U.S. M-1 MONEY SUPPLY SURGE EXPECTED NEXT WEEK
The U.S. M-1 money supply number to be
announced next Thursday is expected to show one of the largest
one-week increases in history, analysts said.
    The average forecast of economists polled by Reuters calls
for a 17.7 billion dlr M-1 jump for the week ended April 20.
Estimates of the increase range from five billion dlrs to 26.3
billion dlrs.
    "The M-1 surge will be very temporary. About two thirds of
the increase is likely to be washed out in the following week,"
said Kim Rupert, an economist at Money Market Services Inc.
    Rupert said a huge increase in M-1 for the April 20 week is
implied by very strong deposit survey data and by an
unexpectedly sharp gain in required reserves in Federal Reserve
data released Thursday.
    Those numbers, covering the two-week bank statement period
that ended on April 22, show a 2.5 billion dlr jump in basic
required reserves. Economists said this largely reflected the
parking in checking accounts of the proceeds from stock market
sales and mutual fund redemptions to pay annual income taxes.
Fed seasonal adjustments do not adequately compensate for these
and other special factors.
    Analysts noted that income tax refunds from the Treasury
also appear to be coming earlier than usual.
    They also are not adequately compensated for by the Fed's
seasonal adjustment factors to the money supply.
    The Federal Reserve is no longer targeting M-1 because the
link between M-1 and economic growth has largely been severed
by financial market innovation and deregulation.
    As such, there is likely to be little financial market
reaction to the huge M-1 increase that is expected to be
announced next week.
 Reuter
