U.S. banks eased standards and terms on loans to businesses ascommercial lending led a credit thaw, according to aFederal Reserve survey.

“Domestic banks, on balance, reported having eased their lendingstandards and having experienced stronger demand in several loancategories over the past three months,” the central bank said inits quarterly survey of senior loan officers released in Washingtontoday. The fraction of banks easing standards for business loanswas described as “relatively large.”

The Federal Open Market Committee reviewed the report at ameeting last week before reiterating that economic growth willprobably “proceed at a moderate pace” even against a headwind fromgovernment spending cuts. The FOMC signaled it may step up monthlybond buying beyond $85 billion if the need arises to overcome aslump in growth or a decline in inflation.