Money Supply Climbs $2.8 Billion in Week

Associated Press

The nation’s basic money supply rose by $2.8 billion in mid-May, the Federal Reserve Board reported Thursday, more than double what many market watchers had expected.

The gain intensified a decline in the bond market, already depressed because of government reports that suggested that economic growth is strengthening and interest rates may rise.

The Fed said M1 rose to a seasonally adjusted $658.9 billion in the week ended May 19 from $656.1 billion in the previous week. M1 includes cash in circulation, deposits in checking accounts and non-bank travelers checks.


For the latest 13 weeks, M1 averaged $644.1 billion, a 10.8% seasonally adjusted annual rate of gain from the previous 13 weeks.

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.

Analysts said the unexpectedly large figure, and a general expansion in the money supply over the past several months, could eventually contribute to a Fed decision to push interest rates higher.

In other reports:

- The Federal Reserve Bank of New York reported that commercial and industrial loans at major New York City banks fell $1.497 billion in the week ended May 21, compared to a gain of $4 million a week earlier.

- The Federal Reserve said bank borrowings from the Federal Reserve System averaged $256 million in the two-week maintenance period ended May 21, down from $344 million in the previous two-week period.

- The Federal Reserve said total adjusted reserves of member banks averaged $48.397 billion in the two weeks, up from $48.083 billion in the previous two-week period.

- 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 $241.8 billion in the two-week period ended Wednesday, down from $241.9 billion two weeks earlier.