M1 Rises $1.6 Billion in Mid-Month, Fed Says

The nation’s basic money supply rose $1.6 billion in mid-December, the Federal Reserve Board reported Monday.

The increase was in line with most analysts’ expectations, and the report had no impact in the credit markets, where bond prices were sharply lower for the day.

The money supply figures are normally released on Thursdays, but the latest report was delayed from last week because of the four-day Christmas holiday.

The Fed said M1 rose to a seasonally adjusted $722.5 billion in the week ended Dec. 15 from a revised $720.9 billion the previous week, originally reported as $720.7 billion.

M1 includes cash in circulation, deposits in checking accounts and non-bank travelers checks.

For the latest 13 weeks, M1 averaged $707.4 billion, a 15.4% seasonally adjusted annual rate of gain from the previous 13 weeks.

The central bank tries to provide enough money to allow the economy to grow steadily but without excessive inflation.

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.

But M1 has consistently exceeded that growth target over the past year without prompting the central bank’s policy-makers to tighten credit conditions.

Most economists believe the Fed is watching broader money measures on which the central bank reports only once a month in shaping its credit policy.

In November, those broader measures fell within the Fed’s growth targets.

William Sullivan, director of money-market research at Dean Witter Reynolds Inc., said the latest figures “suggest another strong month of M1 growth in December” but that “moderate growth is in store for the broader aggregates.”

“These M1 developments can be ignored by the Fed, and I’m sure they will be,” he said.

In other reports:

- Commercial and industrial loans on the books of the nation’s large banks rose $2.91 billion in the week ended Dec. 17, compared to a decline of $112 million the previous week, the Federal Reserve Board said.

- The Federal Reserve Bank of New York reported that commercial and industrial loans at major New York City banks rose $498 million in the week, compared to a decline of $392 million a week earlier.

- The Federal Reserve Bank said borrowings from the Federal Reserve System averaged $263 million in the week ended Dec. 24, down from $330 million the previous week.

- 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 $254.0 billion in the two-week period ended Wednesday, down from $254.9 billion two weeks earlier.

- The Federal Reserve Board revised upward by $500 million its M2 figure for November. The figure, a broader measure of the money supply, earlier reported as $2,780.1 billion, was revised to $2,780.6 billion. There also was a downward revision of $300 million in the M3 figure for November. The M3 figure, which includes M2 plus time deposits over $100,000 and term repurchase agreements, was originally reported as $3,460.6 billion. It was revised to $3,460.3.