Bank stocks have recently rallied as the economy surges ahead without inflation, but worries may grow with the Federal Reserve's next signal about interest rates, which is due March 30.

In a more open approach, the central bank has promised that it will begin telegraphing imminent monetary shifts before rates are changed, through statements after its policy meetings.

Indeed, it is possible that the Fed is already "preparing the economy for a round of interest rate hikes," said Sung Won Sohn, chief economist at Wells Fargo & Co. in San Francisco.

The first step may have been Fed Chairman Alan Greenspan's unexpectedly cautious testimony to Congress last month, which helped trigger a rise in bond yields.

The second step could come a week from Tuesday if the Federal Open Market Committee adopts a bias toward tightening credit. That could presage a rate hike as early as the FOMC's meeting on May 18 if the economy does not show signs of slowing.

Mr. Sohn said the scenario could be a repeat of the Fed's actions in 1987 and 1988 under its then-new chairman, Mr. Greenspan.

To aid a recovery of investor confidence after the October 1987 stock market crash, the Fed quickly and dramatically cut rates by three quarters of a percentage point-just as it did last fall. But it raised rates by a full 3 percentage points in the succeeding year.

In general, stock prices in 1988 snapped back sharply from the crash of the previous fall, but with rates rising, many bank stocks were relative underperformers.

The key difference now, Mr. Sohn noted, is that inflation is much less of a concern than it was a decade ago.

In fact, the failure of strong growth to reignite inflation in the ninth year of an economic expansion has left some economists reluctant to anticipate rate increases by the Fed. They think some of the ground rules have changed.

Through the 1980s, and at least until the mid 1990s, yearly economic growth of 2.5% was widely felt to be the Fed's "speed limit" for the economy-what central bankers refer to as the long-term sustainable trend growth rate. Faster expansion for very long would surely feed the fires of inflation, the Fed was believed to think.

Today, Mr. Greenspan and most other top policymakers at the Fed seem to have accepted a higher noninflationary trend growth rate of 3% to 3.5%.

In other words, the Fed's view of what amounts to "strong growth" has been altered, and this makes the central bank more reluctant to raise rates before actually seeing concrete evidence of higher inflation, said L. Douglas Lee, a Washington economist for HSBC Securities Inc.

"Given the uncertainty about just how much excess demand pressure the economy actually contains, any slowdown is likely to keep the Fed on hold indefinitely," he said.

The key is the always-difficult measurement of productivity in the economy, an issue frequently raised by Mr. Greenspan.

"If our estimates of productivity growth over the recent past have been too low, then actual growth has not exceeded its trend by as much as we thought," Mr. Lee said, "which is consistent with the very favorable inflation performance we have experienced."

Thus the Fed-which once stressed the need to act preemptively to squelch inflation-appears less likely these days to raise rates before its old enemy appears on the horizon.

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