Newspaper article THE JOURNAL RECORD

Basic Money Supply Up

Newspaper article THE JOURNAL RECORD

Basic Money Supply Up

Article excerpt

NEW YORK (AP) - Credit analysts cited Hurricane Gloria for a larger-than-expected $5.3 billion surge in the nation's basic money supply in late September.

The credit markets previously had speculated that the hurricane's sweep through the Northeast two weeks ago might produce an unusually large bulge in the money supply.

As a result, the markets showed little reaction Thursday to the Federal Reserve's late-afternoon release of the monetary data.

The central bank said the basic money supply, called M1, climbed to a seasonally adjusted $615 billion in the week ended Sept. 30 from $609.7 billion the previous week. The gain was about double what many analysts had expected.

M1 represents funds readily available for spending, and includes cash in circulation, checking deposits and non-bank travelers checks.

The latest reading of M1 was a week in which Hurricane Gloria forced many banks and financial markets to shut down on Sept. 27, a Friday.

Normally, over the weekend large companies routinely move their funds out of checking accounts, which are included in M1, and place them in higher-yielding money-market investments, which are not in M1. But the hurricane kept many corporate treasurers and bankers from their offices.

""If they left money parked (in checking accounts) over the weekend, it counted for three days in the weekly calculation of the money supply,'' said Maury N. Harris, chief economist of the investment firm PaineWebber Inc. in New York.

""So it's a plausible explanation, and I think investors were aware of it'' as shown by the credit markets' mild reaction to the M1 data, he said.

For the latest 13 weeks, M1 averaged $604. …

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