Lending fell or held steady in most parts of the country last month, even though the economy continued to grow moderately, the Federal Reserve Board said Wednesday.

Demand for commercial and industrial loans fell in the New York, Kansas City, Richmond, and St. Louis areas and remained steady in Atlanta, Philadelphia, Dallas, and Cleveland. Consumer loan demand was down in Philadelphia, Richmond, and St. Louis, and stayed flat in Atlanta, Dallas, and Cleveland.

Only the San Francisco and Chicago regions reported healthy growth in commercial and consumer lending, the Fed reported in the Beige Book, its periodic review of the economy.

Mortgage lending also was mixed. The Atlanta, Philadelphia, and Richmond regions reported higher demand, while Kansas City, New York, and St. Louis said demand fell.

Delinquency rates rose in New York and Cleveland, but fell in San Francisco and Atlanta. "There appears to be no consistent trend in consumer loan quality," the Fed said.

The report contained some positive economic news for the industry. Inflation appeared to be under control, even though labor markets were tight. Also, local governments issued more building permits, average home prices rose, and vacancy rates for commercial office space fell. Consumer spending was up across the country, and manufacturers boosted their output.

Bank economists said they do not expect the Federal Open Market Committee to raise rates when it meets on March 25.

"There are no clear signs in this report that would push the Fed to tighten," said Christine Chmura, chief economist at Crestar Financial Corp. in Richmond, Va. "The labor market is tight but prices are not rising."

"This is not going to cause the Fed to move at all," agreed James Chessen, chief economist at the American Bankers Association. "It is the kind of news that gives the Fed very quiet, comfortable nights."

Highlights

New York: Banks lowered residential mortgage rates and raised deposit rates. Delinquency rates on consumer loans edged up.

Philadelphia: Bankers predicted slow growth in consumer and commercial lending.

Cleveland: Commercial lending fell as companies took advantage of a strong economy to finance investments internally. Credit unions emerged as competitors to community banks for car loans.

Richmond: Margins for commercial loans reported as "ridiculously low." Quality of consumer loan applicants deteriorated.

Chicago: "Virtually every bank contacted indicated that fierce competition was causing margins to narrow and concessions to be given in order to make business loans." Also, approval rates for consumer loans dropped to 20% last month from 50% a year earlier.

Kansas City. Loan-to-deposit ratios fell. Lending down across the board; consumers put more money in NOW and money-market deposit accounts.

San Francisco: Fierce competition is driving down loan rates.

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