Nine of the Federal Reserve's 12 districts reported loan demand increased during April and May, according to a report released Wednesday.

Three of the nine districts-Chicago, Cleveland, and Atlanta-credited the surge to both consumer and commercial borrowers.

"Demand for commercial loans is still growing amid broad-based gains," the Federal Reserve Bank of Cleveland reported. "Consumer loan demand is moderately improved at most institutions, and a few banks report a very strong consumer loan market."

Competition for borrowers remained intense during the two months, the Cleveland Fed said. "These pressures continue to squeeze the spread between borrowing and lending rates."

The Chicago Fed agreed that "intense competition for quality business loans continued to put pressure on pricing." But it noted banks have not lowered underwriting standards.

The 12 Federal Reserve banks report on local conditions roughly every six weeks. The results, compiled in the "Beige Book," are designed to help Federal Open Market Committee members decide whether interest rates should be changed. The committee next meets June 30-July 1.

"The U.S. economy continues its excellent performance," the report concluded. "Output and employment are high while inflation is low."

James Chessen, chief economist at the American Bankers Association, predicted policymakers would hold rates steady. "From the Fed's point of view, life is very, very good, and they are going to sit patiently and enjoy their summer," he said. "They're not going to do a thing."

The pace of economic growth varied across the country, the Fed said, ranging from quite strong in the Northeast, much of the Midwest, and the West to somewhat more modest in the Southeast.

In agriculture, crop conditions are good, but crop and livestock prices are low, the Fed said.

Seven Fed districts reported some adverse effects from economic problems in Asia. For example, the Dallas Fed cited weak demand in Asia for petrochemicals and telecommunications gear.

Focusing on lending, the San Francisco, St. Louis, and Richmond Fed districts attributed higher demand to commercial borrowers.

In the St. Louis district, commercial lending jumped 4.4% during the two-month period while real estate lending edged up 0.8% and consumer lending fell 3.1%.

"Banks reported robust loan demand and generally healthy conditions," the Federal Reserve Bank of San Francisco reported. "Respondents noted that stiff competition prevented improvement in loan margins and underwriting standards."

The New York, Kansas City, and Dallas Fed districts said loan growth was fueled by consumers. That was true even though the Federal Reserve Bank of New York reported, "Interest rates on loans declined over the last two months-particularly for commercial and industrial loans-while deposit rates remained steady."

The New York Fed said bankers also were increasingly willing to lend and did not change credit standards. Delinquency rates fell slightly, led by the consumer segment.

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