M1 Goes $3 Billion Above Fed Target : Money Supply Climbs $1.4 Billion

The nation’s basic money supply rose $1.4 billion in early February, the Federal Reserve Board reported Thursday.

The increase, though smaller than many analysts surveyed in advance of the report had expected, still left the Fed’s M1 measure of the money supply about $3 billion more than its upper target for growth for the year. The report prompted little reaction in the credit markets.

The Fed said M1 rose to a seasonally adjusted $565 billion in the week ended Feb. 4 from a revised $563.6 billion the previous week. The money supply figure had initially been reported at $559.6 billion.

M1 includes cash in circulation, deposits in checking-type accounts at banking institutions and non-bank travelers checks.

Complicating interpretations of the latest report were the Fed’s annual revisions in previously reported money supply figures. As a result of those revisions, it said the M1 measure of the money supply had grown 5.2% in 1984 rather than 5% as had been reported earlier.

“Despite the revisions, we are still looking at a three-month growth rate which is relatively strong,” said Maury Harris, chief economist for Paine Webber Inc. “The recent trend in monetary growth has not changed that much.”

He said M1 has grown at a 10.6% clip over the past three months, which exceeds the growth-rate targets of 4% to 7% that the Fed would like to see in M1 between the fourth quarter of 1984 and the fourth quarter of 1985. The targets were designed to assure steady economic growth without resurgent inflation.

For the latest four weeks, M1 averaged $563.1 billion, a 6.8% seasonally adjusted annual rate of gain from 13 weeks earlier.

The Fed also released figures for two broader money supply measures, M2 and M3. M1 is reported weekly, while M2 and M3 are reported monthly.

M2, which includes M1 and deposits such as money-market mutual funds and bank savings accounts, rose to a seasonally adjusted $2.4004 trillion in January from a revised $2.3716 trillion in December.

M3, which includes M2 and large, long-term accounts such as bank certificates of deposit in denominations of at least $100,000, averaged $3.0283 trillion in January, compared to $2.9961 trillion in December.

The Fed has set growth targets of between 6% to 8.5% for M2 and 6% to 9% for M3 for this year.

The new figures say M2 grew 7.7% in 1984, up from the 7.5% estimated earlier, while M3 grew about 10.5%, up from the 9.9% previously reported.