Fed Survey Finds Lending Up but Economy Slowing

WASHINGTON - The Federal Reserve Board reported Wednesday that loan demand had either grown or remained steady in all of its 12 districts during the past two months.

"The strength in lending was primarily attributable to commercial and industrial loans," the Fed reported in its Beige Book, a periodic review of the nation's economic condition.

Residential lending slowed in the New York, Atlanta, St. Louis, and Kansas City districts, and consumer lending weakened in Philadelphia, Cleveland, Atlanta, and St. Louis.

Overall, the Fed said the pace of economic expansion had "moderated" in recent weeks. "Half the districts note that growth has slowed, while the remaining districts generally report conditions are mixed," the report stated.

Economists said the report shows that economic growth has moderated from last year's unsustainable pace.

"Not conclusive evidence by any stretch but anecdotal evidence seems to suggest that things have moderated," said Josh Feinman, a global markets economist at Bankers Trust in New York.

Mr. Feinman discounted the loan-growth report, saying lending is not a leading indicator of economic activity. "You can get slowing before lending growth turns down," he said.

The apparent slowdown means the Federal Open Market Committee will not raise rates at its March 28 meeting, Mr. Feinman said.

Kevin SigRist, a corporate economist at Norwest Corp., agreed that the Fed would not raise rates this month. But he said the Producer Price Index and industrial production data indicate that inflation could be just around the corner.

To nip inflation, he predicted, the Fed will raise rates at the May 23 FOMC meeting. After that, he said, the Fed would watch its rate increases take effect for "some time" before acting again.

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