WASHINGTON - Federal Reserve Board Governor Edward Kelley yesterday dismissed bond market worries over inflation and said the economy will probably expand modestly in the months ahead.

Kelley's comments seemed to be more relaxed in tone than those of Fed Governor Lawrence Lindsey, who said in a brief exchange with reporters earlier yesterday that the central bank will do "whatever is necessary" to fight inflation. The remarks came after Lindsey appeared at a forum organized by the Neighborhood Reinvestment Corp., which finances development in low-income areas.

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