I avoid acrylic, as it’s basically plastic. The yarn SueDonim has linked to looks good, although I haven’t used it, but any natural fibre will be fine if it’s not hairy. Cotton is good for baby blankets as it can be washed on a hotter wash than wool, but it can be tricky to knit with as there is no ‘give’ in it.
Try the Drops brand. Their yarn is good quality and not expensive. Just avoid the mohair and other hairy/fluffy yarns as they can shed and get into babies’ mouths and noses. Drops is also available on the Wool Warehouse site.