Newspaper article THE JOURNAL RECORD

Basic Money Supply Climbs by $200 Million in Early June

Newspaper article THE JOURNAL RECORD

Basic Money Supply Climbs by $200 Million in Early June

Article excerpt

NEW YORK (AP) - The nation's basic money supply inched up $200 million in early July, the Federal Reserve Board reported Thursday.

Credit analysts had been looking for essentially no growth in the money supply. The tiny rise caused some additional deterioration of prices in the bond markets, which were already sharply lower for the day.

The Fed said its M1 measure of the money supply rose to a seasonally adjusted average of $596.2 billion in the week ended July 8 from $596 billion the previous week. M1 includes cash in circulation, deposits in checking accounts and non-bank travelers checks.

For the latest 13 weeks, M1 averaged $584.5 billion, a 10.9 percent seasonally adjusted annual rate of gain from the previous 13 weeks.

William Sullivan, director of money market research for Dean Witter Reynolds Inc., said the small gain ""may be the start of a trend towards a more moderate pattern of monetary growth which should take the pressure off the Fed to consider tightening its credit policy.''

But Maury Harris, chief economist for PaineWebber Inc., said he didn't think this week's money supply figure would make much difference to the Fed.

""We have new targets and this number is still over target. It doesn't make a great deal of difference at this point,'' he said.

Earlier this week, the Fed announced it had revised both its target for M1 growth this year and the base from which it was measuring it.

The Fed sets targets for money growth on the presumption that excess money growth may lead to higher rates of inflation. It wants to assure sufficient growth in the money supply, however, to enablethe economy to grow steadily.

Under the new targets, the Fed said it would like to see M1 grow between 3 percent and 8 percent from the second quarter through the fourth quarter.

The old targets had been growth of between 4 percent and 7 percent, but the money supply had grown far in excess of those targets.

Dean Witter's Sullivan said that the gain left M1 about $7.1 billion above the revised upper growth target.

In expanding the target range, the Fed also said it would measure growth from the second quarter rather than from the fourth quarter of 1984 as it had previously declared. …

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