[Federal Register Volume 59, Number 165 (Friday, August 26, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-21071]
[[Page Unknown]]
[Federal Register: August 26, 1994]
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FEDERAL RESERVE SYSTEM
Federal Open Market Committee; Domestic Policy Directive of July
5-6, 1994
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 July 5-6, 1994.\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 July 5-6, 1994, 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 economic
activity recorded another substantial gain in the second quarter,
causing levels of resource utilization to rise further. Increases in
nonfarm payroll employment have been relatively large on average in
recent months; the civilian unemployment rate is reported to have
declined to 6.0 percent in May. The rise in industrial production
slackened in April and May, primarily because capacity constraints
prevented normal seasonal increases in the production of motor
vehicles. Growth in consumer spending has slowed in recent months after
very large increases in February and March. Housing starts have
rebounded from winter disruptions to a pace close to the elevated
fourth-quarter level. Orders for nondefense capital goods point to a
continued strong uptrend in spending on business equipment, while
nonresidential construction has recovered from a weather-depressed
level in the first quarter. The nominal deficit on U.S. trade in goods
and services was larger in April than in March but about unchanged from
the average for the first quarter. Increases in broad indexes of
consumer and producer prices have remained moderate in recent months,
though prices of many basic industrial materials have risen.
On May 17, 1994, the Board of Governors approved an increase in the
discount rate from 3 to 3-1/2 percent. Most market interest rates were
up slightly on balance since the May meeting; declines in bond yields
early in the intermeeting period were offset later by market reactions
to a weakening dollar in foreign exchange markets and rising commodity
prices. The trade-weighted value of the dollar in terms of the other G-
10 currencies was down significantly further on balance over the
intermeeting period, reflecting a sizable drop since early June.
M2 and M3 declined on average over May and June; for the year
through June, both M2 and M3 are at the bottom of their ranges for
1994. Total domestic nonfinancial debt has continued to expand at a
moderate rate in recent months.
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 this meeting the ranges it had established in February
for growth of M2 and M3 of 1 to 5 percent and 0 to 4 percent
respectively, measured from the fourth quarter of 1993 to the fourth
quarter of 1994. The Committee anticipated that developments
contributing to unusual velocity increases could persist during the
year and that money growth within these ranges would be consistent with
its broad policy objectives. The monitoring range for growth of total
domestic nonfinancial debt was maintained at 4 to 8 percent for the
year. For 1995, the Committee agreed on tentative ranges for monetary
growth, measured from the fourth quarter of 1994 to the fourth quarter
of 1995, of 1 to 5 percent for M2 and 0 to 4 percent for M3. The
Committee provisionally set the associated monitoring range for growth
of domestic nonfinancial debt at 3 to 7 percent for 1995. 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 to maintain the existing degree of pressure on reserve
positions. 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,
slightly greater reserve restraint would or slightly lesser reserve
restraint might be acceptable in the intermeeting period. The
contemplated reserve conditions are expected to be consistent with
modest growth in M2 and M3 over coming months.
By order of the Federal Open Market Committee, August 22, 1994.
Normand Bernard,
Deputy Secretary, Federal Open Market Committee.
[FR Doc. 94-21071 Filed 8-25-94; 8:45 am]
BILLING CODE 6210-01-F
