Clinton Fed Nominees Please GOP
NEW YORK — ALICE RIVLIN is known as a "deficit hawk" for her serious efforts to get Congress to balance the budget. Laurence Meyer is respected for his accurate and detailed models of the economy. President Clinton has tapped these mainstream economists to bring their expertise to the Federal Reserve Board.
"Most people in the bond markets breathed a sigh of relief that we are getting this out of the way," says William Sullivan, a senior economist at Dean Witter Reynolds. He predicts both nominations will sail through the Republican-controlled Congress. Ms. Rivlin, who was nominated as vice chairman, would be the first woman in that job. Clinton renominated Fed chairman Alan Greenspan.
The nominations Thursday evening came after the GOP forced Mr. Clinton to back down on his first choice for the No. 2 post, New York investment banker Felix Rohatyn, who was deemed soft on inflation.
Inflation is under control, but the economy has also been slow. Gross domestic product, adjusted for inflation, barely grew in the last quarter of 1995, according to numbers released Friday. GDP grew at a 0.9 percent annual rate in the quarter and only 2.1 percent for the whole year, the lowest since the 1991 recession.
With the soft economy, most economists expect the Fed - including its new members - will drop interest rates another quarter of a percentage point when the Federal Reserve Open Market Committee meets on March 26th. "I wouldn't object or be surprised," says Lyle Gramley, a former Fed governor now at the Mortgage Bankers Association.
Behind the low fourth-quarter GDP is nearly flat consumer spending. "American consumers remain income- and debt-restrained," says Bruce Steinberg, a Merrill Lynch & Co. economist.
Hampered by bad weather, "the first quarter [of 1996] is more likely closer to zero growth," says John Burgess, a managing director at Bankers Trust Company in New York.