WASHINGTON -- Federal Reserve Vice Chairman David W. Mullins said Tuesday that although inflation now appears to be fairly stable, he sees "early warning signs" of stronger inflation ahead.

Speaking at a conference sponsored by the American Enterprise Institute, Mr. Mullins warned that effective monetary policy requires timely action.

Danger Seen in Delay

"Once you see clearly visible signs that inflationary pressures are embedded, it seems awfully late in the game," he said.

But he added, "The underlying fundamentals do not point convincingly to increasing inflation in the near term."

The Federal Open Market Committee next meets to set monetary policy on Dec. 21. Some observers have speculated that if the economy continues to pick up steam, the Fed may move to a less accommodative stance in the near future.

"I think one sees why market participants are wondering when is the appropriate time to switch from accommodative to neutral," Mr. Mullins said.

"Even though things seems to be going very well, I think this is a very important time for monetary policy," he added. "It seems quiet out there, but in my view we're at an important crossroads."

Mr. Mullins predicted strong fourth-quarter growth figures but declined to predict whether they will exceed those of the year-ago quarter.

|Contractionary Influences' Noted

Though the economy is now on firm footing, he said, the Fed remains watchful of economic instanbility.

"There remains an ample supply of contractionary influences to dampen the prospects of overly robust growth," he said.

The Fed vice chairman also characterized the central bank's relationship with the Clinton administration as "healthy" and "constructive."

"Despite the fact that we're central bankers, I'm not opposed to growth," he said. "I am opposed to inflation, and they're not synonymous."

Bright Hopes

And if the Fed remains vigilant in its fight against inflation, he said, "we may have some chance of emerging from this period with an improved inflation regime, reduced inflation expectations."

He added: "This opportunity comes along at best only once every decade or so."

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