[Federal Register Volume 63, Number 110 (Tuesday, June 9, 1998)]
[Notices]
[Page 31477]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-15272]


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FEDERAL RESERVE SYSTEM


Federal Open Market Committee; Domestic Policy Directive of March 
31, 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 March 31, 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 March 31, 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 early months of 1998. 
Nonfarm payroll employment increased sharply further in January and 
February, and the civilian unemployment rate, at 4.6 percent in 
February, equaled its low for the current economic expansion. However, 
growth in manufacturing payroll employment was down over the first two 
months of the year, and factory output decelerated appreciably. 
Consumer spending has risen considerably further since year-end, and 
housing activity also has strengthened in recent months. Available 
indicators point to a sharp rebound in business fixed investment 
following a small decline in the fourth quarter. Fragmentary data on 
nonfarm inventories suggest a slower rate of accumulation early in the 
year. The nominal deficit on U.S. trade in goods and services widened 
substantially in January from its average monthly rate in the fourth 
quarter. Despite indications of persisting pressures on employment 
costs associated with tight labor markets, price inflation has abated 
further, primarily as a consequence of large declines in energy prices.
    Interest rates generally have risen somewhat on balance over the 
intermeeting period. Share prices in U.S. equity markets have moved up 
substantially further over the period. In foreign exchange markets, the 
value of the dollar has increased somewhat over the period in relation 
to the currencies of other major industrial nations, but it has 
depreciated relative to the currencies of most emerging market 
economies in Asia.
    Growth of M2 and M3 picked up somewhat in the first quarter from 
already robust rates in the fourth quarter. Expansion of total domestic 
nonfinancial debt also has strengthened over recent months.
    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 February 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 
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 
considerable moderation in the growth in M2 and M3 over coming months.
    By order of the Federal Open Market Committee, May 29, 1998.
Donald L. Kohn,
Secretary, Federal Open Market Committee.
[FR Doc. 98-15272 Filed 6-8-98; 8:45 am]
BILLING CODE 6210-01-F