FED NOT EXPECTED TO ALTER RATES.

Byline: John D. McClain Associated Press 

Confronted with data suggesting that the economy is slowing with no clear sign of inflation, Federal Reserve policy-makers are expected to keep interest rates unchanged at their meeting today.

Speculation was growing several months ago that the Federal Open Market Committee would have to nudge short-term rates up to keep the economy from overheating and igniting a burst of inflation.

But recent data seem to confirm predictions by many analysts - and Fed Chairman Alan Greenspan himself - that the economic expansion, now in its sixth year, already is moderating from last spring's sizzling pace with few signs of inflation.

``I think the Fed is satisfied that we're beginning to see some slowing in the third quarter after exuberant growth earlier in the year,'' said economist David Jones of Aubrey G. Lanston & Co., a New York securities dealer. ``There is virtually unanimous agreement in the financial markets that there will be no change.''

But many investors stayed on the sidelines on the eve of the meeting. Stock prices were mostly higher in light trading after struggling against a weak bond market.

Lower interest rates help stocks, since they lower the cost of corporate borrowing and stimulate consumer buying. They also are a plus for bonds because they make existing securities worth more.

After edging up just a tiny 0.3 percent at an annual rate in the final three months of 1995, economic growth accelerated to a 2 percent rate in the next three months and then doubled, to 4.2 percent, in the second quarter.

Since then, however, data indicate growth has moderated in most sectors, including consumer spending, which represents two-thirds of the nation's economic activity, housing and industrial production.

Consumer prices rose at a 3.5 percent annual rate during the first six months of 1996. But excluding the volatile food and energy components, the so-called core rate of inflation was a more moderate 2.8 percent. That was little more than the overall 2.5 percent increase in 1995, the smallest since 1.1 percent in 1986.

In congressional testimony last month, Greenspan said he and other Fed officials were predicting slower growth in the last half of the year.

But he also warned that ``recent favorable inflation developments . . . may be drawing to a close,'' causing the Fed to become ``especially vigilant.''

``I am confident that the Federal Open Market Committee would move to tighten . . . should the weight of incoming evidence persuasively suggest an oncoming intensification of inflation pressures,'' he said.

While not yet persuasive, recent inflation data have hinted at building pressures, leading some analysts to predict higher rates later in the year.