[Federal Register Volume 63, Number 33 (Thursday, February 19, 1998)]
[Notices]
[Page 8454]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-4105]


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FEDERAL RESERVE SYSTEM


Federal Open Market Committee; Domestic Policy Directive of 
December 16, 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 December 16, 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 December 16, 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. Nonfarm payroll 
employment increased sharply in October and November; the civilian 
unemployment rate fell to 4.6 percent in November, its low for the 
current economic expansion. Industrial production continued to advance 
at a brisk pace in October and November. Retail sales were unchanged on 
balance over the two months after rising sharply in the third quarter. 
Housing starts increased slightly further in October and November. 
Available information suggests on balance that business fixed 
investment will slow from the exceptionally strong increases of the 
second and third quarters. The nominal deficit on U.S. trade in goods 
and services widened significantly in the third quarter from its rate 
in the second quarter. Price inflation has remained subdued, despite 
some increase in the pace of advance in wages.
    Short-term interest rates have registered small mixed changes since 
the day before the Committee meeting on November 12, 1997, while bond 
yields have fallen somewhat. Share prices in U.S. equity markets 
recorded mixed changes over the period; equity markets in other 
countries, notably in Asia, have remained volatile. In foreign exchange 
markets, the value of the dollar has risen over the intermeeting period 
in terms of both the trade-weighted index of the other G-10 countries 
and the currencies of a number of Asian countries.
    M2 and M3 grew rapidly in November. For the year through November, 
M2 expanded at a rate slightly 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 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 developments, a 
slightly higher federal funds rate 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 in M2 and M3 over coming months.
    By order of the Federal Open Market Committee, February 9, 1998.
Donald L. Kohn,
Secretary, Federal Open Market Committee.
[FR Doc. 98-4105 Filed 2-18-98; 8:45 am]
BILLING CODE 6210-01-F