FED GOVERNOR SUPPORTS COMMODITY PRICE GUIDE

  Robert Heller, a member of the Board
  of Governors of the Federal Reserve System, said commodity
  prices could form a useful guide for setting domestic and
  international monetary policy.
      Speaking to the conservative Heritage Foundation, Heller
  said, "A broadly based commodity price index may be worth
  exploring" as a guide to monetary policy.
      "In times of rising commodity prices, monetary policy might
  be tightened and in times of falling commodity prices, monetary
  policy might be eased," he said.
      Commodities are also standardized to avoid measurement
  problems and occur at the beginning of production so as to give
  "early warning" signs of wholesale and retail changes.
      "There is no need to react to every small fluctuation in
  commodity prices or to do so on a daily basis," Heller said in a
  prepared text.
      "But if commodity prices exhibit a broad trend, a policy
  action might be considered," he said.
      Heller said using a broad-based commodity price index as an
  indicator for monetary policy would also contribute to
  stabilized currency exchange rates.
      Commodity prices are generally uniform worldwide and prices
  for them are more consistent than for other types of goods, he
  said.
      He said other beneficial effects would be to stabilize
  export commodity prices for developing countries by using a
  commodity basket as a guidepost for monetary policy.
  

