New opportunities at the Fed

IF pressed, most Americans would probably admit that they are not certain what the Federal Reserve Board does, although -- they would probably concede -- it (a) is important; (b) has something to do with the nation's economy. And, of course, they would certainly be right on both points. We mention this not to play down the importance of the Fed but rather to note the latest opportunity available to the Reagan administration to help shape the workings of this crucial agency.

Emmett Rice, one of the seven governors of the Fed, has announced his retirement. Mr. Rice, appointed by President Carter, has been one of the governors most concerned about the possibility of rising inflation in the United States.

The Fed now includes four Reagan appointees. But that has not necessarily meant a ``White House tilt'' to the board. Nominees to the Fed are in many ways like members of the Supreme Court of the US. They are people of marked independence.

And yet, there is also no gainsaying that Federal Reserve Board members, like judges on the high court, tend to hold true to their basic economic orientation.

Will the Fed become more ``supply side'' oriented with the departure of Rice, strengthening the hand of those members who lean toward easier credit? In past months, there has been a consensus on the board to loosen the reins on credit. Even Rice voted for the cuts in the discount rate in July and August.

Indeed, the rapid increase in the nation's money supply this year, plus concerns within segments of the financial and business community about the possibility of a rebirth of inflation, makes it difficult for the Fed to loosen the money spigots much more than has been the case. Yet, if the economy continues to poke along, or even worsen, that option would have to be considered.

And the current economic news adds up to a picture of basically sluggish progress. Surely, if economic conditions were to turn downward -- and one would hope that would not be the case -- it would seem far more reasonable to tilt toward a further stimulation than toward inaction. Yet, it would also be foolish to overlook concerns about a renewal of inflation. Balance is called for. Indeed, credit is generally available throughout the economy.

Mr. Reagan's new appointment to the Fed should be based on qualification -- not any particular economic tilt. Moreover, Rice has been the Fed's only black member, and that might well be considered by the White House.