Predicting Economic Outcomes and Growth Rates

Some members also noted that any adjustment of these ranges to align them more fully with projections of money growth consistent with the Committee's expectations for expansion of the economy and prices could be misinterpreted. Such an action might be seen as suggesting that the Committee had a greater degree of confidence in the relationship between money growth and broad measures of economic performance than was warranted by its current understanding of that relationship or that the Committee was now placing greater emphasis on the broad monetary aggregates as a gauge of the thrust of monetary policy.

Two members favored somewhat higher growth ranges for M2 and M3. They noted that the expansion of these broad aggregates was anticipated to be around the upper ends of their tentative ranges, and perhaps even higher, given the Committee's expectations for the performance of the economy and prices. In their view, the higher ranges would be more consistent with what they saw as the Committee's obligations under the Federal Reserve Act to set ranges consistent with expected or desired economic outcomes for the year, and the reasons for establishing those ranges could easily be set forth and understood as an appropriate technical adjustment that would not imply any lessened commitment to the Committee's price stability goal.

The Committee unanimously preferred to retain the 3 to 7 percent range for total domestic nonfinancial debt. This position took account of a staff projection indicating that the debt aggregate was likely to continue to grow at a rate generally in line with the expansion of nominal GDP, although some moderation in private credit demands was anticipated and there were indications that lenders were no longer easing their terms and conditions for granting credit to consumers and businesses.

At the conclusion of its discussion, the Committee voted to approve without change the tentative ranges that it had established in July of last year. In keeping with its usual procedures under the Humphrey-Hawkins Act, the Committee would review its ranges at mid year, or sooner if interim conditions warranted, in light of the growth and velocity behavior of the aggregates and ongoing economic and financial developments. Accordingly, the following longer-run policy statement was approved for inclusion in the domestic policy directive.