Loan demand, particularly for commercial financing, strengthened in most parts of the country while credit quality remained stable, the Federal Reserve reported this week.

In its periodic report on economic conditions, the Fed said total loan volume grew over the last six weeks at banks located in its San Francisco, Cleveland, St. Louis, and Kansas City regions.

Both the Cleveland and Richmond regions described competition among lenders as "fierce."

"The spread between lending and deposit rates has tightened as depositors continue to move savings into higher yielding money-market accounts," the Federal Reserve Bank of Cleveland said.

The Federal Reserve Bank of New York reported average loan rates in the region declined while average deposit rates increased. In addition, the New York Fed noted demand for all types of loans declined, especially for mortgages.

The Richmond Fed said sharp competition for commercial loans was leading banks "to provide added service and to trim pricing."

The Beige Book, which covers the past six weeks and includes information on employment, manufacturing, and consumer spending, helps the Federal Open Market Committee set monetary policy. The Fed's monetary policy arm next meets Feb. 4 and 5.

Loan quality, according to the Fed, is stable, but consumer credit deteriorated slightly in some districts including New York and Kansas City.

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