U.S. MONEY GROWTH SLOWS SHARPLY, ECONOMISTS SAY U.S. money supply growth is slowing down rapidly, and some economists believe that all three of the Federal Reserve's main monetary aggregates may even have contracted in February. A contraction is unlikely to be a major concern for the Fed, especially as it would follow a long period of torrid growth, but it could give the central bank extra leeway in the weeks ahead if it decided that a relaxation of monetary policy was justified on account of weakness in the economy. M-1 money supply for the week ended February 23, reported today, rose 1.9 billion dlrs to 738.5 billion, but preliminary forecasts call for a drop next week of around two billion dlrs. The monthly average in January was 737.1 billion dlrs. M-1 makes up about a quarter of M-2 and a fifth of M-3. With other components of M-2, such as money-market deposit accounts and small time deposits, also falling, the stage is set for falls in the broader aggregates too, economists say. M-1 has been largely discredited because its traditional link to economic growth has disintegrated under the impact of falling interest rates and banking deregulation. But the consistent behavior of all three aggregates is likely to impress the Fed, said Ward McCarthy of Merrill Lynch Economics Inc. "The Fed has confidence in the aggregates when they're all sending the same signal. This is going to raise some eyebrows at the Fed," McCarthy said. Stephen Slifer of Shearson Lehman Brothers Inc added, "We have some very good-looking monetary aggregate data. It's coming in a lot weaker than I thought." The economists were quick to caution that one month's data prove nothing, especially because money growth previously had been so rapid. M-1 in the last 52 weeks has grown at a 16.7 pct rate and at a 19.1 pct rate in the past 13 weeks. Moreover, some of the contraction in M-2 can probably be explained by a shift of funds from savings vehicles into the booming stock market and is thus not an indication of a slowdown in the business expansion. But the data raise the tantalizing possibility for the bond markets that the slowdown in money growth is partly a reflection of a weaker economy that needs more Fed stimulus. McCarthy noted that the slower money growth coincides with signs that the economy is losing momentum as the quarter progresses. "Some of the economic indicators are not as rosy as they were a month ago," he noted. He expects only five to six pct M-1 growth in March and rises in M-2 and M-3 of about four pct. Slifer sees stronger growth of 10 pct in M-1 and five pct or less for M-2 and M-3, but the rates would still be moderate enough to encourage the Fed to ease policy if gross national product for the first quarter proved to be weak. "You'd certainly be more inclined to ease than you would in the past." There was certainly nothing in the Fed's latest balance sheet, however, to suggest a change of policy is already under way, economists said. Discount window borrowings were in line with expectations at 233 mln dlrs a day. Robert Brusca of Nikko Securities Co International Inc argued that an easier Fed policy is unlikely to do much to solve America's most urgent economic problem, its massive trade deficit. Because of the possibility that further dollar depreciation - and thus rising inflation - may be needed to close the trade gap, Brusca said "I'm not prepared to be all that optimistic about the bond market."