Boskin Expects Inflation to Cool in a Few Months

Michael Boskin, the senior economic adviser to President Bush, said Thursday that the U.S. inflation rate, boosted by oil price rises, will stay high for the next two months but then start to decline.

Speaking to reporters before a committee meeting of the Organization for Economic Cooperation and Development, Boskin said: “There may be another one or two months of higher inflation numbers because not all the oil prices have worked through the system.”

“But we expect these effects to be transitory. We expect inflation to stabilize and then, through this year or next year, start to abate.”

Concerns about inflation, rekindled since the middle of last year, have forced industrial nations to raise interest rates and upset currency markets.

In Europe, concern that West Germany next week may raise official rates for the second time in a month has hit stock and bond markets hard during the past week.

But Boskin, chairman of Bush’s Council of Economic Advisers, also said there is no current reason for recession in the United States or anywhere else.

Addressing economists’ worries that the economic expansion of the past six years cannot continue, he said: “There’s no economic law that necessitates a recession in the U.S., or anywhere else for that matter, any time soon.”

He said the causes of recession--sudden external shocks such as the 1970s oil price jumps, policy mistakes or serious imbalances in the economy--are absent.

The White House’s primary goal in economic policy is “to make sure we sustain growth,” he said.

$100 Billion Is Target

But he said there would be no sudden reduction in the so-called twin deficits that have been the subject of strong criticism at home and abroad.

The government budget deficit should shrink to around $100 billion in the 1990 fiscal year, but the external trade gap probably will not be narrowed as much this year as it did in 1988, he said.

Under the Balanced Budget Act, Congress has set $100 billion as a target figure for the 1990 deficit.

But OECD economists see the budget deficit being reduced more slowly, to $149 billion in 1990 from $155 billion in both 1989 and 1988.

Major trading partners have been pressing for both deficits to be reduced to head off a threat to world industrial growth.

Boskin said the recent budget accord between the Bush Administration and Congress was the first reached on time and “outside the atmosphere of crisis.”

He added: “We would have liked it to be still bolder. We believed it was important to show that we have made important first steps.”