2 Money Supply Measures Head in Different Directions

The two broadest measures of the nation’s money supply moved in opposite directions in the week ended Aug. 8, the Federal Reserve Board reported Thursday.

The Fed said the measure known as M2 fell to a seasonally adjusted $3,025.5 billion from $3,026.3 billion the previous week.

An even broader measure, M3, increased to a seasonally adjusted $3,824.8 billion from $3,821.8 billion.

The narrowest measure of the money supply, M1, fell to a seasonally adjusted $781.9 billion from $784.2 billion.

M1 includes cash in circulation, deposits in checking accounts and non-bank travelers checks. M2 is M1 plus accounts, such as savings deposits and money market mutual funds. M3 is M2 plus less-liquid accounts, such as certificates of deposit in minimum denominations of $100,000.

In judging its monetary policy, the Fed has indicated that it is monitoring the value of the dollar, commodity prices and the difference between short- and long-term interest rates. It also has shifted its attention from M1 to the two broader money supply measures

For the latest 13 weeks, M2 averaged $3,016.3 billion, a 5.7% seasonally adjusted annual rate of gain from the previous 13 weeks. M3 averaged $3,803.3 billion, up at an annual rate of 5.7%, while M1 rose at an annual rate of 6.3% to an average of $777.2 billion.

The Fed said in mid 1988 that it reaffirmed its target for annual growth in M2 and M3 at between 4% and 8%, which is slightly lower than the 1987 target of 5.5% to 8.5%. The Fed has not set a specific target range for M1 since early 1987.

In other reports:

- The Federal Reserve Bank of New York reported commercial and industrial loans at major New York banks rose $440 million in the week ended Aug. 10, compared to a decline of $77 million a week earlier.

- The Federal Reserve said discount window borrowings by banks from the Federal Reserve System averaged $556 million in the week ended Wednesday, up from $525 million in the previous week.

- The Federal Reserve said net free reserves totaled a revised $223 million in the two weeks ended Aug. 10, down from a revised $610 million in the previous two weeks.

- 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 $280.2 billion in the two-week period ended Wednesday, down from $281.4 billion two weeks earlier.