Bush Agrees With Darman Call for Fed to Cut Interest Rates

President Bush said today that he agrees with comments by Budget Director Richard Darman suggesting that the Federal Reserve is jeopardizing economic growth by holding interest ratestoo high.

“I thought his comments were very balanced. I can feel very comfortable with his sallying forth and saying that,” Bush said at a White House news conference.

“I don’t know of any President, now or in the past, who doesn’t favor lower interest rates,” Bush said in answer to a question about the unusually critical remarks by Darman.

Privately Critical

Administration officials have been privately critical of the Fed’s interest rate policies, but they have avoided publicly criticizing the independent central bank.

On a conciliatory note Bush added, “You also have to be concerned about inflationary pressures.”

Darman said in a television interview Sunday that the Fed, which until recently had been pushing up interest rates to slow growth and bring inflation under control, would be to blame if the economy falters.

“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 too tight,” Darman said.

“If we do have a recession, I think it will be because they erred on the side of caution,” Darman said.

Bush said he would take under advisement a reporter’s question on Darman’s remarks about blaming the Fed, saying he did not recall that aspect of his budget chief’s remarks.

He promised to let reporters know the answer to that question “at a later date.”

The Federal Reserve pushed rates up by a sharp three percentage points for a year beginning in March, 1988, to curb inflationary pressures in the economy, but the central bank has since eased credit on signs that growth has slowed down.

In June, persuaded that inflation was no longer a pressing danger, the Fed reversed its credit tightening and eased the key federal funds rate, the interest banks charge one another for overnight loans, by about three-quarters of a point.

Caution Planned

Although the Fed is concerned about the risk of a possible recession, Chairman Alan Greenspan has told Congress that the central bank intends to act cautiously in lowering interest rates.

The Federal Reserve influences the economy by controlling the money supply and interest rates. The central bank is independent from the Administration, and in the past there have been clashes between the two groups over interest rate policies.

Some economists say public criticism of the Fed could backfire for the Administration because it might prompt the central bank to demonstrate its autonomy by keeping rates slightly firmer than it would otherwise.