Economic growth was stronger than most economists suspected in the fourth quarter, but Friday's report on the gross domestic product was not expected to spur a rate hike this week by the Federal Reserve Board.
Fed Chairman Alan Greenspan's repeated predictions last week that the Asian crisis could slow the U.S. economy later in the year convinced observers that the Fed, which meets Tuesday and Wednesday, will refrain from action.
The Commerce Department reported the gross domestic product gained at a seasonally adjusted rate of 4.3% in the fourth quarter. Growth for 1997 was 3.8%, the strongest performance in nine years.
Economists surveyed by Dow Jones earlier in the week had predicted a 3.7% growth figure for the quarter. Such surprises normally fuel fears of tighter credit. The Fed has said 2.5% growth is the desired rate.
Nicholas S. Perna, chief economist at Fleet Financial Group, noted that the growth figure came on the heels of a rise in the employment cost index, which indicated that the cost of wages and benefits are on the rise, suggesting a threat of inflation.
But he said the uncertainty over how the Asian crisis will play out here has fostered a "one-meeting-at-a-time monetary policy by the Fed." The governors, he said, will wait for a clear economic trend to emerge before making their move.
Mr. Perna said his own view is that the Fed's next move will be to loosen credit at midyear, although he acknowledged that many economists see it otherwise.
He said the impact of the Asian economic crisis was not yet evident in the fourth quarter, but could begin to take a toll later. If the sex scandal involving the President and a former White House intern weakens leadership and stirs up trouble in the Middle East, which happened as a result of the Watergate scandal in the 1970s, it could put additional pressure on the economy.
But Mr. Perna said there is little risk of a recession this year. Unlike the 1970s, inflation is low and the federal budget deficit is under control, which gives the government the option of both cutting interest rates and lowering taxes if the economy appears vulnerable.
For the immediate future, Mr. Perna said he would look at upcoming employment statistics for signs of inflation and at trade figures for Asia-related economic weakening.
