Money Supply Slides $1.4 Billion in Week

The nation’s basic money supply tumbled $1.4 billion in late September, the Federal Reserve Board reported Thursday.

The decline was in line with analysts’ expectations, and the report had minimal impact on bond prices or short-term interest rates.

“It was a non-event for the marketplace,” said Raymond Stone, chief financial economist for the investment firm Merrill Lynch Capital Markets.

The Fed said M1 fell to a seasonally adjusted average of $693.6 billion in the week ended Sept. 29 from a revised $695 billion in the previous week. M1 includes cash in circulation, deposits in checking accounts and non-bank travelers checks.

The median estimate of a group of economists surveyed in advance of the report by the research firm Money Market Services of Belmont, Calif., had called for a decline of $1.5 billion in M1 for the latest week.

For the latest 13 weeks, the Fed said M1 averaged $685.5 billion, a 17.2% seasonally adjusted annual rate of gain from the previous 13 weeks.

The central bank, 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.

But it has declined to rein in double-digit growth in M1 and has in fact cut its discount rate, or the interest rate that it charges on loans to financial institutions, four times already this year in an effort to stimulate the economy. The discount rate presently stands at 5.5%.