FED GOVERNOR OPTIMISTIC ON STABILITY OF THE DOLLAR

FED GOVERNOR OPTIMISTIC ON STABILITY OF THE DOLLAR

Federal Reserve Governor H. Robert Heller said the U.S. dollar will not suffer a long-term slide so long as international trading partners work together to promote stability.

Assuming members of the Louvre Accord are seeking financial stability in their own countries, then we will get increased exchange rate stability and there won't be a long-term slide in the U.S. dollar, Mr. Heller told a meeting of financial analysts in San Francisco.The Louvre Accord is an agreement signed by the seven major industrialized countries to work together formulating global economic policy.

Mr. Heller added that foreign exchange stability is increasingly important in world financial markets.

World financial markets react much more readily to any changes in the environment, he said.

Mr. Heller also said monetary growth in the United States is at the high end of its target range and M2 and M3, two broad measures of monetary growth, are exceeding their targets in many countries.

We are actually seeing fairly high monetary growth, he said.

Recent strength in the U.S. economy and inflationary pressures in the labor market have led to widespread speculation in financial markets that the Fed will have to react soon by tightening the supply of money. Mr. Heller said he could not comment on future decisions to be made in Federal Reserve committee meetings.

A lot of you are paid handsomely to read tea leaves, he said, a reference to the group of Fed watchers employed by financial institutions. Why do you want to have that gravy train go away?

Mr. Heller also said the unregulated Eurodollar market did not seem to be affecting the Federal Reserve's ability to determine monetary policy. At present that is not a source of instability, he said.