Money Supply Gain Less Than Expected
The nation’s basic money supply, known as M1 and representing funds readily available for spending, increased $800 million in early June, the Federal Reserve Board reported Thursday, continuing to exceed growth limits set by the central bank.
But long-term interest rates fell after the release of the report, which cheered investors because the rise in M1 was not as sharp as had been predicted and because another Fed report said that funds had become more plentiful in the banking system. In addition, two broader money supply measures, known as M2 and M3, remained within the Fed’s growth limits.
The Fed said M1 climbed to a seasonally adjusted $585.6 billion in the week ended June 3 from a revised $584.8 billion the previous week. The previous week’s figure originally was reported as $584.9 billion.
The Fed said that, during May, M1 averaged a seasonally adjusted $581.5 billion, against $575 billion in April. M2 climbed to an average $2.4442 trillion last month from $2.4276 trillion in April, and M3 increased to $3.0774 trillion from $3.0574 trillion.
M1 is reported weekly, and the broader money supply measures are reported monthly.
M2 includes M1 and less liquid deposits such as savings accounts and money-market mutual funds. M3 includes M2 and such things as 90-day certificates of deposit in denominations of $100,000 and up.
For the latest 13 weeks, M1 averaged $576.7 billion, a 9% seasonally adjusted annual rate of gain from the previous 13 weeks.
The Fed has said it would like to see M1 grow between 4% and 7% from the fourth quarter of 1984 through the fourth quarter of 1985.