[Federal Register Volume 59, Number 229 (Wednesday, November 30, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-29457]


[[Page Unknown]]

[Federal Register: November 30, 1994]


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FEDERAL RESERVE SYSTEM

 

Federal Open Market Committee; Domestic Policy Directive of 
September 27, 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 August 16, 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 September 27, 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 the pace of 
economic expansion, though perhaps moderating slightly in recent 
months, remains substantial. Nonfarm payroll employment advanced 
appreciably further in August, and the civilian unemployment rate was 
unchanged at 6.1 percent. Reflecting strength in motor vehicles, 
industrial production rose sharply in August after posting sizable 
gains in other recent months, and capacity utilization moved up further 
from already high levels. Retail sales were up considerably in August, 
boosted by a rebound in sales of durable goods, including motor 
vehicles. Housing starts rose in August but were unchanged from their 
second-quarter level. Orders for nondefense capital goods point to a 
continued strong expansion in spending on business equipment; permits 
for non residential construction remain on a mild uptrend. Inventory 
accumulation appears to have moderated recently after surging in the 
second quarter. The nominal deficit on U.S. trade in goods and services 
widened in July from its second-quarter average. Prices of materials 
have remained under upward pressure, and increases in broad indexes of 
consumer and producer prices have been somewhat larger in recent 
months.
    On August 16, 1994, the Board of Governors approved an increase in 
the discount rate from 3-1/2 to 4 percent, and Committee agreed that 
this increase would be allowed to show through completely to interest 
rates in reserve markets. Most market interest rates are up somewhat on 
balance since the August meeting. The trade-weighted value of the 
dollar in terms of the other G-10 currencies depreciated somewhat over 
the intermeeting period.
    M2 and M3 declined in August after expanding moderately in July; 
for the year through August, M2 and M3 grew at rates slightly above 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 at 
its meeting in July reaffirmed 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, 
somewhat 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 the balance of the year.

    By order of the Federal Open Market Committee, November 23, 
1994.
Donald L. Kohn,
Secretary, Federal Open Market Committee.
[FR Doc. 94-29457 Filed 11-29-94; 8:45 am]
BILLING CODE 6210-01-F