Fed Says U.S. Economy Now Growing, Inflation Still a Concern

From Staff Reports

The U.S. economy has climbed out of an early year rut, and is now growing, albeit very slowly, reports a central bank survey released yesterday. The Federal Reserve’s region-by-region survey said that brisk consumer spending kept the U.S. economy from stalling – even with gasoline prices that zoomed past the $3 a gallon level nationally.

After the economy grew at a 0.7% clip in the first quarter, it is believed to have accelerated to a growth rate of 3% or better for the second quarter, though that latter figure won’t be official until the government reports it on Friday. Rising prices – the essence of inflation – remain a concern, as they continue to increase “at a moderate rate,” the Fed report said.

Central Bank head Ben S. Bernanke told Congress last week that he is anticipating gradual growth for the rest of this year, with strengthening in 2008, but underscored that inflation remains the key concern. Information from this Fed survey – and other economic reports – will absolutely figure into interest-rate discussions at the central bank’s next policymaking meeting, set for Aug. 7. Analysts are right now predicting that the Fed will hold interest rates at 5.25%, where they have been for more than a year.