The nation’s basic money supply rose $900 million in late March, the Federal Reserve Board reported Thursday.
The increase was slightly more than market watchers expected, but the report had little effect on credit markets.
The Fed said M1 rose to a seasonally adjusted $640.1 billion in the week ended March 31 from a revised $639.2 billion in the previous week. M1 includes cash in circulation, deposits in checking accounts and non-bank travelers checks. Last week’s figure was originally reported as $639.3 billion.
For the latest 13 weeks, M1 averaged $632.3 billion, a 7.9% seasonally adjusted annual rate of gain from the previous 13 weeks.
Within Fed Target
The Fed, in its attempt to provide enough money to stimulate non-inflationary economic growth, has said it would like to see M1 grow in a range of 3% to 8% from the fourth quarter of 1985 through the final quarter of 1986.
The Fed also said M2 rose $13.6 billion in March to $2.5899 trillion, or an annual rate of 4.5%, while M3 rose $18 billion to $3.2586 trillion, or an annual rate of 7.2%.
M2 is made up of M1 and such accounts as savings deposits and money-market mutual funds. M3 is the sum of M2 plus less-liquid accounts such as certificates of deposit in minimum denominations of $100,000.
The Fed has said it would like growth of 6% to 9% for M2 and 6% to 9.5% for M3.
“Looking at M1 doesn’t tell you anything,” said Ray Stone, manager of financial economics at Merrill Lynch Capital Markets. “It has expanded in general in March at a fairly rapid pace, mainly due to a speedier processing of income tax refunds than last year.”
William Sullivan, a money-market analyst at Dean Witter, said Thursday’s M1 figure “takes no one by surprise,” but he said Dean Witter had been expecting a larger rise of $16 billion for M2, which “remains well below the Fed’s annual growth target.
“So long as M2 remains subdued, the excessive growth in M1 will be ignored by the Fed,” he said. “That means no pressure on the Fed to tighten up on reserves availability because of excessive M1 growth.”
Predicted No Change
On Tuesday, the median prediction of 42 analysts polled by Money Market Services, an economic research firm based in Belmont, Calif., was that the latest money supply figure would be unchanged.
In other reports:
- The Federal Reserve Bank of New York reported that commercial and industrial loans at major New York City banks rose $1.373 billion in the week ended April 2, compared to a decline of $709 million a week earlier.
- The Federal Reserve said bank borrowings from the Federal Reserve System averaged $298 million, up from $234 million.
- The Federal Reserve said total adjusted reserves of member banks averaged $46.695 billion, up from $46.578 billion a week earlier.
- The Federal Reserve said free reserves totaled $323 million, down from $761 million a week earlier.
- 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 $240.2 billion in the two weeks ended Wednesday, up from a revised figure of $239.3 billion on March 26.