US, N. Korea Clash Over Helicopter Pilots

NORTH Korea yesterday stonewalled requests from Washington for the release of two US Army aviators 24 hours after their small, unarmed helicopter was downed over the Communist country's airspace.

North Korea accused the United States of staging a major air war exercise against it jointly with South Korea near the front lines. The North's official Korean Central News Agency, monitored in Seoul, said 560 US and South Korean fighter planes joined in the exercise Thursday and Friday.

Jim Coles, a US military spokesman in Seoul, called the North Korean accusations ''spurious untruths.''

The confrontation strikes a fresh blow to fragile but improving relations between Washington and Pyongyang over North Korea's nuclear program.

At a meeting with US military delegates at the border village of Panmunjom yesterday, North Korean officials said they would withhold information on the pilots until their probe of the case is finished, the US military command in Seoul said.

It was unclear whether the two-seat helicopter was shot down or made an emergency landing. North Korea announced Saturday that the ''enemy'' helicopter had been shot down. South Korean military sources said ground troops saw the helicopter flying into North Korean territory, but reported no signs of an attack or pursuit.

Fed may wish you a Merry Rate Hike

The US Federal Reserve meets tomorrow to consider raising interest rates for the seventh time this year, but most analysts are betting it will hold off from acting rather than spoil the Christmas cheer.After boosting short-term rates sharply last month, the inflation-wary central bank is at a crossroads. It knows the economy is ending 1994 with a bang, but it expects growth to slow next year as the tighter credit begins to bite.

But a delay is likely be short-lived. Most analysts expect the central bank to resume raising interest rates next month. Some economists are looking for a half percentage point increase in January; others expect a hike of up to full point. Clinton administration insiders admit higher short-term rates are likely next year.

Fed Chairman Alan Greenspan was as clear as he ever gets in signaling that higher rates are on the way in testimony to Congress earlier this month.

While insisting that he did not know whether the central bank would raise rates this week, Mr. Greenspan painted a picture of an economy that was growing too fast for the Fed's liking and that was fueling inflationary pressures in the process.