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C O U N C I L OF E C O N O M I C AD VI SER S

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ATlwL: M J FELLNEfI
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Nov em b er 8,

M E M O R A N D U M FOR THE PR E SIDENT
Subject:

M o n e t a r y and F inancial C on ditions and their
Bearing on the Economic Outlook.

The g r ow t h rates of the m o n e y supply, expressed as annual
rates, were 3.0 or 3.7 percent for n a r r o w l y defined money, and
6.2 or 6.6 percent for broa dl y d e f in e d money, d e p en d in g on
w h e t h e r we m e a s u r e these rates for the past thirteen or the
pas t twen t y six weeks.
Nume r ic a l relationships bet we e n the
gro wt h of the m o n e y supply and the subsequent growth of the
m o n e y val ue of the GNP are m uc h less d ep endable for short
p e r io d s than for long-run averages b ut the numbers give n above
are com p at i bl e w i t h a r e a so n ab l e degree of a n t i - i n fl a ti o na r y
pressure. The result m a y p o ss i bl y be a somewhat more
p r o no u nc e d and brie fe r d e c li n e of ou t p u t than m o s t forec as t er s
had expected. Y et the earlier pro je c te d flatter path and
longer d u r a t i o n of the a d j u s t m e n t still remain possibilities.
S ho r t - t e r m interest rate mo v e m e n t s over the past m o n t h
have bee n mixed, wi t h the T r e as u ry bill rate higher than last
m o n t h ' s average, and the c o mmercial pap er rate lower. L o n g ­
ter m interest rates also c o n ti n ue d their decline of the
p ast four or five weeks.
M e m b e r bank borr o wi n gs from the Fed fell to $1,127 bi l li o n
for the w e e k ending No v e m b e r 6, from the earlier level of
$1,638 billion. During the same we e k the Federal funds
rate — the rate banks charge on loans to other banks — d e cl i ne d
from 9.72 percent to 9.63 percent. O n the whole, these changes
^signal somewhat easier con d it i on s in cred i t markets.
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W i l l i a m J. Eellner
Me m be r

'Sir


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102