[Federal Register Volume 60, Number 174 (Friday, September 8, 1995)]
[Notices]
[Page 46836]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-22389]



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FEDERAL RESERVE SYSTEM


Federal Open Market Committee; Domestic Policy Directive of July 
5-6, 1995

    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, 1995.\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 July 5-6, 1995, 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 level of 
economic activity was about unchanged in the second quarter. Nonfarm 
payroll employment fell in April and May after posting reduced gains in 
the first quarter, and the civilian unemployment rate, at 5.7 percent 
in May, was up somewhat from its first-quarter average. Industrial 
production continued to decline in May, reflecting another cutback in 
the production of motor vehicles, and capacity utilization was down 
somewhat further. Total retail sales have been sluggish on average in 
recent months. Housing starts were about unchanged over April and May, 
but sales of new homes turned up sharply in May. Orders for nondefense 
capital goods have moderated somewhat in recent months but still point 
to considerable further expansion of spending on business equipment; 
nonresidential construction has continued to trend appreciably higher. 
The nominal deficit on U.S. trade in goods and services widened in 
April from its average rate in the first quarter. Broad indexes of 
consumer and producer prices have increased faster on average thus far 
this year, though there were signs of some moderation in the most 
recent data; advances in labor compensation costs have remained 
subdued.
    Most interest rates have declined somewhat further since the 
Committee meeting on May 23. In foreign exchange markets, the trade-
weighted value of the dollar in terms of the other G-10 currencies 
declined considerably over the intermeeting period.
    M2 and M3 strengthened substantially in May and June. For the year 
through June, M2 expanded at a rate in the upper half of its range for 
1995 and M3 grew at a rate well above its range. Total domestic 
nonfinancial debt has grown at a rate in the upper half of its 
monitoring range 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 range it had established on January 31-
February 1 for growth of M2 of 1 to 5 percent, measured from the fourth 
quarter of 1994 to the fourth quarter of 1995. The Committee also 
retained the monitoring range of 3 to 7 percent for the year that it 
had set for growth of total domestic nonfinancial debt. The Committee 
raised the 1995 range for M3 to 2 to 6 percent as a technical 
adjustment to take account of changing intermediation patterns. For 
1996, the Committee established on a tentative basis the same ranges as 
in 1995 for growth of the monetary aggregates and debt, measured from 
the fourth quarter of 1995 to the fourth quarter of 1996. 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 decrease slightly 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 might or slightly 
lesser reserve restraint would 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 31, 1995.
Normand R. Bernard,
Deputy Secretary, Federal Open Market Committee.
[FR Doc. 95-22389 Filed 9-7-95; 8:45 am]
BILLING CODE 6210-01-F