WRAPUP 1-U.S. economy grew sluggishly in recent weeks-Fed

* Fed finds U.S. economic growth “modest” in recent weeks

* Wage pressures, consumer inflation scant

* Rising input prices suggests squeeze on profits

* Mortgage applications drop

By Mark Felsenthal

WASHINGTON, Oct 20 (BestGrowthStock) – The U.S. economy grew
sluggishly in recent weeks, with businesses struggling to raise
prices and reluctanct to hire and invest, the Federal Reserve
said on Wednesday.

The U.S. central bank’s Beige Book provided the latest
evidence the economy is stuck in a recovery too weak to
generate new jobs, and reinforced the view in financial markets
that the Fed will soon ease monetary policy further.

“National economic activity continued to rise, albeit at a
modest pace,” the Fed said in the report, which was prepared
its next policy-setting session on Nov. 2-3.

A separate report showing mortgage applications slumped
last week highlighted lingering weakness in housing markets.
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The Fed’s report, which showed consumers were focused on
buying only necessary items, had little impact on financial
markets on Wednesday.

G20 FINANCE MINISTER MEET THIS WEEK

The central bank’s march toward more stimulus for the
economy has driven the U.S. dollar down in the past month and
caused consternation among emerging markets whose currencies
have been pushed up by investors seeking higher yields in other
countries.

Global currency tensions are expected to get a thorough
airing at meetings of the Group of 20 nations in Korea later
this week. Many emerging market countries have taken steps to
restrain their currencies from rising out of fear their exports
would get choked off.

The Fed has already cut rates to near zero and bought $1.7
trillion in government and mortgage-related debt to support the
economy, which exited a painful recession in June of last
year.

The dollar slumped anew on Wednesday on a report from an
influential consulting group saying the Fed plans to purchase
$500 billion in U.S. Treasury securities over six months as
part of its next round of help for the faltering recover.
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Although comments from a number of Fed policymakers in
recent days point to a growing consensus in favor of another
round of monetary easing, one official signaled on Wednesday he
does not think conditions warrant Fed action.

Philadelphia Federal Reserve Bank President Charles Plosser
said he does not currently see “a great fear” of deflation
although he added that he could change his mind based on
incoming data.

“I don’t see the pay-offs for unemployment as very great
and I don’t see the necessity of it at this point given my
forecast on inflation,” Plosser told reporters after giving a
speech to the Union League of Philadelphia.

MANUFACTURING STRONGER

The Beige Book found that manufacturing had strengthened in
most of the Fed’s 12 districts, buoyed by exports in many
places.

Consumer spending held steady or gained slightly, but
shoppers focused on necessities. Housing markets remained weak,
and although home prices appeared to be stabilizing,
inventories were elevated and rising in areas, the Fed said.

Higher costs of agricultural commodities and metals were
not passed on to consumers, it added, suggesting a squeeze on
corporate profits.

“Pass-through of rising input costs to final prices
remained limited, although there were scattered reports of
increases,” the Fed said.

The report also found that wage pressures were minimal, and
that the job market and business investment remained weak.

“Businesses continued to postpone capital spending plans
because of economic and public policy uncertainties,” the Fed
said. “Hiring remained limited, with many firms reluctant to
add to permanent payrolls given economic softness.”

With the U.S. unemployment rate at 9.6 percent and unlikely
to move much lower soon, some Fed officials are worried the
economy risks falling into a deflation, a broad-based decline
in prices that could further undercut economic activity.

The Beige Book was based on data collected from late
September through Oct. 8 by the Dallas Federal Reserve Bank.

A separate report from the U.S. Mortgage Bankers
Association found falling demand for home loan financing for
the sixth time in seven weeks last week, pointing to lingering
softness in housing markets.

Mortgage interest rates rose, but were not far from record
lows, and analysts said dwindling uptake of low borrowing costs
is evidence of high unemployment and low credit scores.

Borrowing costs on 30-year fixed-rate mortgages, excluding
fees, averaged 4.34 percent, up 0.13 percentage point from the
previous week. Interest rates were also below their year-ago
level of 5.07 percent
(Reporting by Mark Felsenthal; Editing by Neil Stempleman)

WRAPUP 1-U.S. economy grew sluggishly in recent weeks-Fed