[Federal Register Volume 60, Number 196 (Wednesday, October 11, 1995)]
[Notices]
[Page 52915]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-25185]



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FEDERAL RESERVE SYSTEM

Federal Open Market Committee; Domestic Policy Directive of August 
22, 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 August 22, 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 August 22, 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 a strengthening 
in the expansion of economic activity in the current quarter from the 
weak second-quarter pace. Nonfarm payroll employment increased in June 
and July after declining in May; the advance was held down by 
continuing employment losses in manufacturing. The civilian 
unemployment rate in July was at its second-quarter average of 5.7 
percent. Industrial production changed little in recent months after 
falling earlier while capacity utilization was down somewhat further. 
Total retail sales have risen appreciably on balance since early 
spring, but they edged down in July, reflecting weakness in motor 
vehicles. Housing starts were up sharply in July after changing little 
in previous months. Orders for nondefense capital goods still point to 
considerable further expansion of spending on business equipment over 
coming months; nonresidential construction has continued to trend 
appreciably higher. The nominal deficit on U.S. trade in goods and 
services widened in the second quarter from its average rate in the 
first quarter. After increasing at elevated rates in the early part of 
the year, consumer and producer prices have risen more slowly in recent 
months. Advances in labor compensation costs have remained subdued.
    Short-term interest rates have posted mixed changes since the 
Committee meeting on July 5-6, while intermediate- and long-term rates 
have risen appreciably. In foreign exchange markets, the trade-weighted 
value of the dollar in terms of the other G-10 currencies appreciated 
substantially over the intermeeting period, with the gain occurring 
since the beginning of August.
    M2 and M3 continued to register sizable increases in July and 
appeared to be expanding considerably further in August. For the year 
through July, M2 expanded at a rate in the upper half of its range for 
1995 and M3 grew at a rate above its upwardly revised 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 at 
its meeting in July reaffirmed 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 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 or slightly lesser reserve restraint 
would be acceptable in the intermeeting period. The contemplated 
reserve conditions are expected to be consistent with more moderate 
growth in M2 and M3 over coming months.
    By order of the Federal Open Market Committee, October 4, 1995.
Donald L. Kohn,
Secretary, Federal Open Market Committee.
[FR Doc. 95-25185 Filed 10-10-95; 8:45 am]
BILLING CODE 6210-01-F