Inflation-fighting room for the Fed

Inflation barely rising. The US economy still showing strong growth. Unemployment falling. Given such a set of rosy economic indicators, it seems almost churlish to once again have to remind Americans - as some economists are doing - that it is imperative that strong action be taken on two economic fronts:

* At the federal level it is absolutely essential that Congress complete work as soon as possible on a budget deficit-reduction plan to help bring down soaring federal deficits projected in the range of $200 billion or more annually. The House and Senate must still vote on $50 billion in tax hikes and $ 11 billion in spending cuts passed by a joint committee this weekend.

* At the private bargaining level, labor and management need to exercise as much restraint as possible in a series of key contract talks coming up later this year involving postal and automobile workers and coal miners. Although inflation is rising far more slowly than many analysts had expected, it is important that prospective wage and benefit increases be held within the range of actual gains in productivity.

Some union leaders have suggested that given the strong growth in the economy , along with the sizable compensation and benefit packages recently granted some corporate executives (with compensation packages often running in the hundreds of thousands of dollars), workers should seek to win back concessions granted firms during the depth of the recession while also seeking wage increases to help offset possible future inflation.

But any prospective wage packages that exceeded productivity gains would be shortsighted and work against the economy by contributing to inflation.

As a whole, the American economy is clearly looking good, what with all its challenges from the deficits and the course of interest rates - a point not lost on either President Reagan or his Democratic opponents. First-quarter growth, as now revised by the Commerce Department, was a rousing 9.7 percent. The department's flash estimate for the current (second) quarter is also on the up side - 5.7 percent adjusted for inflation.

But lest anyone be overly euphoric, the continuing pell-mell growth is also of concern to the Wall Street investment community, which by necessity looks ahead to the course of interest rates and inflation.

Inflation is expected to rise at an annual rate of 2.8 percent during the second quarter, based on the government's implicit price deflator, a GNP-related measurement. And most economists believe that for the year as a whole, inflation , as measured by the GNP deflator, will stay under 4 percent. Prices are expected to rise next year as more workers go back to the assembly lines and factory capacity utilization rates reach 85 percent or more. They are now in the 82 percent range.

To what extent will the Federal Reserve Board slow money supply growth during the weeks ahead to help hold down inflation, given the strong growth in the economy? That's the big unknown at this point. Many analysts believe the Fed will feel somewhat limited in its freedom to tighten credit, since increases in US domestic interest rates result in increased interest payments for third-world debtors. The Fed would not want to take any action that could help precipitate a debtors cartel - or lead to significant debt repudiations abroad.

So, for the short term, it is all the more urgent that: (a) Congress finish its deficit-reduction work, and that (b) management and labor show restraint in holding the level of future wage packages to gains in productivity. Both steps would ease the pressure on the Fed.