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MANUFACTURERS URGE FED NOT TO RAISE INTEREST RATES

The nation's manufacturers, declaring that their businesses are prospering and their hiring is up, urged the Federal Reserve on Saturday not to raise interest rates again this year. They said higher rates would endanger their prosperity.

In taking this position shortly before a Federal Reserve meeting to consider another rate increase, the National Association of Manufacturers directly challenged a basic tenet of the central bank's policy.While most Fed officials insist that rising inflation poses the greatest danger to the economy and should be prevented, even at the cost of an economic slowdown, the manufacturers take the opposite view. They even prefer a little inflation, which gives them leeway to raise prices.

The NAM passed no formal resolution at a three-day meeting here, attended by 115 chief executives of large and small companies, from giants like Boeing and the Big Three automakers to small machine shops in Midwestern towns.

But the executives opposed higher rates in a poll taken at the meeting, part of the NAM's emerging effort to prevent another rate increase that might slow the economy and dampen its members' sales. In interviews, many of the manufacturing executives forcefully supported that view.

Summarizing the results of the poll at the final session Saturday, NAM preisdent Jerry Jasinowski said, "The overwhelming majority believe that the Fed should hold interest rates at current levels or delay any further action until late this year or next year."

Stanley C. Gault, chairman of Goodyear Tire & Rubber Co. and a former chairman of the manufacturers' group, said: "We have to be particularly careful about what we do now. It is as hard or harder to reverse a slowdown in the economy as it is to reverse rising inflation."

The manufacturers rarely come out so publicly or bluntly against a rate increase. But this time, they said, higher interest rates would catch them just as their sales are expanding, mostly from the ripple effects of strong home construction and surging auto and truck sales.

But even executives of companies removed from the auto and construction industries expressed concern about rates.

Lawrence W. Clarkson, a senior vice president of Boeing Co., for example, said higher rates might discourage people from buying airline tickets on credit, just as air travel was rising and airlines might be ready to order more new planes. "Leisure travel is very interest-rate sensitive," he said.

In their poll, the manufacturers rejected a main argument for a rate increase intended to reduce consumer demand, and with it economic activity, by discouraging borrowing in a nation that runs on credit.

The argument is that shortages of labor and of production capacity will force manufacturers to raise wages to obtain skilled workers and that the higher wages will force businesses to raise prices sharply.

"We have no strains on capacity, and there is certainly" no strong demand for wage increases, said Tracy O'Rourke, the newly elected chairman of the NAM.

As for his own company, Varian Associates Inc., which makes machinery for semiconductor manufacturing, among other products, he said, "Our orders for this machinery will be up 100 percent this year, but every order is a dogfight over prices."

Expectations on Wall Street of another interest rate increase - either at a meeting of Federal Reserve policymakers Tuesday, or at their next meeting, on Nov. 15 - have played a role in the steady decline of stock prices in recent days, as well as the upward pressure on interest rates in the bond market.