[Federal Register Volume 63, Number 232 (Thursday, December 3, 1998)]
[Notices]
[Page 66810]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-32152]
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FEDERAL RESERVE SYSTEM
Federal Open Market Committee; Domestic Policy Directive of
September 29, 1998.
In accordance with Sec. 271.5 of its rules regarding availability
of information (12 CFR part 271), there is set forth below the domestic
policy directive issued by the Federal Open Market Committee at its
meeting held on September 29, 1998.\1\ The directive was issued to the
Federal Reserve Bank of New York as follows:
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\1\ Copies of the Minutes of the Federal Open Market Committee
meeting of September 29, 1998, which include the domestic policy
directive issued at that meeting, are available upon request to the
Board of Governors of the Federal Reserve System, Washington, D.C.
20551. The minutes are published in the Federal Reserve Bulletin and
in the Board's annual report.
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The information reviewed at this meeting suggests that the economy
has been growing at a moderate rate, paced by brisk, albeit slowing,
increases in spending by businesses and households, while expansion in
overall economic activity has continued to be restrained by
developments abroad. Nonfarm payroll employment grew somewhat more
slowly over July and August, mostly reflecting job losses in the
manufacturing sector; the civilian unemployment rate was unchanged at
4.5 percent in August. Industrial production has changed little on
balance over recent months. Total retail sales over July and August
were held down by a sharp contraction in spending for motor vehicles.
Residential sales and construction have remained quite strong in recent
months. Available indicators point to continued growth in business
capital spending, but at a more moderate pace than in the first half of
the year. Business inventory accumulation slowed further in July. The
nominal deficit on U.S. trade in goods and services narrowed slightly
in July from its second-quarter average. Trends in wages and prices
have remained stable in recent months.
Most interest rates have fallen appreciably since the meeting on
August 18, though yields on the bonds of lower-rated firms have
increased and the number of large banks have tightened terms and
standards for making business loans. Broadly similar developments have
occurred in major foreign markets. Share prices in U.S. and global
equity markets have remained volatile and major indexes have declined
considerably further on balance over the intermeeting period. In
foreign exchange markets, the trade-weighted value of the dollar
declined substantially over the intermeeting period in relation to
other major currencies; it was up slightly in terms of an index of the
currencies of the developing countries of Latin America and Asia that
are important trading partners of the United States.
Growth of M2 and M3 strengthened considerably in August and
appeared to have picked up further in September, partly reflecting
shifts of funds by households out of investments in equities and lower-
rated corporate debt. For the year through September, both aggregates
rose at rates well above the Committee's ranges for the year. Expansion
of total domestic nonfinancial debt has moderated somewhat in recent
months after a pickup earlier in the year.
The Federal Open Market Committee seeks monetary and financial
conditions that will foster price stability and promote sustainable
growth in output. In furtherance of these objectives, the Committee
reaffirmed at its meeting on June 30-July 1 the ranges it had
established in February for growth of M2 and M3 of 1 to 5 percent and 2
to 6 percent respectively, measured from the fourth quarter of 1997 to
the fourth quarter of 1998. The range for growth of total domestic
nonfinancial debt was maintained at 3 to 7 percent for the year. For
1999, the Committee agreed on a tentative basis to set the same ranges
for growth of the monetary aggregates and debt, measured from the
fourth quarter of 1998 to the fourth quarter of 1999. The behavior of
the monetary aggregates will continue to be evaluated in the light of
progress toward price level stability, movements in their velocities,
and developments in the economy and financial markets.
In the implementation of policy for the immediate future, the
Committee seeks conditions in reserve markets consistent with
decreasing the federal funds rate to an average of around 5-1/4
percent. In the context of the Committee's long-run objectives for
price stability and sustainable economic growth, and giving careful
consideration to economic, financial, and monetary developments, a
slightly higher federal funds rate might or a somewhat lower federal
funds rate would be acceptable in the intermeeting period. The
contemplated reserve conditions are expected to be consistent with some
moderation in the growth in M2 and M3 over coming months.
By order of the Federal Open Market Committee, November 24,
1998.
Donald L. Kohn,
Secretary, Federal Open Market Committee.
[FR Doc. 98-32152 Filed 12-2-98; 8:45 am]
BILLING CODE 6210-01-F
