White House Backs Off on Darman’s Criticism of Fed

The White House, reluctant to pick a public fight with the Federal Reserve Board, offered only lukewarm endorsement today for the call by Budget Director Richard G. Darman for lower interest rates to sustain economic growth.

White House press secretary Marlin Fitzwater refused to echo Darman’s comment in a television interview Sunday that the Fed should stop worrying about inflation and “be more attentive to the need to avoid tipping this economy into recession.”

While declaring that Darman “speaks for the Administration and the President,” Fitzwater said the White House will offer no further public advice on whether the Fed needs to loosen its grip on credit.

“Our policy is to want continued economic growth with low inflation,” he said. “We believe the economy is generally on that course at the present time, and the Fed is doing a good job.”

Appearing Sunday on the NBC News program “Meet the Press,” Darman, who serves as a top economic adviser to President Bush, advocated lower interest rates to fend off any threat of recession.

“I think it’s quite important that the Fed appreciate that growth is indeed fundamental to the health of this economy,” he said, “and that they not become obsessed with concern about things going well for too long.”

It was the most public indication to date of anxiety that the tight money policy pursued until recently under Fed Chairman Alan Greenspan could choke off growth altogether and end a history-making economic expansion.

Over the last few months, Bush has denied on repeated occasions that he was upset with the anti-inflation strategy that has guided the Fed’s actions on interest rates.

Amid talk that the slowing economy may be headed for worse than the “soft landing” desired by the Fed, even as the stock market soars to record highs, Darman hinted at discord over how to keep the economy on a course to further prosperity.

“I think the Fed has had a difficult job,” he said. “I’m fearful that they may have been a little bit too concerned that things have been going well and that they may have been a little bit tight. If we do have a recession, I think it will be because they erred on the side of caution.

“Insofar as we are concerned about recession, we should all worry a little bit about the Fed.”