The surge in money supply growth that is worrying some officials at the Federal Reserve and in the Reagan administration continued unabated in the week ended March 9, the Fed reported yesterday.
M1, the measure of money that includes currency, checking deposits at financial institutions and travelers checks, rose $4.8 billion that week to a total of $497.8 billion. At that level M1 is far above the target range the Fed has said is consistent with its policy goals for this year.
The Fed is not using M1 as a specific policy guide this year, as it has in the past. But its rapid growth implies that the broader monetary aggregates, which are being used as policy guides, may be increasing much more swiftly than desired, too.
"We don't know yet how serious the continued growth of M1 is in terms of Fed policy," said William V. Sullivan Jr., senior vice president at Dean Witter Reynolds Inc. "But the market is focusing on recent remarks by Chairman Paul Volcker indicating some concern is developing over recent trends."
Some analysts believe the Fed already has begun a process of gradually tightening credit conditions so that short-term interest rates may rise and help slow the growth of money. Others say they see no conclusive evidence of such actions by the central bank.
Other data yesterday showed banks increased their borrowing from the Fed in the week ended March 9 and that, overall, the borrowing of reserves by some institutions was larger than the excess of reserves held by others. When the banking system as a whole is in the position of having so-called net borrowed reserves, it usually means the Fed is making less money available.
However, Fed officials said unusual problems encountered in transferring funds among institutions had sharply reduced availability of reserves in the banking system, implying that the market should not take the shift to a net borrowed position as an indication of Fed policy.