[Federal Register Volume 62, Number 30 (Thursday, February 13, 1997)]
[Notices]
[Pages 6786-6787]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-3621]


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FEDERAL RESERVE SYSTEM

Federal Open Market Committee; Domestic Policy Directive of 
December 17, 1996.

    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 17, 1996.\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 December 17, 1996, 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 has continued to expand at a moderate pace. Private nonfarm 
payroll employment increased appreciably further in November, although 
the civilian unemployment rate edged up to 5.4 percent. Industrial 
production rose sharply in November, in part because of a rebound in 
motor vehicle assemblies that had been depressed earlier by work 
stoppages. Consumer spending has posted appreciable gains over recent 
months after a summer lull. Housing starts rebounded in November after 
declining in September and October. Business fixed investment appears 
to be growing moderately after a sharp rise in the third quarter. The 
nominal deficit on U.S. trade in goods and services widened 
substantially in the third quarter from its rate in the second quarter. 
Increases in labor compensation have trended up this year, and consumer 
price inflation also has picked up owing to larger increases in food 
and energy prices.
    Short-term market interest rates have registered mixed changes 
since the Committee meeting on November 13, 1996, while long-term 
yields have risen slightly. In foreign exchange markets, the trade-
weighted value of the dollar in terms of the other G-10 currencies has 
risen slightly over the intermeeting period.
    Growth of M2 picked up in November, while expansion of M3 moderated 
somewhat from its brisk pace in October. For the year through November, 
M2 is estimated to have grown at a rate in the upper half of the 
Committee's annual range, and M3 at a rate a little above the top of 
its range. Total domestic nonfinancial debt has expanded moderately on 
balance over recent months and has remained in the middle portion of 
its range.
    The Federal Open Market Committee seeks monetary and financial 
conditions

[[Page 6787]]

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 January for 
growth of M2 and M3 of 1 to 5 percent and 2 to 6 percent respectively, 
measured from the fourth quarter of 1995 to the fourth quarter of 1996. 
The monitoring range for growth of total domestic nonfinancial debt was 
maintained at 3 to 7 percent for the year. For 1997, the Committee 
agreed on a tentative basis to set the same ranges as in 1996 for 
growth of the monetary aggregates and debt, measured from the fourth 
quarter of 1996 to the fourth quarter of 1997. 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 
relatively strong expansion in M2 and M3 over coming months.
    By order of the Federal Open Market Committee, February 7, 1997.
Donald L. Kohn,
Secretary, Federal Open Market Committee.
[FR Doc. 97-3621 Filed 2-12-97; 8:45 am]
BILLING CODE 6210-01-F