[Federal Register Volume 63, Number 200 (Friday, October 16, 1998)]
[Notices]
[Pages 55615-55616]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-27737]
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FEDERAL RESERVE SYSTEM
Federal Open Market Committee; Domestic Policy Directive of
August 18, 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 August 18, 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 August 18, 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 domestic
final demand has continued to expand at a robust pace, but overall
economic activity has been adversely affected by the strike at General
Motors and developments in Asia. Nonfarm payroll
[[Page 55616]]
employment continued to expand through July and the civilian
unemployment rate was unchanged at 4.5 percent. Industrial production
declined considerably in June and July; most of the drop over the two
months reflected the GM strike. A decline in total retail sales in July
was more than accounted for by a sharp contraction in spending for
motor vehicles. Residential sales and construction have remained
exceptionally strong in recent months. Available indicators point to
continued growth in business capital spending, although apparently at a
more moderate pace than earlier in the year. Business inventory
accumulation slowed sharply in the spring. The nominal deficit on U.S.
trade in goods and services widened substantially further in the second
quarter. Trends in wages and prices have remained stable in recent
months.
Most interest rates have fallen slightly on balance since the
meeting on June 30-July 1. Share prices in U.S. equity markets have
remained volatile and major indexes have declined appreciably on
balance over the intermeeting period. In foreign exchange markets, the
trade-weighted value of the dollar rose somewhat further over the
intermeeting period in relation to other major currencies; in addition,
it was up slightly in terms of an index of the currencies of the
developing countries of Latin America and Asia that are important
trading partners of the United States.
After robust growth in the second quarter, M2 decelerated somewhat
and M3 was about unchanged in July. For the year through July, both
aggregates rose at rates well above the Committee's ranges for the
year. Expansion of total domestic nonfinancial debt appears to have
moderated somewhat in recent months after a pickup earlier in the year.
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
reaffirmed at its meeting on June 30-July 1 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 1997 to
the fourth quarter of 1998. The range for growth of total domestic
nonfinancial debt was maintained at 3 to 7 percent for the year. For
1999, the Committee agreed on a tentative basis to set the same ranges
for growth of the monetary aggregates and debt, measured from the
fourth quarter of 1998 to the fourth quarter of 1999. 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 would 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, October 7, 1998.
Donald L. Kohn,
Secretary, Federal Open Market Committee.
[FR Doc. 98-27737 Filed 10-15-98; 8:45 am]
BILLING CODE 6210-01-F