<html><base href="http://biz.yahoo.com/"><title>Yahoo - Slower US demand could check inflation-Fed's Parry</title><center><table cellpadding=2 cellspacing=0 width="100%"><tr><td width="1%"><a href="http://quote.yahoo.com/?u"><img src="http://us.yimg.com/i/fi/main4.gif" border=0 width=281 height=31 alt="Yahoo! Finance"></a></td><td nowrap><font face=arial size=-1><a href="http://quote.yahoo.com/?u">Home</a> - <a href="http://www.yahoo.com/">Yahoo!</a> - <a href="/f/bn.html">Help</a></font><br><hr size=0 noshade></td><td width="1%"><a href="http://www.online.reuters.com"><img src="http://us.yimg.com/i/dn/reuters4.gif" border=0 alt=Reuters width=140 height=21></a></td></tr></table><p><a href="http://www.yahoo.com/M=B1049.136755.1241138.7811756/D=finance/S=7811756:N/A=55355/*http://adfinity2.247media.com/?adlink|2|534|1|1|247MEDIA" target="_top"><img width=468 height=60 src="http://adfinity2.247media.com/?adserv|2|534|1|1|247MEDIA" alt="Click Here" border=0></a><p>[ <a href="http://www.yahoo.com/headlines/business/">Business</a> | <a href="/reports/stocks.html">US Market</a> | <a href="/industry/">By Industry</a> | <a href="/reports/ipo.html">IPO</a> | <a href="/apf/">AP</a> | <a href="/snp/">S&P</a> | <a href="/reports/world.html">International</a> | <a href="/prnews/">PRNews</a> | <a href="/bw/">BizWire</a> ]</center><p><hr><b>Thursday August 6, 2:41 pm <small>Eastern Time</small></b><h2>Slower US demand could check inflation-Fed's Parry</h2>  NEW YORK, Aug 6 (Reuters) - While tight U.S. labor markets could lead to inflation, slower spending by consumers and businesses could minimize the risk by keeping aggregate demand in check, Federal Reserve Bank of San Francisco President Robert Parry said on Thursday.<p>``So long as labor markets remain tight, we face a risk that the good news on inflation could come to an end,'' Parry told an audience in Salt Lake City, Utah. ``Of course, a factor that would reduce this risk is some slowing in the growth of aggregate demand to a more sustainable rate,'' he added.<p>A copy of Parry's remarks was made available in New York. <p>Recent slowing in the U.S. economy ``was due in part to some temporary factors, namely the GM strike and the inventory correction,'' Parry said.<p>``The underlying factors affecting our economy's performance -- domestic investment and consumer spending -- remain strong'' and appear to cushion continuing effects of the East Asia crisis, Parry said. ``These reasons seem to lend weight to the likelihood of continued expansion,'' he added. If further signs of strength emerge, ``it would be unwise to dismiss the possibility of higher inflation down the road.''<p>Parry noted that the U.S. has not seen the flood of low-priced products from troubled Asian countries that many had expected. The banking crisis there has made it difficult for businesses to find financing to send goods to the U.S.<p>The absence of a surge in imports ``may have softened the depressing effects of the crisis on our economy,'' Parry said.<p>The modest second quarter Gross Domestic Product growth rate of around 1-1/2 percent, the lowest in three years, was affected by some temporary factors, he said. Parry cited short-term effects of the General Motors Corp. (<a href="http://quote.yahoo.com/q?s=gm&d=t">GM</a> - <a href="/n/g/gm.html">news</a>) strike and a significant slowdown in inventory building.<p>But ``perhaps more important than the temporary effects of the GM strike and the inventory correction is the behavior of U.S. consumers and business -- they're continuing to spend at a very healthy pace,'' Parry said. ``This suggests there's still plenty of underlying strength in the economy.''  <p><hr align=left width="33%" noshade><table border=0 cellpadding=0><tr valign=top><td width="1%" nowrap><b>More Quotes and News:</b></td><td align=left>General Motors Corp (NYSE:<a href="http://quote.yahoo.com/q?s=gm&d=t">GM</a> - <a href="/n/g/gm.html">news</a>)</td></tr><tr valign=top><td colspan=3><b>Related News Categories:</b> <a href="/reports/world.html">international</a>, <a href="/n/z/z0002.html">options</a>, <a href="/reports/stocks.html">US Market News</a></td></tr></table><hr align=left width="33%" noshade><center><form method=get action="http://search.news.yahoo.com/search/news"><input size=24 name=p> <input type=submit value="Search News"><input type=hidden name=n value=10> <a href="http://www.yahoo.com/docs/info/news_search_help.html"><small>Help</small></a></form><hr><small>Copyright © 1998 Reuters Limited. All rights reserved. Republication or redistribution of Reuters content is expressly prohibited without the prior written consent of Reuters. Reuters shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon<br>See our <a href="http://www.yahoo.com/docs/info/gen_disclaimer.html">Important Disclaimers and Legal Information</a>.<br><a href="/f/bn.html">Questions or Comments?</a></small></center>  </html>