[Federal Register Volume 62, Number 4 (Tuesday, January 7, 1997)]
[Notices]
[Pages 994-995]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-250]
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FEDERAL RESERVE SYSTEM
Federal Open Market Committee; Domestic Policy Directive of
November 13, 1996
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 13, 1996.\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 13, 1996, 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 growth in
economic activity slowed substantially in the third quarter, and the
limited available information indicates continued moderate expansion
more recently. Private nonfarm payroll employment increased appreciably
on balance over September and October. The civilian unemployment rate
remained at 5.2 percent in October. Industrial production, which
continued to rise in the third quarter, appears to have declined in
October owing in important measure to work stoppages in the motor
vehicles industry. Total retail sales turned up in September after
slumping earlier in the summer. Housing starts fell in September from
the exceptionally high level registered in August. Outlays for business
equipment were strong in the third quarter and new orders continued to
trend upward; business spending on nonresidential structures posted a
moderate advance. Inventory investment was substantial in the third
quarter, but inventory-sales ratios remained relatively low. The
nominal deficit on U.S. trade in goods and services widened
considerably in July-August from its average rate in the second
quarter. Increases in labor compensation, though moderating in the
third quarter, have trended up this year; consumer price inflation also
has picked up this year, owing to larger increases in food and energy
prices.
Market interest rates have moved lower since the Committee meeting
on September 24, 1996, with the largest declines occurring in
intermediate- and long-term maturities. In foreign exchange markets,
the trade-weighted value of the dollar in terms of the other G-10
currencies has depreciated slightly over the intermeeting period.
Growth of M2 in September and October remained below its pace in
the first half of the year, while expansion of M3 was substantially
higher over those two months. For the year through October, M2 is
estimated to have grown at a rate in the upper half of the Committee's
annual range, and M3 at a rate around the top of its range. Expansion
in total domestic nonfinancial debt has been moderate on balance over
recent months and has remained in the middle portion of its range.
[[Page 995]]
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 January
for growth of M2 and M3 of 1 to 5 percent and 2 to 6 percent
respectively, measured from the fourth quarter of 1995 to the fourth
quarter of 1996. The monitoring range for growth of total domestic
nonfinancial debt was maintained at 3 to 7 percent for the year. For
1997 the Committee agreed on a tentative basis to set the same ranges
as in 1996 for growth of the monetary aggregages and debt, measured
from the fourth quarter of 1996 to the fourth quarter of 1997. 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 to maintain the existing degree of pressure on reserve
positions. 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,
somewhat greater reserve restraint would or slightly lesser reserve
restraint might be acceptable in the intermeeting period. The
contemplated reserve conditions are expected to be consistent with
moderate growth in M2 and relatively strong expansion in M3 over coming
months.
By order of the Federal Open Market Committee, December 27,
1996.
Donald L. Kohn,
Secretary, Federal Open Market Committee.
[FR Doc. 97-250 Filed 1-6-97; 8:45 am]
BILLING CODE 6210-01-F