April 19, 1989

LEAD: THE ECONOMY Consumer prices climbed 0.5 percent in March, maintaining a 6.1 percent annual inflation rate for the first quarter. The latest increases were greeted with relief by investors, and stock and bond prices rose sharply. [ Page A1. ] Consumer prices in the New York area jumped 1 percent, the sharpest increase since August.

LEAD: Adnan M. Khashoggi, a Saudi financier who was a central figure in billions of dollars of arms sales over the last two decades, was arrested by the police in Switzerland today.

LEAD: In a large-scale corporate shake-up, Drexel Burnham Lambert Inc. announced yesterday that it would sell its retail brokerage operation and cut back other divisions, reducing the firm's work force by about one-third.

LEAD: More than 10,000 people took over Beijing's central square on Tuesday night in a rally for democracy. Several thousand students then marched to the Communist Party headquarters, where those in the front of the crowd tried to force their way in to see the nation's leaders.

LEAD: After an all-night negotiating session, legislative leaders reached agreement today on a $47 billion budget that retains many of the programs Gov. Mario M. Cuomo had proposed eliminating. The budget does not put into effect the most sweeping changes proposed by the Governor in his budget plan in January, including an overhaul of the state's Medicaid system and a shift of many costs to local governments.