U.S. Money Supply Climbs $5.4 Billion During Early April

The nation’s basic money supply surged $5.4 billion in early April, the Federal Reserve Board reported Thursday.

The Fed said M1, which represents funds readily available for spending, rose to a seasonally adjusted $645.7 billion in the week ended April 7 from a revised $640.3 billion the previous week. The previous week’s figure originally was estimated at $640.1 billion.

The report had little impact on the credit markets, where analysts attributed the large increase partly to seasonal factors and noted that the Fed had lessened the importance of M1 in setting its monetary policy. M1 includes cash in circulation, deposits in checking accounts and non-bank travelers checks.

The increase during the latest reporting period left M1 well above the upper limit of the range set by the Fed in its attempt to provide enough money to stimulate non-inflationary economic growth. But economists noted that rather than placing a lot of emphasis on M1 in setting monetary policy, the Fed preferred to rely on the broader aggregates known as M2 and M3.

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.

Economists also noted that M1 usually surges in early April as consumers place more money in checking accounts to make contributions to individual retirement accounts or to make state and federal tax payments before the April 15 deadline.

For the latest 13 weeks, M1 averaged $633.6 billion, a 7.9% seasonally adjusted annual rate of gain from the previous 13 weeks. The Fed 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.

In other reports:

- The Federal Reserve Bank of New York reported that commercial and industrial loans at major New York City banks fell $1.01 billion in the week ended April 9, compared to a gain of $1.376 billion a week earlier.

- The Federal Reserve said bank borrowings from the Federal Reserve System averaged $83 million in the week ended Wednesday, down from $373 million in the previous week. Borrowing from the Fed averaged $298 million in the two weeks ended April 9, compared to $234 million in the previous two-week period.