Presidential Statement No. 2 on Economic Issues: Monetary Policy for Stability and Growth.

1. MONETARY policy is one of our crucially important tools for maintaining a healthy and noninflationary economy. The job is never easy. But the results over the past 4 years have been remarkable:

--Ample but not excessive credit has been available to businesses, homebuyers, and State and local governments.

--At the same time, short-term interest rates have been pushed up to reduce capital outflows and help correct our balance of payments deficit.

--Yet long-term interest rates, which are so important to domestic borrowers, have remained moderate--in fact, home mortgage rates and the rates paid by State and local governments are lower today than in early 1961.

2. All this has been made possible by close ties between our monetary and our fiscal and debt management policies, and close harmony among the men responsible for these policies:

--We have maintained the Federal Reserve's traditional independence within the Government.

--Yet the Federal Reserve and the administration agree entirely on the practical need for informal coordination among the various economic programs of the Government.

--The President meets periodically with a group consisting of Secretary Dillon, Chairman Martin of the Federal Reserve Board, Budget Director Gordon, and Chairman Heller of the Council of Economic Advisers, and they in turn are in close and continuous contact.

--These efforts have resulted in government by consensus, not by conflict, in economic policy.

3. In the future as in the past, our monetary system must remain flexible, and not be bound by any rigid, mechanical rules:

--In an atmosphere of private and public moderation, monetary policy has been steadily expansionary for 4 years.

--With continued moderation, there can be the continued monetary expansion essential to economic growth.

--But if inflation develops, or if excessive outflows of funds occur, the Federal Reserve System is in a position to do what is necessary.