[Federal Register Volume 62, Number 203 (Tuesday, October 21, 1997)]
[Notices]
[Page 54637]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-27775]


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FEDERAL RESERVE SYSTEM


Federal Open Market Committee; Domestic Policy Directive of 
August 19, 1997.

    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 19, 1997.\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 19, 1997, 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 is expanding at a moderate pace. In labor markets, hiring 
remained robust at midyear, and the civilian unemployment rate, at 4.8 
percent in July, matched its low for the current economic expansion. 
Industrial production increased relatively slowly in July, owing in 
part to a temporary drop in motor vehicle assemblies. Retail sales rose 
briskly in June and July after having changed little over the preceding 
three months. Housing starts rebounded in June and July after having 
weakened in May. Business fixed investment increased substantially 
further in the second quarter and available indicators point to further 
sizable gains in the current quarter. The nominal deficit on U.S. trade 
in goods and services narrowed slightly on balance over April and May 
from its downward-revised average rate in the first quarter. Price 
inflation has remained subdued and increases in labor compensation have 
been moderate.
    Market interest rates generally have declined somewhat further 
since the start of the Committee meeting on July 1-2, 1997. Share 
prices in equity markets have increased on balance. In foreign exchange 
markets, the trade-weighted value of the dollar in terms of the other 
G-10 currencies rose significantly on balance over the intermeeting 
period.
    After fluctuating sharply from April to May, growth of M2 was at a 
moderate pace over June and July and that of M3 picked up to a 
relatively rapid rate. For the year through July, M2 expanded at a rate 
near the upper bound of its range for the year and M3 at a rate 
appreciably above the upper bound of its range. Total domestic 
nonfinancial debt has continued to expand in recent months at a rate 
near 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 
its meeting in July reaffirmed 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 1996 to the fourth 
quarter of 1997. The range for growth of total domestic nonfinancial 
debt was maintained at 3 to 7 percent for the year. For 1988, the 
Committee agreed on a tentative basis to set the same ranges as in 1997 
for growth of the monetary aggregates and debt, measured from the 
fourth quarter of 1997 to the fourth quarter of 1998. 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 
moderate growth in M2 and M3 over coming months.
    By order of the Federal Open Market Committee, October 8, 1997.
Donald L. Kohn,
Secretary, Federal Open Market Committee.
[FR Doc. 97-27775 Filed 10-20-97; 8:45 am]
BILLING CODE 6210-01-P