Money Supply Falls, Snaps Five-Week Rise
NEW YORK, March 8ÛÓThe nationÛªs basic money supply fell $1.5 billion in late February, snapping a string of five consecutive weekly increases, the Federal Reserve Board said today.</br></br>But the decline was not enough to calm interest rate jitters on Wall Street. One economist predicted a rise in the prime rate this spring, and traders bid up yields on long-term government bonds to their highest level since the fall of 1982.</br></br>Financial economists said the decline pushed Ml, the measure of funds readily available for spending, below the upper growth limits set by the Fed as part of the central bankÛªs anti-inflation strategy.</br></br>But the analysts said a rise in business demand for credit, as shown by a sharp increase in bank loans and lack of progress in reducing huge federal deficits, have raised fears that prospects for a new burst of inflation would prod the Fed to make credit scarcer, pushing interest rates higher.</br></br>Jeffrey Leeds, an economist at Chemical Bank here, said he believes the Fed already has undertaken ÛÏa very subtle firming in policy.Û