[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