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federal reserve

Ba n k

DALLAS, TEXAS

of

D allas

75222

Circular No. 81-76
April 14, 1981
MONEY SUPPLY DATA
Proposals Regarding Reporting Procedures

TO ALL FINANCIAL INSTITUTIONS
AND INDIVIDUALS USING THE FEDERAL
RESERVE ESTIMATES OF THE MONEY STOCK:
On April 2, 1981, the Federal Reserve Board invited public comment
on a number of proposals regarding the publication of weekly money supply data.
Printed on the following pages is a copy of a press release that presents a
detailed explanation of the issues involved and a le tter Chairman Volcker
directed to Senator Garn regarding this m atter.
Money supply figures are published weekly by the Federal Reserve in
the statistical release H.6 (508), Money Stock Measures. A report is released
every Friday containing statistics on the U. S. money stock through the week
ending on Wednesday of the previous week. These statistics are closely followed
by financial institutions and the securities markets.
The Board is concerned over the occasionally erratic nature of the
weekly figures.
The Federal Reserve Board is considering revising the
publication schedule and/or format of the report. Comments and suggestions are
being solicited from the general public to assist the Federal Reserve in its
evaluation process. Any observations you may wish to make should be submitted
directly to Thomas D. Simpson a t the Federal Reserve Board.
If you have any questions regarding this m atter or would like to
discuss the proposed changes with someone locally, please contact Patrick J.
Lawler, Senior Economist in our Research Department, Ext. 6613.
Sincerely yours,
William H. Wallace
First Vice President

B a n k s a n d o t h e r s are e n c o u r a g e d to use th e fo llo w in g in c o m in g W A T S n u m b e r s in c o n t a c t in g th is Bank:
1-800-442-7140 (in tr a s t a te ) a n d 1-800-527 -920 0 (in te r s ta te ). F o r c a lls p la c e d lo cally , p l e a s e use 651 plus th e
e x te n s io n referred to ab ove.

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

FEDERAL RESERVE press release
' • f* A L

For immediate release

April 2, 1981

The Federal Reserve Board today invited public comment on
the desirability of continuing to report money supply data on a weekly
basis, or whether another reporting procedure should be used.
Weekly money supply statistics are erratic and often poor
indicators of underlying trends, Board Chairman Paul A. Volcker said
in a recent letter to Senators Jake Garn and William Proxmire, the
chairman and former chairman respectively of the Senate Banking
Committee.
The Board has not concluded that the present procedure should
be changed and will continue to publish money supply data each Friday,
as it has in the past.
In his letter, the Chairman said:
"There is considerable merit to the view that weekly data as
such convey little information and that weekly seasonal adjustments
are subject to substantial uncertainty.

However, the Board is not

certain at present that the public interest would necessarily be
better served if any of the alternatives noted (in the letter) were
adopted."
As possible alternatives to the present pro cedu re, the
following options are being considered:

(OVER)

.

-2-

1.

To delay weekly publication an additional seven
days to incorporate more data.

2.

T o publish only data that are not seasonally adjusted.

3.

To publish data only monthly— as is now the case with
the broader definitions of money— or use moving
average data.

To assist in the assessment of the publication schedule, the
Board requested comment on the desirability of continuing the present
procedure or of shifting to another option.

Comments, which need not

be limited to the options above, should be sent to Thomas D. Simpson,
chief of the Banking Section, Division of Research and Statistics,
Federal Reserve Board, Washington, D. C. 20551.
A copy of the Chairman's letter is attached

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.••pfCOy)

BOARD

OF

GOVERNORS

OF T H E

FE D E R A L R ES ERV E SYSTEM
W A SH I N G T O N , □ . C. 2 0 5 5 1
P A U L A. V O L C K E R
CHAIRMAN

March 24, 1981

The Honorable Jake G a m
Chairman
Committee on Banking, Housing
and Urban Affairs
United States Senate
Washington, D. C.
20510
Dear Chairman Garn:
The concerns and questions raised in the recent letter from
you and Senator Proxmire about weekly money supply data have been dis­
cussed and debated by the Federal Reserve Board, the Federal Open Market
Committee, and the staff for some time.
The issues are extremely
important and strong arguments— other than Freedom of Information Act
implications— can be made for and against publication of weekly data.
There is nearly unanimous agreement by all observers that
weekly money statistics are extremely erratic and therefore poor indi­
cators of underlying trends.
While monthly data can often deviate
considerably from such trends, the weekly observations are particularly
"noisy".
Week-to-week changes are quite large and recent estimates
indicate that the "noise” element— attributable to the random nature
of money flows and difficulties in seasonal adjustment— accounts for plus
or minus $3.3 billion in weekly change two-thirds of the time.
Such a
large erratic element appears intrinsic to money behavior, rather than
implying poor underlying statistics.
In 1980, weekly M-1A and M-1B
statistics revised on average only about $300 million between the first
published and "final" data several weeks later, though in twelve weeks,
revisions were larger than $500 million, and the largest single revision
was $1.6 billion.
The great preponderance of active market participants are by
now aware of the highly volatile nature of the weekly series.
Publica­
tion has had that educational advantage, and the data are to be used with
a certain caution.
However, from time to time overreactions have
occurred.

The Honorable Jake Garn
Page 2

As a result of concerns about the reaction to and significance
of weekly figures, the Federal Reserve has considered possible revisions
to its current publication schedule or to its method of presentation.
One option might be to delay weekly publication an additional seven days
to incorporate more data— an important issue with additional reporters
under the Monetary Control Act.
This could reduce revisions to the
weekly statistics.
On the other hand, this option would increase the
risk of inadvertent leaks and would increase the interval over which
market participants might react to guesses and rumors of money stock
changes, based in part on fragmentary data such as may be available in
the weekly figures from large banks on deposits and loans.
Even if no
greater volatility in interest rates occurred over the unpublished
interval, lagged publication of a more accurate, but still different
than expected, change in weekly money might simply postpone the market
reaction.
In any event, weekly revisions are usually small, as noted
above, relative to the underlying volatility of the series.
Another option might be to publish seasonally unadjusted money
data in order to reduce the "importance" of the statistics.
Our concern
here is that market participants would then create their own seasonally
adjusted series.
The availability of a large number of conflicting
series would only heighten market confusion, and might inevitably lead
to questions to the Federal Reserve about what it considers to be the
"normal seasonal" change in a particular week if what might seem to be
an unusual change occurs in a seasonally unadjusted figure.
Another approach might be to publish data only monthly— as is
now done, because of data reporting problems, with M-2 and M-3— and/or to
publish weekly, but only a moving average series of weeks.
Under the
monthly approach, market participants would still try to estimate weekly
series from bank balance sheets and clearing house data, and the market
could be swept by rumors and guesses on movements in the money supply.
And they would also probably attempt to glean the weekly number from a
moving average series.
In any event when a monthly figure was finally
published, deviations from market expectations could cause yet further
changes in interest rates as the new information was incorporated into
market expectations.
I might note that this has not been a significant
problem with monthly publication of M-2 and M-3.
A relatively small
portion of these aggregates are supported by reserves, and they have
played a less important role in the day-to-day targeting process than
M-l.
In general, there is considerable merit to the view that
weekly data as such convey little information and that weekly seasonal
adjustments are subject to substantial uncertainty.
However, the Board
is not certain at present that the public interest would necessarily
be better served if any of the alternatives noted above were adopted.
While no one can be sure of their judgment in this respect, it does

The Honorable Jake Garn
Page 3

seem possible that volatility of money market conditions could be encouraged
by misinterpretation of fragmentary data as well as by the continued availa­
bility of the present weekly data.
We will, of course, continue to review the money supply publication
schedule, taking account of the constraints imposed by the Freedom of Infor­
mation Act.
To aid in our assessment of the value of weekly money supply
data, we plan to ask for public comment on the desirability of continuing
the weekly series, or of shifting to the options noted above.
Our decision
will be taken in the light of those comments.
Should Freedom of Information
Act requirements present difficulties in the light of the appropriate course,
we will consult with you further.
I appreciate your interest in these questions.
to all of us.

Identical letter also sent to Senator Proxmire.

They are of concern


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102