RATES MAY STAY PUT; ANALYSTS SAY FED WILL PASS ON HIKES.

Byline: Martin Crutsinger Associated Press 

With the economy still racing along, the Federal Reserve should be getting ready to raise interest rates for a third time to cool things off. But most economists are betting that the central bank will leave rates unchanged when policy-makers meet today.

They base that view on what Fed officials have had to say in recent weeks and also on economic indicators showing that while economic growth has been strong, keeping unemployment at a 29-year low, inflation has remained benign as well.

``They definitely won't raise rates,'' said Lawrence Chimerine, economist at the Economic Strategy Institute, a Washington think tank. ``They have moved pre-emptively twice this year. They can't keep pre-empting when the traditional indicators of an increase in inflation are not there.''

The central bank raised rates for the first time in more than two years on June 30 and then again on Aug. 25, boosting the federal funds rate, the interest that banks charge each other, to 5.25 percent.

Those increases in borrowing costs for banks were matched in lockstep fashion by identical quarter-point raises in the banks' prime lending rate. The benchmark rate for millions of consumer and business loans now stands at 8.25 percent.

After the last rate increase, the Fed kept its policy directive, an indicator of future moves, at neutral, saying its two rate increases ``should markedly diminish the risk of rising inflation going forward.''

Despite that language, economists widely believed at the time that the Fed would not hesitate to move a third time at its Oct. 5 meeting to raise rates should the economy not be exhibiting signs of slowing on its own.

That consensus view has now switched with most analysts betting the central bank will not raise rates at today's meeting even though economic growth in the just-completed third quarter is believed to have rebounded to a rapid clip of around 4 percent, far above the 3 percent rate many Fed policy-makers believe is prudent with the current tight labor market.

Analysts had changed their views basically because of a switch in emphasis in the public comments by Federal Reserve Chairman Alan Greenspan and other Fed officials. Their remarks have taken on a more dovish tone, indicating that they see few signs of inflation pressures despite the economy's rapid growth.