WASHINGTON

                   The U.S. economy is expanding at better than a 3% clip. The pool of
                   workers sitting on the sidelines is evaporating. Unions finally are showing
                   signs of life. Wage and benefit costs may be turning up. Boeing Co. can't
                   make planes fast enough. The nation's railroads can't make timely deliveries.
                   Business executives appear dangerously euphoric and, at least until last
                   week, so did stock-market investors.

                   What more will it take for Alan Greenspan to pull the interest-rate trigger?

                   A lot, apparently.

                   There is little doubt Federal Reserve officials would fall in line if Mr.
                   Greenspan opened their Nov. 12 meeting by calling for higher rates, a step
                   he hasn't taken since March. The published summary of the Fed's August
                   meeting, the most recent available, is full of fretting about "the risks of rising
                   inflation."

                   Other Fed officials caution that when things look too good to be true, they
                   probably are. "The economy's performance over the last year or so -- the
                   extraordinary combination of above-trend growth, exceptionally tight labor
                   markets, but continued low inflation -- has been much more favorable than I
                   and many others expected," Alfred Broaddus, president of the Federal
                   Reserve Bank of Richmond, Va., said the other day. "Speaking strictly for
                   myself, I am doubtful it can continue indefinitely."

                   All this is irrelevant if the stock market crashes. The Fed flooded the
                   economy with credit after the 1987 crash and surely would do so again.

                   But even if the market bounces back, odds are Mr. Greenspan will hold
                   short-term rates steady in November, conversations with Fed officials
                   suggest. Only an unusual combination of bad (to Fed inflation-phobes) news
                   would alter the odds, such as a triple whammy of data showing a spurt in
                   labor costs, an unsustainable surge in hiring and a further drop in the low
                   jobless rate.

                   Not even Mr. Greenspan's early October warning that there aren't enough
                   idle workers to sustain economic growth at its current pace -- a trend shown
                   in the chart accompanying this column -- has persuaded financial markets
                   that a Fed rate increase is imminent. The futures markets put the odds of a
                   Fed move before January at no better than 50-50, and only four of the 18
                   Fed watchers surveyed weekly by Macroeconomic Advisers of St. Louis
                   foresee a rate increase before year end.

                   Perhaps the most important factor is Mr. Greenspan's extraordinary
                   optimism about the U.S. economy. If American business finally is figuring
                   out how to use computer and communications technology to increase the
                   pace of growth in productivity, as Mr. Greenspan suspects it is, then wages
                   can rise even faster without squeezing profits or triggering unwelcome price
                   increases, and the old speed limits for economic growth of about 2% or 2
                   1/4 % are too low.

                   It's important not to confuse Mr. Greenspan's increasingly respectable
                   optimism about productivity with the run-up in stock prices during the past
                   several months. As he has noted, the market's continued rise makes sense
                   only if investors' expectations of future profits continue to improve. Given
                   that forecasts for profit growth are at "levels not often observed at this stage
                   of an economic expansion," as Mr. Greenspan puts it, delivering
                   ever-greater profits would require a much more remarkable productivity
                   surge than he has in mind. That is why he worries in public from time to
                   time about the stock market's sanity.

                   Mr. Greenspan's colleagues at the Fed aren't convinced he is right about
                   productivity. But even the most skeptical has a hard time arguing that the
                   Fed has erred by holding off on interest-rate increases.

                   The wait-and-see monetary policy of the past year looks pretty smart so far.
                   Paul Samuelson, the Nobel laureate who has been urging the Fed to lift rates
                   since November, concedes that "up to this time the nation doesn't show
                   harm from following Greenspan's advice and not following Samuelson's."

                   Despite the pace of the economy and the refreshingly low jobless rate, there
                   is little tangible sign that prices are rising. Fed officials who predicted a year
                   ago that inflation was inevitable are silenced by the simple fact that they
                   were wrong. Indeed, by some measures the inflation rate is still falling. And
                   the Southeast Asian economic crisis, which boosts the U.S. dollar and
                   damps demand for U.S. exports, further weakens the case that the U.S. is
                   on verge of accelerating inflation.

                   With so little inflation to begin with and so much uncertainty, the case for a
                   preemptive strike against inflation is weak. The conventional justification for
                   raising rates, which would have justified a move long before now, won't
                   suffice. Something significant in the economic environment has to change
                   before Mr. Greenspan can justify raising interest rates now.

                   --David Wessel