
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: FRIDAY, April 12, 1991                   TAG: 9104120985
SECTION: NATIONAL/INTERNATIONAL                    PAGE: A-1   EDITION: EVENING 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

PRICES FALL FOR 1ST TIME IN 5 YEARS/ DROP COULD PUSH FED TO REDUCE INTEREST

Consumer prices fell last month for the first time in almost five years, the government said today, a 0.1 percent decline that analysts said should give the Federal Reserve leeway to force interest rates lower.

The Labor Department said the rare decline in its Consumer Price Index followed a 0.2 percent February rise and a 0.4 percent advance in January.

It was the first decline in the index since April 1986, when it fell 0.4 percent. The March drop was attributed to another steep fall in gasoline and other energy prices, which have now retreated 18 percent from their November peak.

Even more important to jittery financial markets was the fact that the so-called core rate of inflation, excluding the volatile energy and food sectors, was up only 0.1 percent in March following worrisome gains of 0.8 in January and 0.7 percent in February.

A moderation in price inreases for such things as women's clothing, new cars and alcoholic beverages was credited for the big slowdown in the core inflation rate.

Many analysts said the good news on retail inflation, following Thursday's report of a fourth consecutive decline in wholesale prices, should provide the Fed with the incentive to launch another round of interest rate reductions to fight the recession.

Such an action is being strongly pushed by the Bush administration, which is worried that the Fed has been half-hearted in its efforts to make sure the current fairly mild recession does not deepen into something worse.

Many private economists think that a string of weak March reports on the economy, ranging from a big jump in unemployment to declines in retail sales, will force the Fed to ease interest rates. However, the timing of the easing move was an open question.

Some economists looked for a quick rate cut while others said the Fed may be slow to ease this time around given a sharp policy split inside the central bank.

Federal Reserve Chairman Alan Greenspan is struggling to reach a consensus among opposing camps. One group says the Fed has already done enough easing to boost the economy out of the recession and any further rate cuts will make inflation worse as the recovery gets underway. However, the other camp, which includes Greenspan, says that more needs to be done in order to guard against a deeper and longer recession.

In the first three months of this year, inflation at the consumer level has been rising at an annual rate of just 2.4 percent.

by CNB