Newspaper article THE JOURNAL RECORD

Heartland Leads in Economic Growth

Newspaper article THE JOURNAL RECORD

Heartland Leads in Economic Growth

Article excerpt

WASHINGTON (AP) _ The economy is chugging along at a "slow to moderate" pace with business activity on the East and West coasts lagging behind the nation's heartland, the Federal Reserve reported Wednesday.

The Fed said the general sluggishness was keeping price increases under control with the exception of lumber prices, which apparently are climbing in anticipation of further demand for new homes caused by the lowest mortgage rates in 25 years.

The central bank noted bright spots in housing and auto sales, both helped by low interest rates, but it said overall the recovery continued to be spotty.

"Geographically, economic growth appears weaker on the East and West Coasts while central areas such as Cleveland, Dallas, Kansas City and Minneapolis report stronger than average growth," it said.

The latest report, based on surveys compiled in July and August by the Fed's 12 regional banks, will be used by Fed policymakers when they meet on Sept. 21 to consider whether to make any changes in interest rates.

Analysts said the report, showing little pickup in economic activity or inflation, should persuade the central bank to keep interest rates unchanged.

Elliott Platt, an economist at Donaldson, Lufkin Jenrette, said he viewed the report as "one more reason for not expecting an immediate move" from the central bank, which has kept the federal funds rate, the interest banks charge each other on overnight loans, at 3 percent for the past year.

Federal Reserve Chairman Alan Greenspan, in an appearance before Congress in July, took a tough line against inflation and said that sooner or later, interest rates would have to move higher.

However, he did not mention any timetable, and since that time various reports have shown inflation moderating.

In Wednesday's report, the Fed noted approvingly that "with the exception of lumber, prices are generally stable and there is little evidence of inflationary cost pressures. …

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