$7.4-Billion Jump in Money Supply Well Above Target

The nation’s basic money supply roared ahead by $7.4 billion in early July, the Federal Reserve Board reported Thursday.

The gain was larger than most analysts had expected and continued a pattern of growth well in excess of what the central bank has set as its targets for the money measure known as M1. But the report had little effect on credit prices.

Maury Harris, chief economist for the investment firm Paine Webber, said traders feel that the Fed is paying little attention to growth in M1.

The Fed said M1 rose to a seasonally adjusted average of $673.9 billion in the week ended July 7 from $666.5 billion the week before. M1 measures money readily available for spending and includes cash, checking account deposits and non-bank travelers checks.

For the latest 13 weeks, M1 averaged $659.3 billion, a 16.2% seasonally adjusted annual rate of gain from the previous 13 weeks.

The Fed, in its attempt to provide enough money to stimulate non-inflationary economic growth, has said it would like to see M1 grow in a range of 3% to 8% from the fourth quarter of 1985 through the final quarter of 1986.

But analysts say the Fed is more intent on stimulating a sluggish economy and is ignoring the torrid pace of M1 growth. They also note that broader measures of the money supply, which the Fed reports on only once a month, have stayed within the central bank’s targets.

Harris said the Fed showed a week ago when it cut its discount rate by a half-point to 6% that growth in M1 is having no impact on how it sets its credit policy.

Harris noted that Paul A. Volcker, the Fed chairman, is scheduled to testify next week before congressional committees and may “give us some guidance” on how the central bank is viewing the money measure. The Fed has been surveying large banks to see why they feel their accounts have swelled.

In other reports:

- The Federal Reserve Bank of New York reported that commercial and industrial loans at major New York City banks fell $1.02 billion in the week ended July 9, compared to a decline of $16 million in the previous week.

- The Federal Reserve said borrowings from the Federal Reserve System averaged $316 million in the two-week period ended Wednesday, down from $354 million in the previous two-week period.

- The Federal Reserve Bank of St. Louis reported that the monetary base was $245.5 billion in the two-week period ended Wednesday, up from $244.9 billion two weeks earlier.