Business: Warning on Prices

Discarding its usual veil of silence, the staid Federal Reserve Board last week issued its harshest criticism of U.S. price-boosting heard in recent years. Up before the Senate antitrust subcommittee stepped the Fed’s research director, Ralph A. Young, with the charge that industry’s price hikes—notably in autos and steel—cut demand and employment even further during the recession. Industry, he said, “needs to use more often the time-tested prescription of lower prices as a cure for inadequate demand and to resort less to appeals to Government.

Young’s testimony was doubly significant because it came just after disclosure of a statement by the Administration’s chief economist, Raymond J. Saulnier, that price increases not only aggravated the recession but contributed greatly to causing it: “These price increases were a major factor in limiting demand.” Saulnier singled out for attack the rises in “heavy industries and those producing automobiles and other consumer durables.” What worried Washington now was that industrial prices have started to inch up sooner than usual for a recession-recovery period. Though the consumer price index has remained fairly stable since mid-1958, the Fed’s Young said that industrial prices have climbed 1½% above the previous record of 1957. That was all Subcommittee Chairman Estes Kefauver had to hear. He warned that big business and big labor alike are now being offered “their last chance to police themselves without controls.”