WASHINGTON -- The cordial relationship between the Clinton administration and the Federal Reserve is still intact, despite recent moves by the Fed that some observers fear will slow the economic expansion for which the President is claiming credit.

Mr. Clinton's topeconomic advisers continue to avoid any criticism of the Fed, despite three increases in short-term interest rates and the strong probability of a move to a 4% federal funds rate in May.

In fact, there are subtle signals that the advisers share the central bank's goal of wiping out the low interest rates that have helped the economy rebound.

The most explicit signal came last week from Laura D. Tyson, head of the President's Council of Economic Advisers. It came when she met with reporters after the government reported that U.S. output slowed to 2.6% in the first, three months of the year.

Seeking the Right Level

"If policy is done correctly this is what we're trying to do, and this is what I believe the monetary authorities are trying to do - you get the economy to gradually glide into or slow down to its long-run capacity growth."

Setting aside the rough syntax and jargon, this is a statement acknowledging that the administration shares the Fed's goal of reining in the economy a bit to head off the threat of higher inflation Most economists agree that this means keeping growth in a range of 2.5% to 3% a year.

Ms. Tyson was careful to emphasize that administration officials believe there is still plenty of slack left in the economy, with factories operating at less than full potential and with plenty of people unemployed. There is room, she said, for the economy to grow faster "for some quarters." But she also stressed that inflation seems to be firmly in check.

On Good Terms

Still, there is no mistaking the tone of mutual respect and understanding, if not outright cooperation, that continues to characterize the relationship between the Fed and the White House.

These ties are now being tested by mounting congressional criticism of the Fed. Shortly after Ms. Tyson breezed through her press conference, Sen. Paul Sarbanes, D-Md., and Sen. Jim Sasser, D-Tenn., called in reporters to denounce the Fed's policy of raising rates.

Sen. Sarbanes is in line to become chairman of the Senate Banking Committee next year, and Sen. Sasser chairs the Budget Committee.

"Just as the economy is coming back up for air, the Fed is pushing it back down again," Sen. Sarbanes said. "The Fed launched a preemptive strike against inflation, but it's actually a preemptive strike against growth."

Jumping the Gun

A group of 45 senators and House members sent a letter to Fed Chairman Alan Greenspan saying the recent credit-tightening moves "could be likened to a physician's prescribing antibiotics without any specific sign of illnes, on the ground that the patient will doubtless develop an infection at some time in the future."

The letter, which was organized by Sen. Byron Dorgan, DN.D., warned that Greenspan is promoting a "two-tiered recovery" that benefits investors at the expense of millions of Americans left out of the expansion of the 1980s.

Congressional aides say it is clear that the White House is not joining in the criticism of the Fed. "The White House does not want to pick a fight with Greenspan at this point," said one aide, perhaps because the President is still looking good, with an improving economy and tax increases that are helping to slash the budget deficit.

Another congressional source said that Robert Rubin, head of the President's National Economic Council, and other advisers remain adamant about not criticizing Mr. Greenspan in public.

They believe that doing so would only rattle the bond .market by creating an impression of political pressure on the central bank, forcing rates higher than they would otherwise be.

The Bobd Buyer is a sister publication of the American Buyer.

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