THE US economy grew 3.2 per cent in the third quarter of 1995, slightly stronger than previously estimated, while price pressures were the mildest in two years, the Commerce Department has said in a report that analysts said shows the "soft landing" is on course.

The reading for third quarter gross domestic product edged up from the 3 per cent growth reported in an initial estimate for the July September period. Second quarter growth was at a 0.5 per cent annual rate.

Economists said the report showed continuing expansion, although they had mixed views on the need for further interest rate cuts by the Federal Reserve.

The report was the first in which the Commerce Department emphasised a new method of calculation through a chainweighted index, which is designed to reflect more accurately how spending patterns change in response to prices.

The German Bundesbank has issued a forceful reminder that only trends noted in connection with the M3 money supply, rather than the general economic situation, are decisive in any decision to reduce key interest rates.

"The Bundesbank stands on the position that the M3 money supply is its central reference in guiding its policy," it said.

The central bank's position, already stated a number of times in the past, was reiterated at a time when many voices are heard - both in Germany and elsewhere - urging the bank to reduce its key interest rates to help boost a flagging economy.

The central bank also emphasised that it does not set a target for the deutschmark's value in framing monetary policy.