M1 Falls $1 Billion, in Line With Analysts’ Forecasts
The nation’s basic money supply dipped $1 billion in mid-November, the Federal Reserve Board reported Friday.
Coupled with a revision in the previous week’s report, the decline matched most analysts’ expectations.
Most bond trading had ended in advance of the release of the report at 4:30 p.m. EST, but trading had been very light anyway as many bond dealers extended Thursday’s Thanksgiving holiday.
William A. Sullivan Jr., director of money market research for the investment firm Dean Witter Reynolds Inc., said he expected the latest money figures to have no influence when trading resumes Monday.
The money supply report, normally released on Thursday, was delayed until Friday because of Thanksgiving.
The Fed said the measure of basic money supply, known as M1, fell to a seasonally adjusted $712.3 billion in the week ended Nov. 17 from a revised $713.3 billion in the previous week. The figure for the week ending Nov. 10 had been reported last week as $712.8 billion. M1 includes cash in circulation, deposits in checking accounts and non-bank traveler’s checks.
For the latest 13 weeks, M1 averaged $699 billion, a 15.5% seasonally adjusted annual rate of gain from the previous 13 weeks and a 14% rate of expansion from a year ago.
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.
The central bank set the goals in its effort to assure steady economic growth without inflation.
The economy has been sluggish for months and inflation has failed to reappear despite above-target growth in M1. That has led many analysts to conclude that the Fed is more intent on following growth in broader measures of money than M1 and will tolerate rapid M1 growth.
Other analysts, however, argue that rapid M1 growth could be foreshadowing inflation months from now.
In other reports:
- The Federal Reserve Bank of New York reported that commercial and industrial loans at major New York City banks rose $288 million in the week ended Nov. 19, compared to a gain of $257 million a week earlier.
- The Federal Reserve said commercial and industrial loans at the nation’s large banks rose $315 million in the week, compared to a gain of $1.01 billion in the previous week.
- The Federal Reserve said bank borrowings from the Federal Reserve System averaged $213 million in the week ended Wednesday, down from $644 million in the previous week.
