[Federal Register Volume 63, Number 72 (Wednesday, April 15, 1998)]
[Notices]
[Pages 18426-18427]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-9886]


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FEDERAL RESERVE SYSTEM


Federal Open Market Committee; Domestic Policy Directive of 
February 3-4, 1998.

    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 February 3-4, 1998.\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 February 3-4, 1998, 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 during the closing months of 1997. 
Nonfarm payroll employment increased sharply further in December after 
posting very large gains in other recent months; the civilian 
unemployment rate, at 4.7 percent, remained near its low for the 
current economic expansion. Industrial production continued to advance 
at a brisk pace in the fourth quarter. Consumer spending rose 
appreciably in the quarter, and housing starts remained close to the 
highs of the current expansion. Business fixed investment weakened 
following exceptionally strong increases in the second and third 
quarters; nonfarm inventory accumulation appears to have picked up 
somewhat. The nominal deficit on U.S. trade in goods and services 
narrowed significantly on average in October and November from its 
level in the third quarter. Price inflation has remained subdued 
despite appreciably faster increases in worker compensation in recent 
months.
    Most interest rates have declined on balance since the day before 
the Committee meeting on December 16, 1997. Share prices in U.S. equity 
markets have moved up somewhat over the period; equity markets in some 
other countries, notably in Asia, have remained volatile. In foreign 
exchange markets, the value of the dollar has risen

[[Page 18427]]

over the intermeeting period relative to the currencies of several 
Asian developing countries, but it has registered only a small increase 
on average in relation to the currencies of major industrial nations.
    M2 and M3 continued to grow at relatively rapid rates in December 
and apparently also in January. From the fourth quarter of 1996 to the 
fourth quarter of 1997, 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 expanded 
in 1997 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 
this meeting 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 1997 to the fourth quarter of 1998. The 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 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, April 6, 1998.
Donald L. Kohn,
Secretary, Federal Open Market Committee.
[FR Doc. 98-9886 Filed 4-14-98; 8:45 am]
BILLING CODE 6210-01-F