December 6, 1984

A picture caption in Metropolitan Report on Nov. 10 with an article about coastal erosion in New York incorrectly described a building protected by sandbags on Fire Island. It is part of the incinerator for the town of Saltaire.

Martha R. Seger, the newest member of the Federal Reserve Board, suggested today that the central bank could move further to relax monetary policy and push down interest rates without undue risk of worsening inflation. Replying to critics who, she said, have complained that the Fed has been ''too tight'' since midyear, Miss Seger said that policy had indeed been aimed toward money and credit growth consistent with ''lasting'' stability of prices.

President Reagan announced today that Paul H. Nitze would serve as the adviser of Secretary of State George P. Shultz for next month's arms talks with Foreign Minister Andrei A. Gromyko of the Soviet Union. The decision opens the way for Mr. Nitze, a 77-year old specialist on national security affairs, to become the negotiator if Mr. Gromyko agrees to a proposal for a permanent ''umbrella'' forum for arms control issues, a State Department official said. Mr. Nitze, who was the negotiator in the suspended Geneva talks on medium-range missiles in Europe, is to help work out a negotiable set of proposals on banning space weapons, reducing strategic arms, and limiting medium-range missiles, all of which are to be discussed with Mr. Gromyko. Impasse in Interagency Group The United States has been trying to develop a unified negotiating position within a Senior Arms Control Group, an interagency committee headed by Robert C. McFarlane, the White House national security adviser.

The Economy President Reagan proposed $34 billion in program reductions to his Cabinet, including a one-year 5 percent decrease in Federal salaries, and then instructed the Cabinet officers to look for further cuts. (Page A1.) Many popular programs were identified for ''reforms, cuts and terminations,'' including the Small Business Administration and the Export-Import Bank, officials said. (A1.) House Speaker O'Neill offered the prospect of bipartisan cooperation on the budget and taxes, provided President Reagan takes the political risk of initiating controversial policy changes. (B20.) Bank regulators and the tax simplification plan appear to be at odds. The Treasury proposals would reduce tax deductions that banks are allowed to take for additions to loan-loss reserves. But regulators want banks to increase reserves for bad loans. (D1.)

Thousands of men, women and children continued to flood the hospitals of this stricken city today two days after gas leaked from an American-owned insecticide plant, reportedly killing more than 1,000 people. They were stretched out on cots in overcrowded wards and in the corridors. Infants and children lay side by side, crying as they struggled to breathe, Others of the stricken were living under tents set up by relief organizations and the army, fed by citizens groups and attended by a throng of doctors, nurses and medical students. They coughed and vomited. Many just sat or lay on the ground, their eyes closed in pain from the effects of the gas. Some were temporarily blind; others complained of dizziness. Almost all had running eyes and found breathing hard.