U.S. Chamber Cautions Federal Reserve Against 'Moving Too Far Too Fast'

WASHINGTON, D.C. – The United States Chamber of Commerce viewed the Federal Reserve Board's decision to raise interest rates one-quarter point this afternoon cautiously, and advised the Fed to act with restraint.

Noting that the Federal Reserve's ¼ point increase in the federal funds rate target marks the fourth such increase since July of last year, U.S. Chamber chief economist Dr. Martin Regalia said, "The Fed is clearly concerned that the economy's nearly 6 percent real growth rate over the second half of 1999 is not sustainable and that tight labor markets will ultimately give rise to accelerating inflation."

He added, "While American businesses share the Fed's desire to prolong this record setting expansion, we would caution against moving too far too fast."

Regalia also pointed out, "The economic effect of a cumulative one percent increase will take some time to be fully felt. Although inflation has risen slightly in recent months, the increases have been concentrated in the volatile food and energy sectors. A broad-based acceleration in core prices has yet to materialize."

The recent economic growth spurt has been driven by solid gains in productivity, which give every indication of being long-lived and fundamental. According to the Chamber, the Fed should guard against overcorrecting an economy that is using technological innovations to invent new, more-efficient ways to produce goods and services.

The White House and Congress must guard against provoking the Federal Reserve to tighten rates further to squelch an inflation threat fueled by government actions, according to the Chamber. Proposed significant new spending, raising regulatory burdens and increasing the minimum wage, is a prescription for inflation.

The U.S. Chamber of Commerce is the world's largest business federation representing more than three million businesses and organizations of every size, sector and region.

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