[Federal Register Volume 62, Number 250 (Wednesday, December 31, 1997)]
[Pages 68291-68292]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-34057]



Federal Open Market Committee; Domestic Policy Directive of 
November 12, 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 November 12, 1997.\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 November 12, 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.

    The information reviewed at this meeting suggests that economic 
activity continued to grow rapidly in recent months. In labor markets, 
hiring has remained robust and the civilian unemployment rate fell to 
4.7 percent in October, its low for the current economic expansion. 
Industrial production increased very rapidly in the third quarter, and 
appears to have remained strong in October. Retail sales also rose 
sharply in the third quarter, though at a moderating pace as the summer 
progressed. Housing starts, while fluctuating from month to month, were 
little changed on balance in the third quarter. Business fixed 
investment posted unusually strong increases in the latest quarter, and 
available indicators point to further sizable gains in coming months. 
The nominal deficit on U.S. trade in goods and services widened 
substantially on average in July and August from its rate in the second 
quarter. Price inflation has remained subdued despite some increase in 
the pace of advance in labor compensation.
    Short-term interest rates have registered small mixed changes since 
the day before the Committee meeting on September 30, 1997, while bond 
yields have fallen somewhat. Share prices in U.S. equity markets have 
fluctuated widely in turbulent trading activity and are down on balance 
over the period; equity markets in other countries, notably in Asia 
have been volatile as well and some have registered very large 
declines. 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. The dollar appreciated 
significantly, however, in terms of the currencies of a number of Asian 
and Latin American countries.
    Growth of M2 and M3 appears to have moderated further in October 
from the unusually brisk rates of August. For the year through October, 
M2 expanded at 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 expanded in recent months at a pace somewhat 
below 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

[[Page 68292]]

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 moderate growth in M2 and M3 over coming months.
    By order of the Federal Open Market Committee, December 22, 
Donald L. Kohn,
Secretary, Federal Open Market Committee.
[FR Doc. 97-34057 Filed 12-30-97; 8:45 am]