanced budget. As for Mr. Meyer, architect of an economic model that has won awards for accurate forecasting, he was among those economists who urged the Fed to go slow in lowering rates last September.

President Clinton's selections for the central bank board, which has the pivotal job of regulating money supply and setting short-term interest rates, move him another big step toward the political center as he launches his re-election campaign. If the Republican Party should blunder into giving its presidential nomination to that baiter of big business, Pat Buchanan, the Democratic president could emerge as the favored candidate of Wall Street and corporate America. In politics, strange things happen.

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