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Fed Reports Solid Growth, Stable Prices

The nation's central bank reported Wednesday that the economy is growing at a robust pace with little evidence of inflation.

The Federal Reserve's ''beige book'' report— published eight times a year— says expanding manufacturing activity and mounting retail sales paced by consumer electronics and home furnishings are still producing strong growth.

The Fed also reports labor markets remain tight around the country, with employers having difficulty finding workers to fill job openings, something that economists fear could lead to wage and price inflation down the road.

But ''despite faster wage growth for some workers, increases in the prices of final goods and services were limited overall, although the prices of transportation services and some industrial commodities rose noticeably,'' the Fed said.

The Fed survey, compiled from reports from its 12 regional banks and named for the color of its cover, will be used when Fed policy-makers meet March 21 to review the central bank's stance on interest rates. The beige book was based on information collected before Feb. 29.

Many economists believe the Fed will boost rates again at that meeting in a further effort to slow economic growth to a pace that will keep inflation in check.

Four times since June, the central bank has raised rates by a total of a full percentage point to 5.75 percent, making borrowing more expensive for millions of consumers and businesses.

Still, economists said those actions have had little impact in cooling the red-hot economy, which grew at a breakneck 6.9 percent annual rate in the last three months of 1999.

Fed Chairman Alan Greenspan on Monday expressed new worries about an overheated economy and sounded a warning that interest rates will be raised if the economy doesn't slow.

The U.S. economy's current expansion became the longest in U.S. history at 107 months in February, and this month is celebrating its ninth birthday.

Greenspan, in a speech Wednesday to the Independent Community Bankers of America in San Antonio, Texas, cautioned banks to maintain their lending standards in the face of the remarkably strong economy.

Even though he did not discuss interest rates or monetary policy, Greenspan's remarks contributed to Wall Street investors' nervousness because they echoed his concerns about Americans' inflated expectations of the economy.

That market anxiety may have been behind the nearly 400-point drop in the Dow Jones Tuesday.

Helping to offset inflation fears, a Labor Department report released Tuesday found that the productivity of American workers surged at a 6.4 percent rate in the final three months of 1999, marking the strongest jump in productivity growth in seven years, the government reported Tuesday.

That revised estimate made productivity growth for all of last year th best efficiency gain since a 4.1 percent increase in 1992.

On the retail front, the Fed found sales were strong in most areas and either met or exceeded merchants' expectations.

Sales of consumer electronics, appliances and home furnishings posted the biggest gains, the survey said. Demand for cars and light trucks was solid with sales matching or surpassing activity reported for the same period a year ago.

In the manufacturing sector, most districts reported a pickup in activity in January and February, the Fed said. "The gains were moderate in general although Richmond's report indicated considerable strengthening."

By Jeannine Aversa

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