As Federal Reserve officials watch warily, a tug-of-war intensifies between opposing forces that have kept interest rates unchanged.

"On one side, we have the irresistible force: a domestic economy of high confidence, increasing wealth, and tight labor markets," said economist Don Hilber of Norwest Corp.

"On the other, we have the immovable object: an Asian economy that continues to weaken beyond expectations and reform at a snail's pace," he said.

The strong economy continues sucking in imports, which will grow cheaper as Asian economies with devalued currencies step up shipments, he noted. Countering that deflationary factor are rising wages and health care costs

The paradox of accelerating deflation in goods and quickening inflation in services could develop into the equivalent of the 7-10 split in bowling, said Paul A. McCulley, chief economist at UBS Securities, New York

"It's an impossible split to cover," he said-two pins to knock over at opposite sides of the lane-and no bowler wants to face that situation.

Right now, both targets are still standing, he said-but wavering. The Fed, under Chairman Alan Greenspan, "hopes the teetering pins will simply teeter indefinitely, or that one will fall, opening the way for a direct and easy shot at the other."

If the Fed is forced to roll its second ball at a 7-10 split, Mr. McCulley said, "we believe strongly that it would have no choice but to cover the deflationary 7-pin of goods prices and live with the inflationary 10-pin of services prices."

However, Mr. McCulley doubts the Fed will have to face that dilemma. Declining goods prices will ultimately weaken the manufacturing sector of the economy, slowing job growth and dampening cost increases in services.

Mr. Hilber agrees, noting that many American manufacturers are already being pinched by lower world prices. "Despite strong domestic demand, jobs have been shed in all industries except consumer durables, whose growth has slowed," he said.

"Many developing nations continue devaluing to boost exports," he noted, while U.S. exports are falling sharply. Moreover, "forces driving the widening trade balance are not likely to change anytime soon."

The net impact will be "to exacerbate job losses in manufacturing, but to prevent inflation from flaring," Mr. Hilber said, while noting that "inflation will still creep up."

Mr. McCulley said his projected economic scenario is for a noninfationary "soft landing" over the next 18 months. And even if inflation does creep up, the Fed will probably be forced to accept it without any increase in interest rates.

A third complication is possible, according to Nicholas S. Perna, chief economist at Fleet Financial Group. "The problem is that the bigger the U.S. trade deficit gets, the greater the risk that interest rates will eventually rise."

The growing trade gap may cause the dollar to begin falling in international value, as a natural cyclical process begins that would help make U.S. exports more competitive and also raise import prices.

That, however, would stir inflation at home and raise market interest rates as foreign buyers of U.S. bonds sought compensation for erosion of principal and interest in terms of their own currencies.

"Slow and gentle currency corrections are digestible," he cautioned. "But the experience of the last few decades is that adjustments tend to take place fairly quickly."

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