Federal Reserve officials, focusing more on the nation's very low inflation than on its continuing strong economic growth, decided yesterday to leave short-term interest rates unchanged.

But the central bank's policymaking group, the Federal Open Market Committee, signaled its concern about the possible inflationary consequences of strong growth with a statement that the FOMC is leaning toward a possible rate increase in the future.

In the statement, however, the FOMC also "emphasized that such a [stance] did not signify a commitment to near-term action."

The decision to stand pat on rates was widely expected by participants in the financial markets, but the announcement of a lean, or "bias," toward higher rates caused both stock and bond prices to decline. The stock market bounced back to close down only slightly for the day, but the bond market stayed down. The Dow Jones industrial average lost less than a point for the day.

Earlier this year the FOMC began to announce changes in its stance on possible future actions. According to members of the committee, however, there has been no consensus on precisely what having a bias implies or to what time period it applies. To a number of analysts, the wording of yesterday's statement underscored that lack of agreement on meaning.

"The announced shift to a tightening bias with the added note that that doesn't signify near-term action reflects the Fed's continued uncertainty with how to use its new method of communicating its thinking to the public," said Mickey Levy, chief economist for Bank of America in New York. "The negative reaction of both the stock and bond markets shows how such tentative statements only add uncertainty."

The committee had raised its target for a key short-term rate by a quarter of a percentage point at each of its last two meetings and in both instances adopted a neutral stance on the likelihood of a future rate increase or reduction. Those actions left the federal funds rate, the rate financial institutions charge one another on overnight loans, at 5.25 percent.

While strong growth in consumer and business spending, coupled with rising world oil prices, have pushed up consumer prices in the United States this year, the core portion of the consumer price index, which excludes volatile food and energy prices, rose at just a 1.6 percent annual rate in the first eight months of the year. That was significantly lower than the 2.4 percent increase for all of 1998.

Many of the Fed officials, including Chairman Alan Greenspan, remain somewhat puzzled about why inflation has remained so tame--indeed, why the underlying rate appears to be still falling--when the nation's unemployment rate is so low and economic growth remains strong. But many of the FOMC members are convinced that labor productivity--the amount of goods and services produced for each hour worked--is increasing so rapidly that the economy's overall efficiency is rising, allowing strong growth without inflation.

As the FOMC put it in explaining the decision to leave rates unchanged, "Strengthening productivity growth has been fostering favorable trends in unit costs and prices, and much recent information suggests that these trends have been sustained."

The policymakers remain concerned, however, and their statement continued: "Nonetheless, the growth of demand has continued to outpace that of supply, as evidenced by a decreasing pool of available workers willing to take jobs. In these circumstances, the FOMC will need to be especially alert in the months ahead to the potential for costs to increase significantly in excess of productivity in a manner that could contribute to inflation pressures and undermine the impressive performance of the economy."

In other words, Fed officials will be scrutinizing all available data on prices and business costs for signs of more inflation. They also will be watching closely for signs that economic growth, which for the past 3 1/2 years has run close to 4 percent annually, may be slowing, as many of the officials expect.

Between now and their next policymaking meeting, Nov. 16, Fed officials will have a wealth of additional economic data, including reports for both September and October on consumer prices and employment and unemployment, as well as an advance estimate on economic growth for the July-September period.

The officials may also have a better sense of the extent to which worries about the potential "Y2K" year-end computer problem are affecting the economy. At the beginning of the year the clocks in unmodified older computers will treat the "00" of 2000 as if it were 1900. Any systems controlled by such computers, such as electricity grids, might have problems. A massive effort to update computer systems is expected to head off any major problems in the United States.

Some Fed officials have suggested privately that because of the uncertainties about Y2K effects and possible strains in some financial markets, they would prefer not to have to change rates later this year unless economic conditions shift in such a way that a response is absolutely necessary.

Wrapping all these considerations together, the FOMC statement concluded, "The committee will need to evaluate additional information on the balance of aggregate supply and demand and conditions in financial markets" before making any decision to raise rates.