The nation's money supply remained basically unchanged for the week ended June 7, the Federal Reserve Board reported yesterday. This follows a near-record spurt the previous week.
Analysts said they still expect the Fed to soon raise interest reates another notch because recent money supply increases as far outstripping the central bank's money growth targets. But they said they are no credit crunch in the wings, despite a warning from Citibank in its latest Monthly Economic Letter that such a crunch may come by early 1979.
The fed said the basic money supply, or M1, was unchanged last week at $34.97 billion, seasonally adjested. The broader money supply measure, M2, climbed $100 million.
The stability in the money stock follows a $4.2 billion rise in M1 during the previous statement week. And for the last four weeks, M1, which consists of cash and checking account deposits, has increased at 10.1 percent annual rate over the previous quarter. TR for ad 1
"I think the Fed just has to bear down at this point in attempting to slow monetary growth to a more moderate pace, particularly with inflation still on the high side," said David Jones predicted that the Federal Aubrey G. Lanston and Co.
Jones predicted that the Federal Open Market Committee, when it next meets on June 20 to assess monetary policy, "will decide to tighten another notch." That could put the key federal funds rate, now at 7 1/2 percent, "as high as 8 percent by early July," he said.
"But my own view is that the Fed is not prepared to have a shoot-out with the credit markets at this moment," said Jones, indicating he saw no immediate credit crunch, where interest rates soar and borrowers get turned away.
William N. Griggs, vice president with J. Henry Schroeder Bank and Trust Co., said "the pool of liquidity, remains fairly adeuate. The Fed can't keep going without pushing rates higher, but not a great deal higher. And I see no credit crunch, even with a high level of Treasury financing."
Griggs disputed some projections of torrid loan demand for the remainder of the year at the New York City money center banks, claiming the traditional big corporate customers of these banks remain in a good cash position.
The Fed reported yesterday that commercial and industrial loans at major New York City banks fell $210 million. But the week before they he previous week they declined $495 million. But the week before they surged by $1.2 billion.