clarinews@clarinet.com (BOB WEBSTER, UPI Business Writer) (02/03/90)
WASHINGTON (UPI) -- The administration would like to see lower long-term interest rates, Treasury Secretary Nicholas Brady said Friday in remarks before the congressional Joint Economic Committee. Brady said it is ``unfortunate'' that recent increases in interest rates in Germany and Japan will ``create an uptick in rates of 30-year U.S. bonds.'' He also acknowledged that differences exist between the administration and the Federal Reserve over the direction of interest rates. ``I think the administration probably has a bias toward (economic) growth that is greater than the Fed,'' he said. Lower interest rates stimulate business activity and consumer buying.''Obviously we'd like lower long-term interest rates,'' Brady said. For more than a year, the Fed has tightened credit in an effort to slow economic growth and keep inflation under control. At the same time, the central bank has been trying to avoid driving the economy into a recession. Recent economic indicators have shown that the central bank has been successful in engineering this so-called soft landing. But in recent weeks, differences have surfaced between the administration and the Federal Reserve after White House spokesman Marlin Fitzwater called upon the Fed to lower rates. Federal Reserve Chairman Alan Greenspan, in congressional testimony, called Fitzwater's comment ``inapporpriate.'' Brady, who meets weekly with Greenspan, termed his discussions with the Fed chairman as ``vigorous'' but declined to disclose the subject of the talks. ``With all due respect, the subject of my discussions with Greenspan is something best kept between he and I,'' Brady said. On other matters, Brady said he agreed with Greenspan's assessment that the probability of a recession within the next six months has declined. He said the economy is stable, but added that inflation will continue to hover around the 4 percent mark. ``The U.S. economy is now in its eighth year of sustained real growth, a record peacetime expansion, during which output gains have averaged 4 percent annually,'' Brady said. Growth has been sustained internationally, as well, Brady said, with a 3 percent economic expansion forecast for the industrial members of the Organization for Economic Cooperation and Development. Brady also said ties between the United States and Japan are ``increasingly close,'' noting that Japan is now the nation's second-largest trading partner after Canada. The United States has been engaged in ``very intensive talks'' with the Japanese about reducing structural trade impediments. He said it is still too early to assess any progress from the talks. Brady, the architect of the so-called Brady Plan to reduce international debt among developing nations, said an agreement to be signed this weekend with Mexico will reduce that nation's commercial bank debt by $7 billion immediately and by at least $10 billion by 1992. ``In practical terms for Mexico, the overall debt service reduction provided by the package effectively represents savings of domestic resources amounting to about 4 percent of the GNP,'' he said.