Keeping an eye on inflation

Talk is starting up again about inflation. But it would be better for Americans not to get overly concerned. What is important amidst all the new forecasts of price hikes is to keep the issue in perspective.

That is not to say that the public should ignore the warnings now heard - such as estimates, for example, that beef prices may edge upward next year because of smaller corn and soybean harvests, both livestock feeder crops.

Given the progress that has been made in fighting inflation, the public should certainly want to keep up its guard.

Estimates of future inflation now being discussed (a range of 5 to 8 percent) may not sound all that high, but that isn't the point. As the experience of the 1970's taught us, any material increase in the rate of inflation would beget expectations of still higher inflation to come, and influence the decisionmaking of business, labor, and all us plain consumers in that direction.

Currently, the US inflation rate is below 5 percent. And now that the economy is slowing somewhat from the pell-mell growth of the last quarter, the inflation rate for all of 1983, in the eyes of many analysts, will probably not exceed 5 percent. For the first seven months of this year, prices have risen at an annual rate of 3.2 percent. That compares to a rate of 3.9 percent for the year 1982. One would have to go back a decade or two to find a time when inflation was so low over so many months.

That very reduction in inflation has been remarkable. But it has been brought about at great cost to the economy, in the sense of personal hardship for millions of Americans who have lost jobs. Some economists attribute the severity of the recent recession to tough - but necessary - efforts by the Federal Reserve Board to slow inflation by sharply constricting the expansion of the money supply during the early months of the Reagan administration.

Fortunately, steps can be taken by the government and the public to help prevent a reigniting of inflation. Among them:

* Business and labor need to exercise wage and price restraint.

That is not to say that prices should not rise to enable business leaders and farmers to gain a fair rate of return on investment. Or that workers should be denied pay boosts. But price and wage increases should be held equal to or below the rate of increase in productivity.

So far, the indicators appear promising. Yearly pay hikes have been running well below inflation, averaging 2.7 percent during the first half of this year. Energy prices are not a problem. Auto firms have been holding back price increases. The danger is that as the economy continues to improve, calls will be heard for higher prices and wages.

* The Reagan administration must continue to whittle away at federal rules and regulations that discourage competition and, thus, drive up costs.

* Congress needs to avoid enacting protectionist legislation that, while aiding specific industries through quotas or other import relief, artificially inflates the price of US-made products.

* The Federal Reserve Board needs to avoid wide swings in monetary policy - between overly-tightening or overly-increasing the rate of growth in the money supply - as has too often been the case in recent years. What is needed is a more gradual and consistent rate of reduction in the growth of the money supply.

* Management and labor need to work with more cooperation to turn out goods and services more efficiently, using the latest technology.

Given vigilance - and action at all levels of society - there need be no retreat in combatting inflation.