Leaning Against the Seasonal Wind: Is There a Case for Seasonal Smoothing of Interest Rates?

At present, the Fed allows the money supply to grow faster than average in the third and fourth quarters of each year to meet the seasonally high demand for money during summer and the holiday shopping season and forces it to grow slower than average in the first and second quarters. In other words, the Fed injects additional money into the economy during the last two quarters of a year, then withdraws this addition during the first half of the following year.

This article appeared in the March/April 1993 edition of Business Review.