President Carter, alarmed by new signs that inflation is worsening, yesterday speeded up his review of his economic and energy policies in an effort to find a way of jolting the nation out of its inflationary psychology.
Carter met for two hours last night in a rare Sunday session with a full array of top economic and energy advisers to discuss the new developments and outline possible policy options.
Speculation centered on possible cuts in non-defense spending to reduce the federal budget deficit this year and next. Deficits have become the most visible symbol of inflation to many people.
Administration officials said later it was unlikely the president would make any decisions until sometime next week. Carter and his advisers repeatedly have ruled out mandatory wage-price controls.
The White House disclosed House disclosed Friday that Carter would begin a review of his economic policies. An official told reporters last night there had been "some acceleration of this process of review."
The heightened concern stems from new figures published on Friday showing consumer prices up a sharp 1.4 percent in January, the steepest jump in more than six years, with a speedup in virtually every category.
That, and a similar report on producer prices a week ago, sent the nation's financial markets into turmoil last week. Interest rates are rising sharply and some analysts fear the long-term bond market may collapse.
A White House official said last night that "based on the figures we have seen this month, there is concern over the inflationary effect of energy spilling over into other areas of the economy" more than it has in previous months.
Carter earlier had maintained that the speedup in inflation has come primarily from rising oil prices. However, the inflation figures published Friday showed acceleration in every major category except food.
One of the major factors helping create chaotic conditions in the financial markets has been a belief by investors that the administration has not been aggressive enough in holding down spending.
The deficit for the current fiscal year has balooned to $39.8 billion, , according to administration estimates, and Carter has proposed a red-ink figure for fiscal 1981 of $15.8 billion.
With controls ruled out, and the Federal Reserve Board already steadily tightening credit conditions, Carter's major options lie primarily in further cuts in domestic programs and, possibly, in the energy area.
The review comes barely a month after Carter unveiled his new fiscal 1981 budget and economic policies, designed to slow the economy, as an anti-inflation move, without major cuts in non-defense programs.
Attending last night's meeting with Carter were Treasury Secretary G. William Miller, budget director James T. McIntyre, domestic adviser Stuart E. Eizenstat, Charles L. Schultze, chairman of the Counicil of Economic Advisers, and Energy Secretary Charles Duncan.
In another sign of the urgency with which the administration views the situation, Schultze was asked to cut short a visit to Miami to attend last night's session.
In a speech there on Friday, Shultze defended all elements of the administration's current economic policies, particularly the $15.8 billion deficit, which he said was the smallest in relation to the economy in the past seven years.
The Carter adviser said the budget would be in surplus by $20 billion were it not for the administration's forecast of a recession.
He said the budget represents "a very substantial swing toward restraint."
The administration, along with most private economists, has forcast that inflation will slow later this year from the 1979 rate of 13.4 percent once the latest round of oil price increases has worked its way through the economy.
However, the recent bad news on inflation has shaken whatever confidence the financial markets -- and many economists as well -- have had in those predictions.
Carter and his policy-makers are now seeking a sufficiently dramatic gesture to convince the skeptics that inflation will abate as predicted, and that the administration's policies are tough enough to bring that about.
Ironically, Carter already had on his desk, before this week's review began, a recommendation by his Pay current voluntary wage guidline from 7 percent for 1979 to a range of 1.5-9.5 percent.
It had been widely assumed that the president would accept those proposals. However, unless he takes some other anti-inflation actions as well, the step could be interpreted as acquiescence in a higher inflation rate.
Meanwhile, calls for mandatory wage-price controls continued to mount. Sen. Howard H. Baker Jr. (R-Tenn.) said yesterday he would be willing to consider controls as one short-term remedy for inflation -- an unusual move for a GOP candidate.
And Sen. William Proxmire (D-Wis.), chairman of the Senate Banking Committee, said his panel will look into the use of controls at a hearing next week. However, he and most others on the committee oppose controls personally.
At the same time, Sen. Edward M. Kennedy (D-Mass.), campaigning in New Hampshire, continued his attack on Carter's policies, saying the United States faces "the greatest economic crisis" since the Depression. Kennedy has urged a wage-price freeze, followed by controls.