[Federal Register Volume 60, Number 28 (Friday, February 10, 1995)]
[Notices]
[Pages 7969-7970]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-3337]



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FEDERAL RESERVE SYSTEM


Federal Open Market Committee; Domestic Policy Directive of 
December 20, 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 December 20, 1994.\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 December 20, 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 a further pickup 
in economic growth in recent months. Nonfarm payroll employment rose 
sharply in November, and the civilian unemployment rate declined to 5.6 
percent. Industrial production registered another large increase in 
November and capacity utilization moved up further from already high 
levels. Retail sales have continued to rise rapidly. Housing starts 
increased appreciably in November. Orders for nondefense capital goods 
point to a continued strong expansion in spending on business 
equipment; permits for nonresidential construction have been trending 
higher. The nominal deficit on U.S. trade in goods and services widened 
somewhat in October from its average rate in the third quarter. Prices 
of many materials have continued to move up rapidly, but broad indexes 
of prices for consumer goods and services have increased moderately on 
average over recent months.
    On November 15, 1994, the Board of Governors approved an increase 
from 4 to 4-3/4 percent in the discount rate, and in line with the 
Committee's decision the increase was allowed to show through fully to 
interest rates in reserve markets. In the period since the November 
meeting, short-term interest rates have risen considerably while long-
term rates have declined slightly. The trade-weighted value of the 
dollar in terms of the other G-10 currencies recovered further over the 
intermeeting period.
    Growth of M2 resumed in November after several months of decline, 
while M3 expanded moderately further. For the year through November, M2 
grew at a rate at the bottom of the Committee's range for 1994 and M3 
at a rate in the lower half of its range for the year. Total domestic 
nonfinancial debt has continued to expand at a moderate rate in recent 
months and for the year-to-date it has grown at a rate in the lower 
half of its monitoring range.
    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 [[Page 7970]] 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, February 6, 1995.
Donald L. Kohn,
Secretary, Federal Open Market Committee.
[FR Doc. 95-3337 Filed 2-9-95; 8:45 am]
BILLING CODE 6210-01-F