The money supply remained constant in the week ended Jan. 3, and has been falling at a seasonally adjusted annual rate of 0.1 percent for the last three months, the Federal Reserve Board reported yesterday.
The abrupt slowdown in the growth of money -- checking accounts and currency in circulation -- prompted House Banking Committee Chairman Henry S. Reuss (D-Wis.) to warn yesterday that the Federal Reserve Board may be laying the ground for a recession.
The Fed has been raising interest rates since spring to fight inflation by checking monetary growth. The Fed's policies seemed to have little success until November, when money growth ground to a sudden halt. The Fed's goal is to slow money growth but not so precipitously as to cause the economy to go into a tailspin.
The central bank has not eased monetary policy in the wake of the sudden slowdown, apparently convinced that the decline in the money supply is temporary and will reverse itself.
The Fed said that the money supply averaged $360.6 billion in the week ended Jan. 3 and the week ended Dec. 27. The federal funds rate -- the interest banks charge each other for short-term loans of excess reserves -- averaged 9.97 percent in the week ended Jan. 10, close to the 10 percent target the Fed has had for the key rate since early November.