Money Supply Soars $2.7 Billion in Week
The nation’s basic money supply surged $2.7 billion in early August, and last month broader money measures grew at clips close to the upper end of growth ranges set by the Federal Reserve Board, the Fed said Thursday.
But the report of the rapid growth produced barely a ripple in the bond market.
“A year ago, these growth rates would have horrified the market,” said John Sebastian, executive vice president and chief economist of Clayton Brown & Associates in Chicago. “But the market knows now that the Fed doesn’t pay much attention to the money supply numbers.”
The basic M1 money measure rose to a seasonally adjusted average of $679.6 billion in the week ended Aug. 4 from $676.9 billion in the prior week.
More comprehensive money tallies, called M2 and M3, grew $28.1 billion and $35.7 billion, respectively, in July, the Fed said.
The money supply is only one guide in a galaxy of data by which the central bank steers credit policy. The Fed’s policy-making arm, called the Federal Open Market Committee, is scheduled to meet Tuesday to set a course for the next few weeks. The group will analyze an array of U.S. and world economic information before making decisions.
For July, M2 rose at an 8.5% clip from the fourth quarter average. M3’s growth rate was 8.3%.
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 M3 this year.
The Fed reports weekly on M1, but information on M2 and M3 comes out only once a month.
In other reports:
- The Federal Reserve Bank of New York reported that commercial and industrial loans on the books of major New York City banks rose $745 million in the week ended Aug. 6, compared to a gain of $182 million in the previous week.
- The Federal Reserve said commercial paper outstanding nationally rose $2.88 billion in the week ended Aug. 6, bringing the total to $318.13 billion. In the previous week, such corporate IOUs fell $111 million.
- The Federal Reserve said bank borrowings from the Federal Reserve System averaged $386 million daily in the two weeks ended July 30, down from $408 million a day in the previous two-week period.
- The Federal Reserve said total adjusted reserves of member banks averaged $50.80 billion in the two weeks ended July 30, down from $50.81 billion in the previous two weeks.
- The Federal Reserve said the nation’s banking system averaged net free reserves of $203 million in the two weeks ended July 30. That compared to free reserves of $699 million for the previous two-week period.
