FED WATCHERS SEE U.S. ECONOMIC, INFLATION UPTURN
This year will see a pickup in U.S.
economic growth and inflation, the Shadow Open Market Committee
said in its semi-annual policy statement.
    The SOMC, a group of basically "monetarist" private
economists, said that "economic growth will accelerate in 1987
in response to powerful stimulative actions by the Federal
Reserve."
    The group said the Fed's actions have been excessive. As a
result, it said that "inflation and ultimately another
recession now loom on the horizon."
    The SOMC said that central bank policies that rely on
progressively larger swings in monetary expansion will not lead
to sustainable economic growth and stable prices.
    The group made no specific nominal forecasts of economic or
inflation growth in its policy statement. However, the
Committee at its Sunday policy-making meeting said it was
basically in accord with projections by Jerry Jordan, who is a
member of the SOMC and economist at First Interestate Bancorp.
    Jordan expects real GNP growth to be about one percentage
point higher than in the past two years. He expects consumer
prices to rise about 4-1/2 pct this year.
    The SOMC said in recent months rapid money growth has been
a principal cause of the devaluation. To avoid another costly
inflation and disinflation, the SOMC urged the Fed to "abandon
its inflationary policy and set the growth rate of the monetary
base on the path toward sustained lower inflation."
    The Fed in February said it would no longer target the
narrow M-1 money supply because the link between M-1 and
economic growth has been largely severed.

