Beige Book Says Effect of Credit Turmoil Limited

Washington, DC, September 5, 2007--The Federal Reserve found the effects of the August credit-market rout on the broader economy to be ``limited'' beyond the housing industry, according to its regional business survey.

“Outside of real estate, reports that the turmoil in financial markets had affected economic activity during the survey period were limited,'' the Fed said in the survey, which concluded before Aug. 27 and was released today in Washington. “Economic activity has continued to expand'' nationwide, the Fed said in the Beige Book.

The assessment carries more weight than usual ahead of the Fed's Sept. 18 meeting to set interest rates, because regular monthly economic reports fail to capture the impact of the credit-market sell-off. Chairman Ben S. Bernanke said last week that ``we will pay particularly close attention'' to information from regional business contacts.

While tighter lending standards were having a ``noticeable effect on housing,'' several banks reported that ``credit availability and credit quality remained good for most consumer and business borrowers,'' the Beige Book said.

Two Fed districts reported ``a moderate pace'' of expansion, three districts described an economy expanding at a ``modest rate,'' and four districts reported a slower pace of expansion. The New York Fed cited ``continued expansion.''