[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