Fed: Housing slowdown widespread

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The economy's still growing but certain sectors like real estate are showing weakness.

WASHINGTON (Reuters) -- The economy kept growing since early September, the Federal Reserve said Thursday, as a number of regions reported growth had firmed while at least two noted growth had cooled.

The remaining districts characterized growth as moderate or mixed, the Fed said in its Beige Book summary of economic conditions, which is composed of reports from the 12 regions covered by each Fed bank.

The latest report was prepared by the Richmond Fed Bank with data collected before Oct. 2.

A number of regions saw tight labor markets and some shortages of skilled workers. Some areas reported wage pressures, although others said wage pressures were in check.

Also, while the majority of districts felt price pressures were contained, input prices increased in several areas and a few regions said businesses were passing higher costs on to consumers, the Fed said.

Fed districts reported widespread cooling of housing markets. Home prices fell, inventories rose, and sales softened in most districts, although some regions reported gains in residential activity, the Fed said.

Rate cut coming? Not so fast

At the same time, most districts reported stronger growth in consumer spending even though automobile and housing-related sales generally weakened. The latest report was prepared by the Richmond Fed Bank with data collected before Oct. 2.

The Fed's rate-setting Federal Open Market Committee meets next on Oct. 24-25 and financial markets are watching to see whether policy-makers will hold benchmark interest rates steady at 5.25 percent for a third straight meeting.

Fed Chairman Ben Bernanke and his fellow policy-makers have been trying to lower inflation by slowing the economy - they raised rates for two years straight until they paused from raising again at meetings in August and September.

In the minutes from the September meeting issued Wednesday, the Fed said officials were "quite concerned" about inflation when they met last month and worried that their credibility could come under attack if inflation did not ease as they hoped.

Some analysts said the minutes, and the Fed's outlook for economic growth, meant that the rate cut that investors are expecting next from the central bank may not come so soon.

"This indicates to people who were thinking that maybe the Fed might be cutting interest rates sometime this year or early next year, that's not likely to happen," said Nigel Gault, director of U.S. economic research for Global Insight in New York.

The minutes were released after two Fed officials offered upbeat assessments on the outlook for the economy, saying they did not feel the expansion would be derailed by a softening housing market.

Richmond Federal Reserve Bank President Jeffrey Lacker said Wednesday that the outlook for consumer and business spending was robust, and said the central bank must be "quite vigilant" on inflation.

Lacker was the lone dissenter on the FOMC, voting for another rate increase in August and September.

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