[Federal Register Volume 62, Number 229 (Friday, November 28, 1997)]
[Notices]
[Pages 63344-63345]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-31206]


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FEDERAL RESERVE SYSTEM


Federal Open Market Committee; Domestic Policy Directive of 
September 30, 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 September 30, 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 September 30, 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 of 
economic activity remains brisk. In labor markets, hiring continued 
robust over the summer months and the civilian unemployment rate, at 
4.9 percent in August, remained near its low for the current economic 
expansion. Industrial production increased considerably further in July 
and August. Retail sales have risen sharply over recent months after a 
pause during the spring. Housing starts declined in July and August, 
but home sales have been strong. Business fixed investment has 
increased substantially further since

[[Page 63345]]

mid-year and available indicators point to further sizable gains in 
coming months. After narrowing somewhat in the second quarter, the 
nominal deficit on U.S. trade in goods and services widened 
substantially in July. Inventory investment in July was well below the 
average pace in prior months of 1997. Price inflation has remained 
subdued and increases in labor compensation have been moderate in 
recent months.
    Most market interest rates are about unchanged on balance since the 
day before the Committee meeting on August 19, 1997. Share prices in 
equity markets have increased considerably over the period, with some 
stock price indexes reaching new highs. In foreign exchange markets, 
the trade-weighted value of the dollar in terms of the other G-10 
currencies declined somewhat on balance over the intermeeting period.
    Growth of M2 appears to have moderated somewhat in September from a 
very rapid pace in August, while expansion of M3 remained very strong 
in both months. For the year through August, M2 expanded at a rate 
somewhat above the upper bound of its range for the year and M3 at a 
rate substantially above the upper bound of its range. Total domestic 
nonfinancial debt has continued to expand in recent months at a pace 
near the middle of its 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 2 to 6 percent 
respectively, measured from the fourth quarter of 1996 to the fourth 
quarter of 1997. The range for growth of total domestic nonfinancial 
debt was maintained at 3 to 7 percent for the year. For 1998, the 
Committee agreed on a tentative basis to set the same ranges as in 1997 
for growth of the monetary aggregates and debt, measured from the 
fourth quarter of 1997 to the fourth quarter of 1998. 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 conditions in reserve markets consistent with 
maintaining the federal funds rate at an average of around 5-1/2 
percent. 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, a 
somewhat higher federal funds rate would or a slightly lower federal 
funds rate might be acceptable in the intermeeting period. The 
contemplated reserve conditions are expected to be consistent with some 
moderation in the growth of M2 and M3 over coming months.
    By order of the Federal Open Market Committee, November 20, 
1997.
Donald L. Kohn,
Secretary, Federal Open Market Committee.
[FR Doc. 97-31206 Filed 11-26-97; 8:45 am]
BILLING CODE 6210-01-F