The nation's basic money supply spurted $6.7 billion in mid-December, the Federal Reserve Board said Friday, a somewhat larger-than-expected increase but one that still left M1 in the middle of the Fed's annual target range.
The bond market retreated sharply after the report was released but later recovered most of its lost ground.
"It's really not such a big deal," said Maury Harris, an economist with the investment firm of Paine Webber Inc.
The Fed said M1 rose to a seasonally adjusted $557.6 billion in the week ended Dec. 24 from $550.9 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 $548.8 billion, a 1.4% seasonally adjusted annual rate of gain from the previous 13 weeks.
"The money supply was up more than people expected," Harris said, adding that analysts had been predicting an increase of $4 billion to $5 billion.
But, he said, "The reason the market shouldn't react too much is that we expected it to go up anyway."
The latest increase in the money supply leaves it $11.3 billion above the lower end of the Fed's target range and $11.6 billion below the upper end. The money supply has grown at an annual rate of 6% so far this year.
The Fed has said it would like to see M1 grow between 4% and 8% from the fourth quarter of 1983 through the fourth quarter of 1984.
"It was near the bottom of the target range. This brings it up to the middle--not really a cause for alarm," Harris said.