Banks eased U.S. credit standards somewhat over the last three months and reported stronger demand for loans and residential mortgages, according to the Federal Reserve's latest quarterly Senior Loan Officer Survey, which was released on Monday.

The January report, based on responses from 68 domestic banks and 22 U.S. branches of foreign firms, also asked if domestic banks had tightened lending standards to European competitors, but found that only 10 percent had done so.

Signs of improved access to lending and stronger demand for debt would chime with more upbeat U.S. economic data on consumer and business spending, and brighter news from the nation's battered housing market.

But U.S. officials have been frustrated by the difficulty experienced by some households and businesses in obtaining credit, despite ample bank liquidity and overnight interest rates that the Fed has held near zero since late 2008.

"Modest fractions of domestic banks reported having eased their standards across major loan categories over the past three months on net," the Fed said. "Domestic respondents indicated that demand for business loans, prime residential mortgages, and auto loans had strengthened."

The Fed has flooded the economy with money via three rounds of bond purchases, tripling its balance sheet to almost $3 trillion since 2008. But growth remains fragile and U.S. gross domestic product actually shrank slightly in the fourth quarter of last year.

NO CLIFF DIVING

"These latest figures were consistent with continued growth in the economy but did not signal a significant pickup in lending activity," JP Morgan economist Daniel Silver wrote in a note to clients, adding that the survey also showed no impact from the so-called U.S. fiscal cliff.

Businesses and households might have curbed spending because of uncertainty over year-end tax hikes and spending cuts. But the worst of the 'cliff' effect appears to have been deflected after a last-minute deal to raise taxes on wealthier Americans while preserving cuts for everyone else.

On the other hand, $85 billion in automatic spending cuts were merely postponed to March 1 to win time for a broader budget deal. Economists worry U.S. lawmakers will not narrow their differences in time to spare the economy these 'sequesters'.

Commercial loan standards were eased almost entirely because of greater competition for business, the Fed said, while stronger demand was driven by customer investment in plant or equipment, and the need for finance related to mergers and acquisitions.

Credit standards for residential mortgages had not changed, but demand was higher, according to the survey, as was demand for car loans. U.S. auto sales rose 14 percent in January, according to data released last week.

In addition to its regular assessment of lending conditions, the Fed also asked survey participants three specific questions, including queries about commercial real estate, or CRE, and the outlook for credit quality.

"Respondents indicated that they had eased selected CRE loan terms over the past 12 months," the Fed said, adding that "moderate to large fractions of banks expect improvements in credit quality in most major loan categories."

It also asked about lending to European banks. In addition to revealing that only a small portion of domestic banks had tightened loan standards to European counterparties, most also said they experienced a drop in competition from this source.

Europe has been battered by a prolonged sovereign debt crisis, although strains have eased somewhat following policy responses last year led by the European Central Bank.