Federal Reserve System White House Statement on the Board of Governors' Actions To Ease Credit Restraints.

The actions taken today by the Federal Reserve Board to relax credit restraints are appropriate in view of the success in moderating credit demands and reversing inflationary psychology since the March 14 program was announced.

The Federal Reserve actions will help to assure greater availability of funds for lending to small businesses, farmers, automobile dealers and buyers, and many other borrowers. Since the cost incurred by banks in obtaining lendable funds will be lower, the rates that banks charge their customers should also decline.

The administration is particularly concerned that the prime rate of interest has fallen much less than other interest rates in recent weeks. In late March the prime rate of interest was about 2 to 2 1/2 percentage points above the interest rate on short-term commercial paper. Since then, the spread has widened to more than 6 to 6 1/2 percentage points. We hope that banks will act promptly to pass on to their loan customers the benefits of the reduction in costs of funds they are now experiencing.