Fed Signals No Easing of Short-Term Rates : Economy: Chairman Alan Greenspan says there are no signs of ‘underlying deterioration.’ Critics still want lower interest rates.

The Federal Reserve Board signaled Wednesday that it is not ready to reduce short-term interest rates in the United States, despite fresh signs that the economy is stagnating.

At a news conference here, Fed Chairman Alan Greenspan conceded that the economy’s growth rate is “exceptionally” slow. But he insisted that the overall vital signs are still “quite ambiguous,” and he asserted that the Fed does “not as yet see any underlying deterioration.”

Although Greenspan did not say so flatly, he clearly implied that the Fed does not intend either to push interest rates down or to ease money and credit policies any time soon, even though the central bank’s critics--including a few senior Bush Administration officials--are calling for a relaxation.

Fed sources say the chairman’s current position reflects a solid consensus on the Fed’s policy-setting Federal Open Market Committee, whose members are fearful that inflation pressures still have not abated. “I’ve never seen members of the FOMC so determined and dug-in,” one veteran Fed-watcher said.

Many Fed strategists are leery about moving too quickly in response to adverse economic statistics. The Fed relaxed monetary policy in such a situation last December and ended up seeing the credit markets push interest rates higher after investors became fearful that it was easing too quickly.

The Fed chairman’s comments came in the wake of new figures published last Friday suggesting that the economy may be decidedly more stagnant than had been thought. A monthly report by the Labor Department showed that the creation of new private sector jobs has slowed virtually to a halt.

Fed policy-makers have been trying to keep the economy growing sluggishly in an effort to dampen inflation pressures and cool demand for imports without plunging the nation into a recession. So far, most analysts agree, they have managed to carry out their aims.

Recent signs that economic stagnation may be spreading have revived fears that the economy might be heading into a recession and have brought renewed calls from some quarters for the Fed to push short-term interest rates down.

But Greenspan pointed out Wednesday that although the economy was operating sluggishly, there still has been “no indication” either of a buildup of inventories or of cumulative layoffs--two signs the Fed watches that might point to a serious economic weakening.

And he noted that even though creation of new private sector jobs slowed dramatically last month, the nation’s unemployment rate still has “not budged” from the 5.3% level at which it has remained for several months. A recession “does not at this stage exhibit itself,” he told reporters.

Greenspan and senior central bank officials from Japan, Britain and France also sought to allay fears that the coming reunification of West and East Germany is likely to push global interest rates up.

The four central bankers said it still was much too early to tell precisely what economic impact reunification would have or whether West German authorities would be able to contain pressures for higher interest rates, as most of them now are contending.

The central bankers also joined former International Monetary Fund Managing-Director Jacques de Larosiere, now governor of the Bank of France, in expressing confidence that the West German Bundesbank will be able to manage any new inflation pressures.