With the exception of mortgage and home-refinance lending, loan demand was strong over the past two months, the Federal Reserve said Wednesday.

In the Fed's Beige Book, a summary report on economic conditions by the 12 Federal Reserve banks, only Philadelphia and St. Louis reported an overall weakening in loan demand.

Consumer lending continued to strengthen in the Atlanta, Dallas, and Kansas City districts, while Chicago, Cleveland, New York, Philadelphia, and Richmond all reported growth in the commercial-and-industrial loan category.

Except in Dallas and Philadelphia, higher rates have generally discouraged mortgage and home-refinancing loans. One banker in Charlottesville, Va., was quoted as saying that the mortgage market is "dead in the water."

The most sanguine report came from the Dallas Fed, which said, "Lending growth was boosted by near-record auto sales, while real estate and home equity lending remained strong. Financial institutions reported liquidating other investments to fund new loans."

The report, which is intended to guide members of the Federal Open Market Committee at their Oct. 5 meeting, sparked various reactions from industry observers.

Martin J. Mauro, manager of financial economics for Merrill Lynch in New York, predicted that the Fed would not raise interest rates again. "This is the kind of report that tells the Fed officials that the economy is basically behaving the way they want it to," he said. "Growth is good and inflationary pressures are low."

"I would say there is only at best a 50-50 chance of a hike in interest rates," said Sung Won Sohn, senior vice president and chief economic officer at Wells Fargo & Co. in Minneapolis. "We are seeing some glimmer of hope for the economic slowdown that Chairman (Alan) Greenspan has been waiting for."

But Wayne Ayers, chief economist for BankBoston Corp., sees a hike as a sure thing. "In the light of the strength in this report, they are going to continue with their preemptive strike stance. We will see another increase in either October or November. My bet is October."

The Federal Open Market Committee has raised the federal funds rate by a quarter point at each of its last two meetings.

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