Basic Money Supply Falls $500 Million at End of ’84

NEW YORK â€”  The nation’s basic money supply dipped $500 million in the final week of 1984, the Federal Reserve Board reported Thursday, leaving the measure well within the central bank’s anti-inflation growth target for the year.

With the latest decline, the measure, known as M1 and representing funds readily available for spending, ended the year with a rise of 5%, said Robert Sinche, chief economist at the investment firm of Bear, Stearns & Co.

“They made the target comfortably,� said Sinche. “I don’t think there are any serious problems ahead.�

The Fed had said it wanted to keep the growth of M1 between 4% and 8% between the fourth quarter of 1983 and the final three months of 1984.

The Fed sets the target at a level it deems necessary to provide enough money to fuel economic growth without rekindling double-digit inflation.

However, Sinche and other economists said that with broader measures of the money supply growing at a faster clip than M1 and with the economy showing renewed strength, it was unlikely the Fed would move soon to accommodate further declines in interest rates.

The Fed said M1 slipped to a seasonally adjusted $557.2 billion in the week ended Dec. 31 from a revised $557.7 billion the previous week. The previous week’s figure originally was reported as $557.6 billion.

M1 includes cash in circulation, deposits in checking accounts and non-bank travelers checks.

Long-term bond prices, which move in the opposite direction of interest rates, fell about $3.75 for each $1,000 in face value during late trading following the release of the money supply figures at 4:30 p.m. EST.

David Jones, an economist at the government securities firm Aubrey G. Lanston & Co., said there had been some “wishful thinking� that M1 had dropped sharply, so the slight decline reported dashed hopes that the Fed would have room for additional credit-easing moves.

“It is very unlikely that the Fed will be nudged off its stable stance in the weeks immediately ahead,� Jones said.

Donald Maude, chief economist at the investment firm Refco Partners, said “it would be very difficult for the Fed to rationalize a further easing� for the time being.

But none of the analysts said that they expected the Fed to make credit scarcer.

Although M1 growth for the year was 5%, it had been stagnant during parts of the summer and early fall, only picking up again with stimulus from the central bank in the final four months of 1984.

For the latest 13 weeks, M1 averaged $549.6 billion, a 1.8% seasonally adjusted annual rate of gain from the previous 13 weeks.

The Fed also released figures for two broader money supply measures, M2 and M3.

M2, which includes M1 and such deposits as money market mutual funds and bank savings accounts, ended the year $19 billion below the upper range of the Fed’s growth target and $51.9 billion above the lower growth limit, according to Money Market Services Inc., a consulting service in Belmont, Calif.

M3, which includes M2 and such long-term large accounts as bank certificates of deposit in denominations of at least $100,000, wound up the year $42.8 billion above the Fed’s upper growth goal.

The Fed sought growth of 6% to 9% for both M2 and M3.