Federal Reserve Chairman Alan Greenspan intensified his warnings about growing inflationary pressures Wednesday, labeling "disturbing" a new report that showed consumer prices shot up in January at their fastest pace in two years.
Greenspan, who was appeared for a second day of testimony on the central bank's handling of monetary policy, referred to a government report showing that consumer prices climbed by 0.6 percent in January, spurred by higher costs for food and energy.Greenspan said that a recent acceleration in wage increases was probably the reason that prices at the consumer level were beginning to climb more rapidly.
Greenspan repeated his belief before a House Banking subcommittee that the economy is not in danger of a recession. But, he said, if inflation is allowed to get out of hand the next downturn could come suddenly.
Greenspan's warning put further distance between the central bank and the Bush administration, which has sought to play down fears that the country was about to embark on a new inflationary spiral.
Congressional Democrats, meanwhile, resumed their criticism of the president's $1.16 trillion budget, accusing the administration of sidestepping needed decisions on savings.
Richard Darman, Bush's budget director, defended the fiscal 1990 blueprint before the House Budget Committee, but the panel's chairman, Rep. Leon Panetta, D-Calif., said Bush's call for deficit savings over a wide range of programs - without specifying where spending would be cut - was inadequate.
"These are important (programs) to the country and to the American people," Panetta said. "The public is entitled to know where the president stands on these crucial programs."
Rep. Bill Frenzel of Minnesota, the panel's ranking Republican, said he believed Bush had presented "a pretty complete budget picture within 19 days of the inauguration."
Darman told the Senate budget panel on Tuesday that the best way for Bush and the Democratic-controlled Congress to work out a budget was by negotiating.