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Fed likely to predict moderate growth

The weather is not the only thing behaving strangely this winter. The economy has been topsy-turvy as well. In just two months, December and January, many economists went from predicting an impending economic downturn to believing that the longest peacetime expansion in history has found another of its nine lives.

The new consensus of moderate economic growth this year is likely to be an important element in Federal Reserve Board Chairman Alan Greenspan's testimony before Congress today when he reveals the Fed's policy targets for 1990. These targets will have a major influence on interest rates and economic growth.

Greenspan could be excused for expressing a certain amount of perplexity about recent events.

In December, the economic outlook was as bleak as the unusually cold weather. Housing construction plunged, Christmas retail sales were lackluster, and the overall economy, as measured by the gross national product, turned in its worst showing in 3{ years.

But in January, the weather warmed, and so did the economy. Housing construction soared 29.6 percent, the biggest monthly increase on record. Retail sales also rebounded, largely on the strength of a pickup in auto demand.

"The economy is doing a lot better than a lot of people thought it would," said Michael K. Evans, head of a Washington forecasting firm.

Greenspan, in an unusually candid comment last week, said the chance of a recession has diminished markedly since last spring.

Economists believe Greenspan will restate those views today, and they are not expecting any credit easing on the part of the central bank, especially in light of current inflationary pressures.

In January, wholesale prices rose at an annual rate of more than 24 percent, the fastest rate since the early 1970s.

That could set up a potential clash with the Bush administration, which has been complaining that the Greenspan-led Fed has not been aggressive enough in pushing interest rates down.

In addition, many economists believe Greenspan will stick to an earlier forecast in which the Fed estimated that economic growth for 1990 would range between 1.5 percent to 2 percent. That falls short of the Bush administration's projection of 2.6 percent growth _ a level needed to meet 1991 deficit-reduction goals.

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