WASHINGTON -- The economy remained listless during October in most regions of the United States as consumers stayed away from shopping malls and manufacturers'production slowed, the Federal Reserve Board reported yesterday.

The report, an assessment of business conditions in the 12 Federal Reserve Bank districts based on information collected through Oct. 11, gave little evidence that the recovery is taking hold outside the Midwest.

"Sources contacted by the Federal Reserve banks generally described the economy in September and early October as weak or growing slowly," the report said.

Private economists said that, all things being equal, the report's findings suggest Fed policymakers will remain inclined to lower short-term interest rates another notch to shore up what is by most measures an anemic recovery. The Federal Open Market Committee, which meets eight times a year to review monetary policy, is scheduled to gather again on Nov. 5.

But analysts also said the bond market is getting bad vibrations from all the talk in Congress and the Bush administration over tax cuts and other measures to get the economy going. As a result, some said, Fed officials find themselves in a dilemma -- inclined to lower rates but perhaps leery of addint to the market's newfound jitters over inflation.

"It's clear that the economy warrants further easing by the Fed, but in the last week or so there's been another dimension added to the market," said Gary Schlossberg, senior economist for Wells Fargo Bank in San Francisco.

"The market is beginning to anticipate inflation picking up next year, and there's concern that there's an election-year bidding war unfolding in Washington as the Republicans and the Democrats try to outdo each other with stimulative tax cuts," said Mr. Schlossberg. "What's good for the economy often isn't good for the bond market."

In another example of the rush to give election-year goodies to voters, Senate Budget Committee Chairman Jim Sasser, D-Tenn., yesterday called for overhauling last year's budget agreement to permit an immediate $30 billion tax cut for the middle class that would be financed by additional cuts in defense.

House Speaker Thomas Foley, D-Wash., is also on record favoring some kind of tax relief before Congress adjourns this fall.

H. Erich Heinemann, chief economist for Ladenburg, Thalmann & Co., joked about a new oxymoron coming out of Washington: "revenue-neutral tax cuts."

In a related development, a Washington Post-ABC News Poll published yesterday said falling public confidence in the economy is eroding support for President Bush's re-election.

The Fed's economic report, known as the beige book, said most bank districts reported little improvement in retail sales, with generally weak auto sales. Analysts said this finding is important because it suggests consumer spending -- which accounts for two-thirds of U.S. gross national product -- is not providing much lift to the economy.

And the outlook for holiday buying that could spruce up yearend sales is not encouraging, the report said. In most cases, retailers reported that they are "cautious" about seasonal sales prospects.

Other sectors of the economy -- notably housing and manufacturing -- seem to be slowing down or showing only scattered gains after doing better earlier in the year, the report said.

The Philadelphia and Chicago districts reported slower growth in the industrial sector, and San Francisco said conditions were still getting worse in California and the Pacific Northwest. Cleveland and Chicago reported gains that were largely in the volatile auto and steel sector, and Boston and St. Louis noted weakness the defense industry.

The housing sector is mixed, despite recent declines in rates that have brought mortgage rates to a 14-year low, the report said. The districts of New York, St. Louis, and Kansas City reported some increase in home sales, while Atlanta and Minneapolis each said gains in some parts of their region were offset by declines in other parts.

The San Francisco district, which earlier in the year saw a rebound in home sales in California and the Northwest, said sales were now sluggish.

In the financial sector, loan demand remained weak for commercial, industrial, and consumer loans, the report said. Some banks reported that they had not tightened credit conditions in the last two months, and there was an upswing in home mortgage refinancings in response to the drop in interest rates.

The bond market's new worries over inflation are spurred not only by talk of economic stimulation by Congress and the administration but also by concern over the recent upturn in commodity prices, Mr. Schlossberg said. In addition, there are worries about the fresh supply of Treasury debt that is starting to tumble into the market. As a result, he said, a Fed move now to ease policy might get a bad reception in the bond market and send long rates higher.

"I'm afraid this leaves the Fed in a holding pattern," said Kathleen Camilli, chief economist for Maria Ramirez Capital Consultants Inc. "It looks to me like the econoly is showing renewed signs of weakness in October, which should keep Fed policy biased toward further easing. However, the current state of the bond market doesn't lend itself to Fed easing at this juncture."

The best guess is that Fed policymakers will move sometime after their Nov. 5 meeting, she said. By then, there should be additional government reports showing economic weakness in housing and manufacturing.

The Commerce Department is scheduled to report today on durable goods orders to manufacturers in September.

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