WASHINGTON -- A day after the Federal Reserve's latest move to tighten credit, the government yesterday reported that consumer prices are not showing any sign of speeding up.

The Labor Department said that the consumer price index in. October rose a barely noticeable 0.1% in October, resulting in a 2.6% rate of inflation compared with a year earlier. Excluding food and energy, prices were up 2.9% over the year.

"It's great," said Bruce Steinberg, head of macroeconomic analysis for Merrill Lynch & Co. "Inflation has yet to show any acceleration at the retail level. This is the best it's going to get, undoubtedly, but I don't think it's going to be deteriorating all that fast."

Economists generally view the CPI figures as a lagging indicator, not a sign of what will happen in the future to infiation. Fed chairman Alan Greenspan has indicated that Fed officials are paying close attention to commodity prices, market interest rates and other indicators that arc believed to do a better job of predicting price pressures.

Lately these forward-looking indicators have been flashing warning signs to the bond market. Industrial material prices, for items such as steel, have risen sharply, and the Fed retorted on Tuesday that the U.S. industrial sector was operating at 84.9% of capacity -- the highest level in over 14 years. The unemployment rate has fallen to 5.8%, a level that usually signals tightening labor markets.

Analysts yesterday said they believe Fed officials will wait until their next policy meeting on Jan. 31 before considering another increase in short-term rates. Whether they actually sqeeze the trigger will probably depend on whether the economy still seems to have a lot of forward momentum or appears to be slowing to the 2.5% rate of growth targeted by policymakers.

At the same time, the latest CPI report raised questions among some economists about whether the Fed will have to raise rates much higher. Not only are the broad inflation measures tame, but increases in interest rates take up to 18 months or longer to be fully felt by consumers and businesses.

"If we go much beyond the current level of rates, I would begin to worry and see the possibility of higher risk of causing an economic downturn," said Sang Won Sohn, chief economist for Norwest Corp. in Minneapolis.

Sohn predicted that home buyers may see interest rates hitting 10% in a few months, which could lead to a slowdown in construction and fewer sales of durable goods for new homes. The Commerce Department is scheduled to report today on housing starts in October.

Many forecasters are predicting that the economy will slow in the first half of 1995 as the Fed's rate increases take hold, said Sohn. "There is still quite a bit of restraint in the pipeline," the economist said. "I think it would be a big mistake to keep raising interest rates based on economic growth today."

Rising rates will also force home buyers with adjustable-rate mortgages to start shelling out more to lenders over lime as their loans are repriced. The Fed began tightening credit less than a year ago in February, and the first rate increases were small. However, wiga a prime lending rate of 8.5 %, rates are now higher than they were during the late 1980s when adjusted for inflation.

The Labor Department said clothing costs in October dropped 0.5%, the fourth

sWaight monthly decline. Prices Inid by consumers actually rose slightly, but not as much as usual during the fall, and as a result the seasonal adjustment recorded a decline in prices.

Energy prices dropped 0.7% for the second straight month, reflecting continued weakness in gasoline and home heating oil prices. Lower fuel prices also helped cut transportation costs 0.2%. Food prices rose only 0.1%, the studiest gain since April. Medical care, after rising 0.4% for five straight months, was up 0.6%.

During the first 10 months of the year, consumer prices were up at an annual rate of 2.6%, down slightly from the 2.7% rise in all of 1993.

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