FED'S HELLER SAYS MONETARY GROWTH TO BE SLOWER
  Robert Heller, a member of the
  Federal Reserve Board, said he expects "more modest levels" of
  growth in the money supply this year.
      "In my view, this would not only be a logical, but also a
  most desireable development," he said in a speech prepared for
  delivery to an economic forum at Chapman College in Orange,
  Calif.
      A text was released in Washington.
      He said the effect of lower inflation and financial
  deregulation on monetary aggregates was now largely finished.
      "Consequently, monetary growth may return to more modest
  levels," Heller said. He noted growth in the money supply slowed
  after mid-January.
      "I would not be surprised at all if the monetary aggregates
  were to grow rather slowly during the balance of the year as
  well," he added.
      Heller said there was a danger of renewed price inflation.
      "The pricing behavior of American producers in response to
  price increases of their foreign competitors will be crucial
  for our economic future," he said.
      Widespread domestic price rises in response to rising
  import prices would "generalize the inflationary forces
  emanating from the foreign trade sector" and might not gain more
  market share for U.S. producers.
      "A return to the stagflation of the late 1970s may well be
  the result of such a behavior pattern," Heller warned.
      He said "we at the Federal Reserve will have to be
  disciplined in our conduct of monetary policy." 
      Heller said said the government should also exercise fiscal
  discipline and cut the deficit by spending restraint rather
  than new taxes.
      "The imposition of new taxes would tend to rekindle
  inflation and certainly would not make us more competitive in
  international markets," Heller said.
      He said the U.S. economy should expand by nearly three pct
  during 1987, aided by higher exports to Europe and Canada.
      A free trade agreement currently being negotiated with
  Canada "would be exceedingly helpful in allowing American
  producers to compete more effectively in that country," Heller
  said.
  

