[Federal Register Volume 62, Number 136 (Wednesday, July 16, 1997)]
[Notices]
[Page 38092]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-18718]


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FEDERAL RESERVE SYSTEM


Federal Open Market Committee; Domestic Policy Directive of May 
20, 1997

    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 May 20, 1997.\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 May 20, 1997, 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 growth in 
economic activity has slowed after surging in late 1996 and earlier 
this year. Private nonfarm payroll employment increased at a 
considerably reduced pace over March and April, but the civilian 
unemployment rate fell appreciably to 4.9 percent in April. Industrial 
production was flat in April following sizable gains over previous 
months. Nominal retail sales were unchanged in March and declined in 
April after a considerable advance in earlier months. Housing activity 
in March and April was little changed from other recent months. 
Available indicators point to further sizable gains in business fixed 
investment. The nominal deficit on U.S. trade in goods and services 
widened substantially in January-February from its temporarily 
depressed rate in the fourth quarter. Underlying price inflation has 
remained subdued.
    Market interest rates generally have posted small mixed changes 
since the Committee meeting on March 25, 1997; share prices in equity 
markets have risen considerably. In foreign exchange markets, the 
trade-weighted value of the dollar in terms of the other G-10 
currencies declined on balance over the intermeeting period.
    Growth of M2 and M3 was brisk over March and April, boosted by a 
buildup in household balances to cover unusually large tax payments. 
For the year through April, both aggregates expanded at rates 
appreciably above the upper bounds of their respective ranges for the 
year. Growth in total domestic nonfinancial debt has moderated over 
recent months, reflecting reductions in federal government borrowing.
    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 February established ranges for growth of M2 and M3 of 1 
to 5 percent and 2 to 6 percent respectively, measured from the fourth 
quarter of 1996 to the fourth quarter of 1997. The monitoring range for 
growth of total domestic nonfinancial debt was set at 3 to 7 percent 
for the year. 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 some 
moderation in the expansion of M2 and M3 over coming months.
    By order of the Federal Open Market Committee, July 9, 1997.
Donald L. Kohn,
Secretary, Federal Open Market Committee.
[FR Doc. 97-18718 Filed 7-15-97; 8:45 am]
BILLING CODE 6210-01-F