The money supply continued on its erratic growth path, growing $2.4 billion in the week ended Nov. 9 after falling $3.4 billion the week before.
The Federal Reserve Board reported yesterday that the basic money supply - currency in circulation and checking accounts - average $333.6 billion the week ended Nov. 9.
Economists agree that money supply growth has an important impact on unemployment and inflation. Federal officials have been perplexed in recent months because the money supply has not been responding as expected to moves by the central bank to hold down money growth.
The Fed apparently has relaxed its tightening in recent weeks. As a result, some of the increase announced yesterday was expected.
The federal funds rate, which was 6.58 per cent in the week ended Nov. 9, fell to 6.42 per cent in the week ended Nov. 16. The rate is the interest banks charge each other for overnight loans of excess reserves.
When the Fed tightens up on monetary policy, it allows the fed funds rate to rise.When it eases, the rate is permitted to fall.
The money supply has been growing at an annual rate of 6.1 per cent over the past 13 weeks and 7.8 per cent for the last six months.
The Federal Reserve has set a money growth target between 4 per cent and 6.5 per cent over the next year.