Money Supply Falls $4.8 Billion

The nation’s basic money supply tumbled $4.8 billion in mid-July, the Federal Reserve Board reported Thursday.

The decline was about twice as large as many credit analysts had expected, and it brought money supply growth more closely in line with the targets set by the Fed to assure steady, non-inflationary economic growth.

The report also erased any lingering fears that the Fed would have to tighten its credit policy and drive up interest rates, analysts said, but it caused little reaction in the bond markets.

11.1% Growth Rate

The Fed said its basic measure of the money supply, called M1 and including cash, checking deposits and non-bank travelers checks, fell to a seasonally adjusted average of $591.6 billion in the week ended July 15 from a revised $596.4 billion in the previous week. The previous week’s figure was revised upward by $200 million.

For the latest 13 weeks, M1 averaged $585.9 billion, an 11.1% seasonally adjusted annual rate of gain from the previous 13 weeks.

The Fed has said it would like to see M1 grow between 3% and 8% from the second quarter of this year through the fourth quarter.

Earlier, Money Market Services, a research concern in Belmont, Calif., said its survey of 39 economists called for a decline of $2 billion, although individual estimates ranged from a gain of $500 million to a decline of $4 billion.

Other figures released included:

- Commercial and industrial loans on the books of leading New York banks fell $509 million in the week ended July 17, compared to a decline of $511 million in the previous week, the Federal Reserve Bank of New York said.

- Commercial paper outstanding nationally rose $2.402 billion in the week ended July 17, following a $1.958-billion increase in the previous week.

- Paper issued by financial companies rose $1.863 billion in the latest week, while paper issued by non-financial companies was up $539 million.

- The federal funds rate, the interest rate on short-term loans between banks, averaged 7.88% in the week ended Wednesday, up from 7.77% 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 $227.5 billion, down from $228.6 billion a week earlier.