The government said yesterday that consumer prices rose 1.4 percent in January, the most in any month in more than six years, and the White House said its anti-inflation policies are now under "active review."
Almost immediately after the new price figures were published, several of the nation's largest banks raised their prime lending rates to a record 16 1/4 and 16 1/2 percent. The prime rose to 15 3/4 percent only a week ago. [Details on Page D9.]
Jody Powell, President Carter's press secretary, said that in the wake of the new statistics the administration's anti-inflation policies are under review, but he declined to speculate on what changes might result.
However, Charles L. Schultze, chairman of the Council of Economic Advisers, told an audience in Miami that the White House still is firmly opposed to wage-price controls, which some private economists have suggested.
"In my judgment, mandatory wage and price controls are neither a quick nor a sure way to reduce inflation," Schultze said. "They cannot be maintained long enough to do the job and . . . they are likely to cause major harm to the economy."
The Labor Department reported separately that consumer prices in the Washington metropolitan area rose 2.9 percent during December and January combined, with supermarket prices up 1.3 percent. [Details on Page A8.]
The national figures, the steepest for any month since just before the 1974-1975 recession, jolted official Washington and the financial community, already alarmed about last week's wholesale price figures.
On Wall Street, stock prices slumped further, despite heavy speculation in petroleum stocks, and the bond market went into a flurry. Talk of still-higher interest rates pushed the dollar up on world currency markets.
The sharp jump in prices cut deeply into consumers' purchasing power. The Labor Department's hourly earnings index, adjusted for inflation, plunged 1.2 percent over the month to a level 5.5 percent below a year ago.
Robert R. Russell, director of the presidents Council on Wage and Price Stability told Congress, "It is beginning to appear that the underlying rate of inflation is starting to explode.
Both Russell and Schultze expressed fears that if inflation continues to get worse it might "spill over" into higher wage settlements. Russell predicted that an "explosion of wage increases" seemed inevitable.
At the same time, the AFL-CIO warned that, unless the administration acts soon to control inflation more firmly, it will lose labor's support for its voluntary wage-price guidelines program.
Lane Kirkland, the federation's president, told reporters at a news conference in Miami that "the intent and reason and rationale for our participation is withering away unless some further steps are taken. . . ."
Particularly discouraging to some analysts was that the January increase unlike those in some earlier months, was not concentrated primarily in food energy and housing costs. There were significant increases posted virtually across the board.
Energy prices still accounted for about a third of the total increase, reflecting the new crude oil prices announced in December by the oil exporting cartel. Gasoline prices jumped 7.4 percent -- the most on record.
Housing costs rose 1.4 percent in January, the same as in the previous month. Supermarket prices remained unchanged from December's levels.
Analysts saw little hope that the price surge would abate in the forseeable future. The sharp rise in crudeoil prices isn't expected to work its way through the economy for several more months.
There was no immediate indication of what policy changes the White House might be considering. A Treasury spokesman said the administration is "looking again at different options," but declined to disclose any details.
However, Powell told reporters that the administration considers its biggest problem now to be "inflationary psychology" -- leading to speculation that the White House may order further budget cuts as an anti-inflation gesture.
Powell also told reporters that wage-price controls "are not under consideration." There is no authority for Carter to impose controls, and sentiment in Congress still is heavily against such a move.
Carter has been trying to slow inflation gradually by a relatively restrictive budget policy and increases in interest rates by the Federal Reserve Board.
The increase in the consumer price index brought inflation to the retail level over the past three months to an annual rate of 15.6 percent -- the highest since just after World War II.
The 1.4 percent increase for January amounts to an annual rate of 18.2 percent. Consumer prices rose 13.3 percent during 1979, up from 9 percent in 1978 and 6.8 percent in 1977.
The index for January stood at 233.2 percent of its 1967 average, meaning it took $233.20 to buy the same goods and services at retail last month that cost $100 13 years ago.
Yesterday's report came on the heels of a Labor Department announcement last week that prices charged by producers rose 1.6 percent in January, pointing to further sharp jolts at the retail level in coming months.
In his speech yesterday, Schultze also dismissed as "basically groundless" contentions by some economists that the administration's proposed increases in defense spending over the next few years would fuel inflation significantly. i
Some analysts have cited growing fears about the impact of higher defense spending as one of the reasons inflationary psychology is turning sour. Carter is seeking $90 billion in added military outlays over five years. [TEXT OMMITTED FROM SOURCE]