INFLATION STILL A CONCERN, VOLCKER SAYS

  Federal Reserve Board Chairman Paul
  Volcker said both the Fed and the financial markets remain
  concerned about the possibility of renewed inflation.
      "A possibility of renewed inflation remains of concern,
  both in the markets and within the Federal Reserve," he said in
  remarks prepared for delivery to a group of business leaders
  here.
      He said one potential channel for renewed inflationary
  pressures would be an excessive fall of the dollar in the
  exchange markets, which would push import prices up sharply.
      He said participants in financial markets and business
  remain skeptical of prospects for lasting price stability.
      "Should the skepticism about our ability to resist
  inflation be reinforced by bad policy, the consequences for
  interest rates, for exchange rates, and for the economy
  generally would clearly be undesirable...recognition of that
  danger neccesarily must weigh heavily in the formation of
  monetary policy," the Fed chairman said.
      Volcker said attempts to drive the dollar much lower would
  undermine the hard won gains against inflation and would risk
  dissipating the flow of foreign capital.
  

