Basic Money Supply Up $1 Billion; Broader Measures Score Bigger Gains
Apr. 16, 1987
NEW YORK (AP) _ The nation's basic money supply rose $1 billion in early April, the Federal Reserve Board said Thursday.
The central bank also reported growth in two broader money measures for the month of March, but the increases left both figures below the lower targets that the Fed has set to facilitate steady, noninflationary economic growth.
The prices of some longer-term Treasury bonds, which were up for the day before the 4:30 p.m. EDT release of the report, extended their gains afterwards. Short-term interest rates were unaffected by the report.
One credit-market analyst said the broader money figures would discourage the central bank from trying to boost interest rates.
There has been speculation that the United States would follow that course to help stabilize the dollar, which has been battered on foreign exchange markets.
The Fed said its M1 measure of the money supply rose to a seasonally adjusted $739.8 billion in the week ended April 6 from $738.8 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 $739.9 billion, a 10.4 percent seasonally adjusted annual rate of gain from the previous 13 weeks.
The Fed has not set a specific 1987 target range for M1. As a result, those who follow the credit markets have paid closer attention to monthly movements in the broader measurements of the money supply known as M2 and M3.
The central bank reported $4.1 billion rise in the month of March in M2, which is made up of M1 and such accounts as savings deposits and money-market mutual funds. That left it at $2.826 trillion.
The Fed reported a $5.5 billion rise in M3, which is the sum of M2 plus less-liquid accounts, such as certificates of deposit in minimum denominations of $100,000. That left it at $3.526 trillion.
The Fed said it would like growth of 5.5 percent to 8.5 percent for M2 and and for M3, but the latest report showed M2 has grown at a 5.1 percent rate in the first quarter of the year while M3 is up at about a 5.4 percent rate.
William V. Sullivan Jr., director of money market research at the investment firm Dean Witter Reynolds Inc., said the two money measures have grown more slowly in each of the past three months than the Fed would prefer.
''This could be signalling some problems for the economy down the road,'' he said. ''And against that backdrop the Fed is unlikely to take any major risks with the economy by tightening in a significant fashion at this time.''
He said he detected no reaction in the credit markets to the report. But prices of some long-term Treasury issues, up 1/8 point at 4 p.m. EDT, were up 5/8 point 30 minutes after the money supply report was released.
In other reports:
-The Federal Reserve Bank of New York reported commercial and industrial loans at major New York City banks fell $330 million in the week ended April 8, compared with a decline of $1.31 billion the previous week.
-The Federal Reserve said discount window borrowings from the Federal Reserve System averaged $443 million a day in the week ended Wenesday, up from $361 million in the previous week.
-The Federal Reserve Bank of St. Louis reported that the monetary base, the seasonally adjusted total of member bank reserves held at Federal Reserve banks and cash in bank vaults and in circulation, was $261.1 billion in the two-week period ended Wednesday, up from $260.0 billion two weeks earlier.