[Federal Register Volume 63, Number 171 (Thursday, September 3, 1998)]
[Notices]
[Page 47025]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-23747]
=======================================================================
-----------------------------------------------------------------------
FEDERAL RESERVE SYSTEM
Federal Open Market Committee; Domestic Policy Directive of June
30-July 1, 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 June 30-July 1, 1998.\1\ The directive was issued to
the Federal Reserve Bank of New York as follows:
---------------------------------------------------------------------------
\1\ Copies of the Minutes of the Federal Open Market Committee
meeting of June 30-July 1, 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.
---------------------------------------------------------------------------
The information reviewed at this meeting suggests that the
expansion in economic activity has slowed considerably after a very
rapid advance in the first quarter. Nonfarm payroll employment
registered another substantial increase in May, and the civilian
unemployment rate was unchanged at 4.3 percent. Industrial output
picked up in recent months after weakening early this year; however, a
strike at General Motors likely depressed output substantially in June.
Although retail sales posted large gains in April and May, overall
consumer spending appears to have grown less rapidly in the second
quarter than in the first. Residential sales have remained
exceptionally strong, but housing starts and building permits slipped
back in the spring, on a seasonally adjusted basis, from a sharply
increased first-quarter level. Available indicators suggest that growth
of business fixed investment also is slowing after a surge earlier in
the year. Business inventory accumulation appears to have moderated in
April from an extraordinarily rapid rate in the first quarter. The
nominal deficit on U.S. trade in goods and services continued to widen
in April. Developments in the food and energy sectors contributed to a
slightly faster advance in consumer prices in May.
Most short -term interest rates have changed little since the
meeting on May 19, but longer-term rates have declined somewhat. Share
prices in U.S. equity markets remained volatile and changes in major
indexes were mixed on balance over the intermeeting period. In foreign
exchange markets, the trade-weighted value of the dollar rose sharply
through mid-June in terms of other major currencies, declined more
recently, but is up somewhat on net since the May meeting; the
fluctuations in the average value of the dollar in terms of these major
currencies were largely related to movements against the Japanese yen.
The dollar has risen further against the currencies of key emerging
market economies, particularly some of those in Asia.
Growth of M2 and M3 slowed in the second quarter, but remained
fairly robust. For the year through June, both aggregates rose at rates
well above the Committee's ranges for the year. Expansion of total
domestic nonfinancial debt appears to have moderated somewhat 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 this meeting 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 tentative ranges for monetary growth, measured from
the fourth quarter of 1998 to the fourth quarter of 1999, of 1 to 5
percent for M2 and 2 to 6 percent for M3. The Committee provisionally
set the associated range for growth of total domestic nonfinancial debt
at 3 to 7 percent for 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
maintaining the federal funds rate at an average of around 5-1/2
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
somewhat higher federal funds rate would or a slightly lower federal
funds rate might be acceptable in the intermeeting period. The
contemplated reserve conditions are expected to be consistent with
moderate growth in M2 and M3 over coming months.
By order of the Federal Open Market Committee, August 21, 1998.
Donald L. Kohn,
Secretary, Federal Open Market Committee.
[FR Doc. 98-23747 Filed 9-2-98; 8:45 am]
BILLING CODE 6210-01-F
