WASHINGTON -- The Federal Reserve should raise short-term interest rates immediately because current policy is pumping too much liquidity into the economy and is causing a speculative bubble in the bond and stock markets, a panel of private economists said yesterday.

"The committee warned that easy money was playing a major role in driving up stock and bond prices, particularly the latter, thus raising the risk of a ~bubble' in security prices that eventually will burst," the Shadow Open Market Committee said in a prepared statement.

The group of Fed watchers, consisting of eight economists from universities, investment firms, and banks, releases an assessment of monetary and fiscal policy every six months.

At a news conference yesterday, Allan Meltzer, chairman of the panel and economics professor at Carnegie Mellon University, said the Fed has created a "mini-version" of the huge speculative bubble in asset prices in Japan, which eventually burst.

Current Fed policy is too expansionary because the monetary base, consisting of bank reserves and currency in circulation, is growing much faster than the economy as a whole, the panel said. "Either money growth must slow, or nominal gross domestic product must rise mainly through higher inflation," the group said in the prepared statement.

The extra liquidity is "merely slushing around in the financial markets," said Mickey Levy, committee member and chief financial economist of NationsBank.

The gap between the growth of the monetary base and the growth of nominal GDP is "unsustainable," the panel said. One of two' things will happen: Either the Fed will begin tightening, which will slow the growth of bank reserves, or inflation will heat up and cause a correction in the financial markets, the panel said.

"The Federal Reserve has already waited too long before acting to slow money growth," the panel said. "They have failed to respond to their own forecast of higher inflation in 1994."

The group would not speculate on how long the Fed could hold rates at current levels before causing inflation to spark and a correction in stock and bond prices. "We don't know." Meltzer said while answering questions.

He did predict that a Fed tightening would raise the entire yield curve initially; then, the long end would decline on the expectation of weak growth in the future.

The committee focuses on the monetary base in assessing monetary policy, a methodology that is out of favor with most Fed watchers who normally watch M2 growth. M2 is a broader measurer of liquidity that includes currency, checking accounts, savings accounts, and small certificates of deposit.

However, money growth has been subdued for the last couple of years as investors have poured money into stock and bond funds.

In addition, Levy predicted that real growth in the second half of this year will be about 3%, slightly better than the consensus forecast, and will grow by 2.5% to 3% next year.

The economy is stronger than recent GDP statistics show for the first and second quarter, Levy said. Among other things, he said that real personal consumption gained 3.3% in the last 12 months and real final sales advanced at more than a 3% annual rate in each of the last three quarters.

"We've seen uneven performance by sector, but the strengths obviously outweigh the weaknesses." Levy said during yesterday's news conference.

The panel also predicted that President Clinton's tax and budget package passed by Congress will shave about 0.5 percentage point off real growth next year.

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