Money Supply Off Unexpected $4.4 Billion

The nation’s basic money supply dropped $4.4 billion in mid-April, the Federal Reserve Board reported Thursday.

Although the magnitude of the decline exceeded the prediction of many analysts, the report on the money measure known as M1 stirred little interest in the credit markets.

Interest rates and bond prices--which move in opposite directions--hardly budged in response to the Fed’s announcement on M1.

The week-to-week behavior of M1 no longer holds much fascination for the markets because Fed policy-makers are paying more attention to broad economic trends and the dollar than to M1 in forming credit strategy, analysts said.

“The Fed hasn’t been emphasizing M1, so the market has learned not to emphasize it either,” said Raymond W. Stone, chief financial economist for Merrill Lynch Capital Markets.

Near Top of Target Range

In the week ended April 14, M1 fell to a seasonally adjusted $641.5 billion from a revised $645.9 billion in the previous week. The Fed originally estimated that M1 averaged $645.7 billion in the week ended April 7. M1 includes cash in bank vaults and in circulation, deposits in checking accounts and non-bank travelers checks.

For the latest 13 weeks, M1 averaged $634.7 billion, a 7.8% seasonally adjusted annual rate of gain from the previous 13 weeks.

The latest decrease brought M1 closer to the upper limit of the growth range established by the Fed.

In other reports:

- The Federal Reserve Bank of New York reported that commercial and industrial loans at major New York City banks rose $1.06 billion in the week ended April 14, compared to a decline of $1.01 billion 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 $239.8 billion in the two-week period ended Wednesday, down from $240 billion two weeks earlier.