Federal Reserve Banks See Loan Demand Still Strong and Inflation in Check

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The Federal Reserve's latest snapshot of economic conditions captures a fiercely competitive banking industry facing strong loan demand.

Credit quality remains solid as lending standards have held steady, according to the Beige Book. The report, released Wednesday, was compiled by the Fed's 12 district banks. It covers May and early June.

The Beige Book includes updates on everything from manufacturing to employment to wages and prices. Agriculture sticks out as one of the few negatives in the report.

"There is little optimism about farm incomes across districts, as commodity prices remain low," according to the Beige Book. "Agricultural credit markets are somewhat stressed, with Minneapolis reporting increases in farm liquidations and bankruptcies and Chicago reporting a general slowing in agricultural loan repayments."

The Fed's monetary policymaking arm considers the report when setting interest rates. The next meeting of the Federal Open Market Committee is slated for June 29-30.

A rate increase is widely expected. The economy remains strong, according to the report, with tight labor markets exerting pressure on wages in many parts of the country.

Still, the report notes that inflation has not taken off. "Prices ... remain well behaved," the report states.

While the overall picture on loan demand remained bright, many Federal Reserve banks said higher rates have reduced mortgage refinancings. …