BUDGET CHIEF MILLER WARNS FED ON INTEREST RATES
White House Budget chief James
Miller said he was concerned that the Federal Reserve might
"overreact" to the decline in the value of the U.S. dollar by
raising interest rates, a move he said could cause a recession
next year.
    "Our greatest danger is overreaction," Miller told newspaper
reporters yesterday. "I'm concerned about the Fed's
overreaction. I'm concerned about what I see in recent data
showing a substantial fall in the money supply."
    Edwin Dale, Miller's spokesman, said the remarks, published
in the New York Times today, were accurate.
    Miller said he was concerned the Fed might overreact to
signals of rising inflation by tightening credit -- a move he
said could have "political consequences."
    The White House budget chief appeared to be referring to
the effect an economic slowdown could have on the presidential
and congressional elections next year.
    "My fear is that if we get into a recession we are in deep
soup, and there is no question about it," he said.
    Miller said an economic slowdown could lead to lower tax
revenues and a widening of the budget deficit.
    Miller's remarks reflected concern that the U.S. central
bank might feel compelled to tighten credit as a means of
bolstering the dollar.
    Both Treasury Secretary James Baker and Federal Reserve
Board Chairman Paul Volcker recently have warned that further
declines in the value of the U.S. dollar could jeopardize
global growth prospects.
    U.S. officials have urged Japan and West Germany to
stimulate economic growth in their countries -- a move that
could boost U.S. exports and relieve trade protectionist
pressures in the United States.
 Reuter
