NEW YORK — The nation's basic money supply declined by $600 million in the middle of the month, the Federal Reserve Board reported Friday, but the overall amount still exceeds the government's targets.
The Fed said the measure of money readily available for spending, known as M1, dropped to a seasonally adjusted $622.6 billion in the week ended Dec. 16 from $623.2 billion in the previous week. The previous week's figure originally was reported as $623.0 billion.
M1 includes cash in circulation, deposits in checking accounts and non-bank travelers checks.
For the latest 13 weeks, M1 averaged $623.3 billion, a 9.3% seasonally adjusted annual rate of gain from the previous 13 weeks.
The Fed has said it would like to see M1 grow between 3% and 8% from the second quarter of this year through the fourth quarter.
Interpretations at Variance
A rapid growth in the money supply is seen by some economists as a sign of impending high inflation, but others contend it has little impact.
The decline was consistent with economic forecasters' expectations, but the amount of change was so small that analysts were hesitant to offer a specific reason for it. Ray Stone, manager of financial economics for Merrill Lynch Capital Markets in New York, called the decrease "not a big deal."
Some analysts were more interested in other figures released by the Fed, primarily one showing that borrowing from the Federal Reserve system averaged $317 million in the two weeks ended Dec. 18, compared to $2.425 billion in the previous two-week period.
"I would say somewhat lower borrowing numbers seem to indicate that the Fed is aggressive in providing reserves to push down the federal funds rate," said Maria Ramirez of Drexel Burnham Lambert, a New York brokerage.
The federal funds rate, the interest on overnight loans between banks, is scrutinized because it strongly influences other interest rates. It stood at 7.5% late Friday, compared to 7.813% on Thursday.
Other Monetary Reports
Analysts also watch the rate for clues to possible changes in Fed policy. In other reports:
- The Federal Reserve Bank of New York reported that commercial and industrial loans at major New York City banks fell $308 million in the week ended Dec. 18, compared to a decline of $998 million a week earlier, bringing the total to $58.39 billion.
- The Federal Reserve said total adjusted reserves of member banks averaged $44.727 billion in the two weeks ended Dec. 18, up from $45.042 billion in the previous two-week period.
- The Federal Reserve said net borrowed reserves totaled $450 million in the week ended Wednesday, down from $471 million in the previous week.
- 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 $235.1 billion in the week ended Wednesday, up from $234.3 billion a week earlier.