Money Supply Jumps $8.7 Billion

The nation’s basic money supply jumped $8.7 billion in the third week of December, the Federal Reserve Board reported Monday.

The increase was two to three times the estimate made by most analysts, it but had no immediate effect on credit markets.

The Fed said M1 rose to a seasonally adjusted $731 billion in the week ended Dec. 22 from a revised $722.3 billion the previous week, originally reported as $722.5 billion. M1 includes cash in circulation, deposits in checking accounts and non-bank travelers checks.

For the latest 13 weeks, M1 averaged $710.3 billion, a 15.8% 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.

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

William Sullivan, director of money market research for Dean Witter Reynolds, predicted the increase would be considered to be “without substance, not only in terms of Fed policy but in terms of what it means to underlying growth trends in the monetary aggregate.”

Sullivan said the jump was attributable to the hefty increase in borrowing in December as individuals and businesses sought to complete transactions before the new tax code took effect.