[Federal Register Volume 62, Number 250 (Wednesday, December 31, 1997)]
[Notices]
[Pages 68291-68292]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-34057]
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FEDERAL RESERVE SYSTEM
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:
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\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.
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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,
1997.
Donald L. Kohn,
Secretary, Federal Open Market Committee.
[FR Doc. 97-34057 Filed 12-30-97; 8:45 am]
BILLING CODE 6210-01-F