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March 28, Strictly Confidential (FR) 1986 Class I FOMC MONETARY POLICY ALTERNATIVES Prepared for the Federal Open Market Committee By the staff Board of Governors of the Federal Reserve System STRICLY CONFIDENTIAL (FR) March 28, 1986 CLASS I - FOMC MONETARY POLICY ALTERNATIVES Recent Developments (1) After essentially no growth in January, M1 subsequently accelerated, expanding at annual rates of 7-1/4 percent in February and an estimated 14-1/2 percent in March. As a result, M1 grew from November to March above its 7 percent short-run objective--leaving this aggregate somewhat over the upper bound of its 3 to 8 percent long-run target cone. Given the staff's first-quarter GNP forecast, M1 velocity is estimated to have declined at around a 1-3/4 percent annual rate this quarter, compared with its drop of 6 percent over all of 1985. Expansion in M2 also picked up in February and March, but on balance growth was quite modest and the aggregate remained below both the Committee's short-run path and long-run cone. Growth of M3, meanwhile, remained moderate throughout the quarter, with the aggregate essentially on the Committee's short-run path and ending the quarter around the middle of its long-run range. (2) The recent strength of M1 reflected mainly a sharp acceler- ation in demand deposits following their runoff in January. OCDs so far in 1986 have grown at about the relatively substantial pace of the last few months of 1985. Available information continues to suggest that the January deregulation of NOW accounts has had little overall impact on M1, with depositories to date generally not posting more liberal contract terms on these accounts. M2 growth was held down by sluggishness in its nontrans- actions component through most of the quarter. Inflows to retail deposits again appear to have been depressed by household investments in bond and stock mutual funds; in the early months of the year, bond and stock funds -2- KEY MONETARY AGGREGATES (Seasonally adjusted annual rates of growth) QIV'85 to Mar.P Mar.P Nov. to Mar.P 7.3 14.6 9.0 8.9 1.4 3.6 8.0 5.0 4.9 8.2 6.1 7.6 7.3 7.2 Jan. Feb. M1 1.1 M2 M3 Money and credit aggregates Domestic nonfinancial debt 17.9 10.1P 9.3 15.0 14.5 Bank credit 15.3 4.3 10.0 11.7 11.6 19.6 8.9 20.0 20.9 18.2 Total reserves 4.8 11.9 15.9 13.8 13.6 Monetary base 8.9 7.6 9.1 8.6 8.7 273 391 243 - 1111 1096 879 Reserve measures Nonborrowed reserves1 Memo: (Millions of dollars) Adjustment and seasonal borrowing Excess reserves - Note: Monthly reserves measures, including excess reserves and borrowing, are calculated by prorating averages for 2-week reserve maintenance periods that Data incorporate adjustments for discontinuities associated overlap months. with implementation of the Monetary Control Act and other regulatory changes to reserve requirements. 1. Includes "other extended credit" from the Federal Reserve. p--preliminary. -3continued to increase at about the elevated 50 percent annual rate that has prevailed since the spring of last year. Within the non-M2 component of M3, large time deposits decelerated over the past two months; while there was a sharp pickup at thrifts, outstanding CDs at commercial banks declined a little. (3) The expansion in total debt of domestic nonfinancial sectors slowed appreciably over the first quarter following its extraordinary growth late last year. Tax-exempt borrowing was virtually nil, on net, and federal government borrowing dropped off as the Treasury drew down its cash balance to meet a substantial portion of the first-quarter deficit. Although businesses borrowed unusually heavily in long-term bond markets, much of this borrowing substituted for shorter-term sources of credit such as bank loans and commercial paper or served to refund existing long-term debt; on a net basis, credit market borrowing by businesses slowed as the financing gap remained moderate and merger activity abated. Equity issuance, spurred by soaring stock prices, also lessened business needs for borrowed funds. Falling interest rates stimulated mortgage activity, including refinancings, as interest rates in this market reached the lowest level in seven and a half years. (4) Total and nonborrowed reserves grew at about a 14 percent annual rate on average in February and March, mirroring the strength in transactions deposits. Throughout the intermeeting period the nonborrowed reserves path was constructed on the assumption of $300 million of adjustment plus seasonal borrowing. The allowance for excess reserves was raised to $900 million about midway through the period in view of the recent high levels of excess reserves; in part, this might reflect needs for larger balances related to an expanded volume of clearings associated -4with very heavy financial transactions. In the three complete maintenance periods since the last FOMC meeting borrowing averaged $353 million. (5) The federal funds rate remained mainly between 7-3/4 and 8 percent during the first half of the intermeeting period, but fell to around 7-3/8 percent following the reduction in the discount rate to 7 percent on March 7. Other short-term market rates have declined about 50 to 80 basis points since the last FOMC meeting and the prime rate was reduced from 9-1/2 to 9 percent. Long-term rates have dropped more sharply, reacting to further weakness in oil prices, against a backdrop of mixed economic news and declines in some aggregate price indexes. Corporate and Treasury bond yields have dropped 100 to 150 basis points, while rates for fixedrate mortgages have declined around 75 basis points. Broad stock price indexes surged over the intermeeting period, increasing about 10 percent. (6) The trade-weighted average value of the dollar, though firming somewhat in recent days, dropped about 2 percent further on balance since the last FOMC, bringing its total decline since the September G-5 meeting to about 15 percent. February 1985 peak. It is now nearly 30 percent below its During the intermeeting period the dollar reached a postwar low against the yen, prompting statements of concern and hints of officials. action by Japanese These developments contributed to the recent more general appreciation in the dollar. Policy alternatives (7) The table below gives three alternative specifications for growth in the monetary aggregates fromMarch to June, along with associated federal funds rate ranges. More detailed data, including growth rates implied by each alternative from the fourth-quarter base of the Committee's long-run ranges to June, can be found on the table and charts on the following pages. Alt. A Alt. B Alt. C Ml 9 7-1/2 6 M2 M3 8 7-1/4 7 6-1/2 6 5-3/4 5 to 9 5-1/2 to 6 to 10 Growth from March to June Associated federal funds rate range 9-1/2 (8) Under alternative B, which assumes maintenance of about the current degree of pressure on bank reserve positions as indexed by $300 million in borrowing, M1 would be expected to grow at about a 7-1/2 percent annual rate from March to June. This would leave it a little upper end of its 3 to 8 percent longer-run range in June. percent over the three months would lift end of its long-run range. above the M2 growth at 7 this aggregate to around the lower M3 would be somewhat below the midpoint of its range. (9) With reserve conditions unchanged under alternative B, federal funds would be expected generally to trade in the 7-1/4 to 7-3/8 percent area. Other interest rates may change little, although some reversal of recent declines cannot be ruled out, and on foreign exchange markets the dollar may remain around current levels for a time. To some degree, a further easing in monetary policy over coming months may be built into the Alternative Levels and Growth Rates for Key Monetary Aggregates Alt. A Alt. B Alt. C Alt. A Alt. B Alt. C Alt. A Alt. B Levels in billions 1986-January February March 627.1 630.9 638.6 627.1 630.9 638.6 627.1 630.9 638.6 2568.4 2576.1 2593.2 2568.4 2576.1 2593.2 2568.4 2576.1 2593.2 3222.1 3238.6 3259.0 3222.1 3238.6 3259.0 3222.1 3238.6 3259.0 April May June 643.1 647.4 653.0 642.8 646.5 650.6 642.5 645.6 648.2 2610.1 2627.1 2645.1 2609.2 2624.2 2638.6 2608.3 2621.3 2632.1 3278.8 3298.5 3317.7 3278.0 3295.8 3312.0 3277.2 3293.0 3306.3 Monthly Growth Rates 1986-January February March 1.1 7.3 14.6 1.1 7.3 14.6 1.1 7.3 14.6 1.4 3.6 8.0 1.4 3.6 8.0 1.4 3.6 8.0 8.2 6.1 7.6 April May June 8.5 8.0 10.4 7.9 6.9 7.6 7.3 5.8 4.8 7.8 7.8 8.2 7.4 6.9 6.6 7.0 6.0 4.9 7.3 7.2 7.0 10.5 14.5 10.6 7.7 9.1 10.5 14.5 10.6 7.7 8.4 9.0 7.7 10.5 9.0 9.0 7.7 9.4 7.5 9.0 7.7 8.2 6.0 8.9 9.1 8.9 8.4 8.9 7.7 Quarterly Ave. Growth Rates 1985-Q2 10.5 14.5 Q3 10.6 Q4 7.7 1986-Q1 9.9 Q2 Nov.85 Dec.85 Feb.86 Mar.86 Mar.86 Mar.86 June 86 June 86 Q4 85 to Mar. 86 Q4 85 to June 86 1986 Target Ranges: 3 to 8 Alt. C 5.5 7.7 6.4 7.2 6.5 6 to 9 6 to 9 1 ACTUAL AND TARGETED M1 Chart Bi ll iona of do I ars 1 690 -4 680 - ACTUAL LEVEL --- PROJECTED LEVEL * SHORT RUN ALTERNATIVES -H 670 660 S *A *B 650 640 630 620 610 I I I O N 1985 D I J I 1 F 1 M A I M I J 1986 I J I A I S I 0 I N 600 D Chart 2 ACTUAL AND TARGETED M2 B 1I1 ions of do lars I 2850 2800 ACTUAL LEVEL --- PROJECTED LEVEL * SHORT RUN ALTERNATIVES -- 2750 -- 2700 2650 - C.,. -- 2600 2550 ^ «« - I 0 N 1985 I I D I I i I I I I J F M A M J J 1986 A I S I O = I I I i N 2500 D 2450 Chart 3 ACTUAL AND TARGETED M3 Bill ions of doI Iars 1 3600 - ACTUAL LEVEL -- PROJECTED LEVEL * SHORT RUN ALTERNATIVES -- 3500 3400 3300 3200 I 0 N 1985 I I D I J I F I M I A I M I J J 1986 I I A I S I O I N 3100 D Chart 4 DEBT BI ll ion of dol lar I 7700 -- ACTUAL LEVEL 7500 --- PROJECTED LEVEL -- 7300 -7100 -- 6900 -- 6700 I 0 I N 1985 I D J I I F M I A I M I J I J 1986 1I A S I O L N 6500 D existing interest rate structure. Thus, should the market come to view such an easing as unlikely, the 3-month bill rate could back up into the 6-1/2 to 6-3/4 percent area. Bond yields may come under upward pressure as well, though they are likely to continue to be influenced importantly by movements in oil prices. On the supply side of the bond market, offerings are expected to remain relatively heavy. Though corporate issuance may ease back from recent record levels reached in response to the decline in rates so far this year, Treasury bond issuance will pick up now that the Congressional ceiling on high coupon bonds has been lifted. (10) M1 growth in the March to June period under this alternative is expected to remain at about the same rate on average as over the first three months of the year. The transactions demand for M1 is projected to slacken, given the slowing in nominal GNP growth expected by the staff in the second quarter and probably also a drop-off in the heavy volume of financial transactions that accompanied the surge in stock and bond prices of recent months. On the other hand, demands for M1 are likely to be boosted somewhat over the next few months by the recent declines in short-term interest rates. The accompanying flattening of the yield curve, by working to reduce offering rates on small time deposits, would also seem to add to demands for interest-bearing M1 balances.1 On a quarterly average basis, M1 would be expected to expand at a 9 percent annual rate in the second quarter under alternative B, implying a drop in velocity at around a 4 percent annual rate, given the staff GNP forecast. 1. M1 is not expected to be affected by limits on daylight overdrafts that went into effect on March 27. Only a small number of institutions are constrained by the initial caps. Moreover, results of a survey of large institutions indicate that, in adapting to the new regulation, banks are not looking to higher demand deposits but are emphasizing other approaches, such as restructuring federal funds transactions and adjusting the timing of payments. (11) M2 under alternative B would be expected to increase considerably more rapidly from March to June than its relatively sluggish rate of growth in the first quarter, partly as shifts to bond and stock investment vehicles moderate as portfolio adjustments to the recent surge in securities prices abate. 1 The continued moderate M3 growth under this alternative presumes that bank credit growth will remain relatively subdued. (12) The debt of domestic nonfinancial sectors is likely to grow over the second quarter at around the much reduced pace of the first quarter, although the level of debt in June would still the upper limit of the FOMC's monitoring range. be somewhat above Federal borrowing is projected to be larger on a seasonally adjusted basis in the spring than in winter, when a sharp drop in the Treasury cash balance had financed a substantial portion of the deficit. Municipal security issuance also is likely to pick up a bit from the early months of the year. On the other hand, households, while apt to maintain a relatively steady pace of fixed-rate mortgage borrowing in response to recent rate declines, are expected to ease demands for consumer credit in light of their already heavy debt burden. Businesses will continue to focus on longer-term markets as sources of funds, but overall net borrowing should be kept subdued by a continued modest financing gap and diminishing merger and acquisition activity. 1. The final phase-out of savings deposit rate ceilings on April 1 is not expected to have a perceptible impact on money growth, given the wide variety of deregulated accounts already available and the likelihood that funds shifted into newly deregulated accounts will come predominantly from other M2 components. (13) Alternative A encompasses some easing of reserve conditions, with discount window borrowing dropping to minimum levels of $100 to $150 million, and the federal funds rate averaging around, or a little the 7 percent discount rate. below, While some monetary easing may be anticipated in the current structure of market rates, those interest rates probably would decline further under this approach, partly on more widespread expectations of another reduction in the discount rate. Depending on the pervasive- ness of such expectations, the 3-month Treasury bill rate may fluctuate around a 6 to 6-1/4 percent area. Long-term rates are not likely to decline by more than short-term rates, and probably by less, assuming no further change in inflation expectations. The dollar would probably again come under donward pressure, particularly if other leading central banks did not also ease monetary conditions. (14) M1 growth would be expected to strengthen under alternative A to around 9 percent over March to June, noving this aggregate further above the upper end of its long-run range, though within its parallel band. Even more rapid growth could occur, given the very narrow spread that could develop between rates on market instruments, MMDAs and time deposits and those on NOW accounts--especially if institutions are reluctant to reduce the latter in the fluid competitive environment following full deregulation. Strong demands for money may well continue later in the year partly in lagged response to the rate declines associated with this alternative. Under those circumstances, and particularly if transactions- related demands were also on the strong side, greater restraint on reserve positions and an increase in interest rates might be needed at some point later in the year if M1 were to be constrained within its range for 1986. longer-run -10- (15) Under alternative A, the stronger growth of M2--bolstered by inflows from market instruments mainly into MMMFs and MMDAs--would move this aggregate up into its longer-run range by June. of M3 would probably be less. The acceleration Bank credit growth through the second quarter would be further restrained by softness in business loans as corporations rely more heavily on bond financing in response to a further drop in long-term rates. (16) Alternative C entails a firming of reserve conditions characterized by discount window borrowing rising to around $500 million. The federal funds rate would probably move up to the 7-3/4 to 8 percent area. Such a tightening is not anticipated by market participants, and substantial upward rate movements would probably occur. rate would rise to above 7 percent. The 3-month bill Long-term rates would also back up considerably for a time, but upward pressures should abate as corporate bond issuance drops off and as incoming data continue to suggest low inflation. The foreign exchange value of the dollar would tend to firm over the short run. (17) M1 growth under the money market and reserve conditions of alternative C would be expected to slow over the March to June period, bringing this aggregate to within its long-run range by June. M2 would remain noticeably below the lower end of its though within its parallel band. Moreover, if However, long-run range, growth of M2 within its longer-run range for the year is to be attained, the higher level of rates is likely to prove unsustainable, particularly if restrain economic expansion significantly. it worked to -11- Directive language (18) Draft language for the operational paragraph, with the usual alternatives, is shown below with suggested deletions from the current directive indicated in strike-through form and proposed additions in caps. The proposed format follows that used at the December and February meetings in highlighting the uncertainties surrounding the behavior of M1. With regard to the issue of intermeeting adjustments in the degree of reserve pressure, the draft retains the symmetrical language of the last directive. An asym- metric approach could of course be indicated by insertion of "might" or "would" as appropriate. OPERATIONAL PARAGRAPH In the implementation of policy for the immediate future, the Committee seeks to DECREASE SOMEWHAT (Alt. A)/maintain (Alt. B)/ INCREASE SOMEWHAT (Alt. C) the existing degree of pressure on reserve positions. This action is expected to be consistent with growth in M2 and M3 over the period from [DEL: Novemberto] March TO percent, ____ 6] ____ percent and [DEL: 7] JUNE at annual rates of about[DEL: respectively; while the behavior of M1 continues to be subject to unusual uncertainty, growth at an annual rate of about [DEL: ____ 7] percent over the period is anticipated. Somewhat greater reserve restraint or somewhat lesser reserve restraint might be acceptable depending on behavior of the aggregates, the strength of the business expansion, developments in foreign exchange markets, progress against inflation, and conditions in domestic and international credit markets. Chairman may call for Committee consultation if it The appears to the -12Manager for Domestic Operations that reserve conditions during the period before the next meeting are likely to be associated with a 6 to ____ 10] federal funds rate persistently outside a range of[DEL: ____ percent. TO Selected Interest Rates March 31, 1986 Percent Short-term Period Treaury bills eary b secondary market federal 1 3-month 2 I month 3 Long-Term CD secondary n 1-yer 4 r 3-month 5 money market comm. paper l-month U.S. government constant prime maturity yields loan fund 7 6 bank 8 0- 3-y r 9 1 year 10 30-year 11 corporate A utility offered 12 municipal Bond Buyer conventional home mortgages secondary primary market fixed-rate 14 13 fixed-rate 15 ARM 16 1985--High Low 9.21 7.06 9.13 7.34 8.83 7.22 8.31 7.00 10.75 9.50 11.19 8.24 11.95 9.07 11.89 9.34 13.23 10.62 10.31 8.85 13.57 10.52 13.29 11.09 11.14 9.17 1986--High Low 7.35 6.52 7.94 7.16 7.91 7.22 7.22 6.85 9.50 9.00 8.60 7.24 9.38 7.72 9.52 7.91 10.83 9.29 8.72 7.55 10.97 9.74 10.99 10.01 9.09 8.58 1985--Feb. Mar. 8.56 9.06 8.69 9.02 8.46 8.74 7.80 7.97 10.50 10.50 10.55 11.05 11.51 11.86 11.47 11.81 12.76 13.17 10.07 10.23 13.05 13.48 12.92 13.17 10.63 10.90 Apr. May June 8.44 7.85 7.27 8.49 7.92 7.44 8.31 7.80 7.34 7.97 7.71 7.21 10.50 10.31 9.78 10.49 9.75 9.05 11.43 10.85 10.16 11.47 11.05 10.45 12.75 12.25 11.60 9.85 9.46 9.18 13.07 12.65 11.88 13.20 12.91 12.22 10.83 10.55 9.89 July Aug. Sept. 7.31 7.48 7.51 7.64 7.61 7.93 7.58 7.73 7.83 7.03 7.08 7.10 9.50 9.50 9.50 9.18 9.31 9.37 10.31 10.33 10.37 10.50 10.56 10.61 11.64 11.76 11.87 9.20 9.44 9.61 11.94 12.04 12.11 12.03 12.19 12.19 9.68 9.52 9.52 Oct. 7.45 7.33 7.16 7.88 7.81 7.80 7.81 7.84 7.87 7.15 7.21 7.23 9.50 9.50 9.50 9.25 8.88 8.40 10.24 9.78 9.26 10.50 10.06 9.54 11.82 11.35 10.93 9.54 9.22 8.96 11.97 11.51 10.83 12.14 11.78 11.26 9.50 9.38 9.19 7.21 7.11 7.82 7.69 7.78 7.70 7.15 7.11p 9.50 9.50 8.41 8.10 9.19 8.70 9.40 8.93 10.74 10.21 8.50 7.99 10.79 10.45 10.88 10.71 9.01 8.93 Dec. 1986-Jan. Feb. 1985-Dec. 18 25 7.06 7.10 7.66 7.76 7.78 7.83 7.25 7.21 9.50 9.50 8.27 8.24 9.16 9.07 9.46 9.34 10.68 10.62 8.90 8.85 10.72 10.52 11.14 11.09 9.17 9.17 1986-Jan. I 8 15 22 29 7.08 7.14 7.35 7.25 7.14 7.77 7.76 7.94 7.84 7.80 7.91 7.78 7.83 7.80 7.73 7.22 7.21 7.09 7.16 7.15 9.50 9.50 9.50 9.50 9.50 8.23 8.27 8.60 8.48 8.36 9.01 9.05 9.38 9.26 9.15 9.28 9.29 9.52 9.42 9.38 10.59 10.83 10.75 10.82 10.67 8.72 8.51 8.54 8.46 8.29 10.52 10.82 10.97 10.87 10.75 10.81 10.75 10.99 10.97 10.89 9.04 9.02 9.09 8.93 8.97 Feb. 5 12 19 26 7.08 7.19 7.12 7.08 7.72 7.76 7.69 7.66 7.70 7.72 7.72 7.68 7.15 7.09 7.12 7.09 9.50 9.50 9.50 9.50 8.21 8.23 8.11 8.04 9.03 9.00 8.72 8.46 9.30 9.22 10.58 10.27 10.01 9.48 8.24 8.09 7.95 7.66 10.67 10.57 10.47 10.07 10.85 10.80 10.68 10.51 8.98 9.00 8.90 8.84 5 12 19 26 6.88 6.62 6.59 6.52 7.56 7.26 7.16 7.17 7.62 7.28 7.23 7.22 7.11 7.06 6.93 6.85 9.50 9.07 9.00 9.00 7.66 7.31 7.29 7.24 8.06 7.83 7.78 7.72 8.22 8.04 7.97 7.91 7.57 7.55 8.13 7.69 10.02 9.74 9.87 9.82 10.20 10.01 10.01 10.10 8.67 8.58 8.67 8.67 Daily-Hat. 21 27 28 6.54 6.37 I 7.17 7.14 7.19 7.27 9.00 9.00 7.28 7.13 C 7.80 7.49 7.98 7.63 Nar. K - E NOTE: Weekly data for columns 1 through 11 are statement week averages. Data in column 7 are taken from Donoghue's Money Fund Report. Columns 12 and 13 are 1-day quotes for Friday and Thursday, respectively, following the end of the statement week. Column 13 la the Bond Buyerrevenue index. Column 141s the FNMA purchase yield, plus loan servicing fee, on 30-day mandatory delivery commitments on tne Friday following the end of the statement week. Column 15 Is the average contract rate on new commitments for fixed-rate mort- T 8.96 8.67 L 9.56 9.37r 9.38 9.29 0 S E D gages (FRMs) with 80 percent loan-to-value ratios at a sample of savings and loans. Column 16 Is the average Initial contract rate on new commitments for one-year, adjustable-rate mortgages (ARMs) at S&Ls offering both FRMs and ARMs with the same number of discount points. FR 1367 (12/85) Strictly Confidential (FR)Class II FOMC Money and Credit Aggregate Measures Seasonally adjusted MAR. Period PERCEBT ANNUAL GRORTH: AWUIUALLY (tUI TO UV) 1983 1984 1985 QUARTBILY AEIRAGE 2ND UT. 1985 3RD UTB. 1985 4TH QTI. 1985 1ST QTR. 1986 PE HONTHLI 1985--EAR. APR. nAT JUIB JULY AUG. SEPT. OCT. NOV. DEC. 1986--JA.I FEB. M1 M2 1 2 10.4 5.4 11.9 10.5 2.6 0.2 8.2 18 3A 9.9 10.5 7.7 10.4 11.9 8.5 10.6 10.8 9.9 21.5 5.5 7.7 6.4 7% 6.0 7.8 9.5 9.7 9.6 8.8 8.0 1.9 6.0 9.3 6.1 9.0 9.4 11.6 4.9 13.4 9.5 10. 6.5 8.2 2.0 16.4 6.1 7.3 14.2 17.3 10.8 17.3 13.3 5.1 11.5 12.6 3.8 2.5 8.6 13.3 8.3 9.4 6.7 4.2 5.9 7.0 3.0 1.0 7.0 11.9 7.4 6.8 4.6 3.9 4.0 5.2 10.4 0.8 0.6 2.3 -3.7 -2. 1 11.7 11.0 6.1 7.0 5.1 2.1 7.0 11.0 5.9 7.9 7.7 5.6 5.9 7.0 1.1 7.3 15 1.4 3.6 8 1.4 2.4 6 35.7 16.3 6 8.2 6.1 8 1924.2 1930.6 1939.0 1941.3 1945.2 627.8 3166.1 3181.6 3200.2 3222. I 3238.6 624.8 6J1.3 630.5 634.1 3 1.0 21.2 3.9 L 6 5.0 8.0 4.6 3 / WREELY LEVELS ($BXLLIONS) 1986--FEB. 3 10 17 24 10P 17P 12.8 8.8 7.6 2538.3 25b0.7 2565.5 2568.4 2576.1 631.0 634.7 653.6 662.5 7.0 12.2 11.1 16.6 15.3 4.3 3761.6 3800.0 3835.3 1844.4 18U69.6 1895.5 1919.6 1926.4 1986 Domestic nonfinancial debt U.S. 2 govenment other 2 total 5 6.3 9.5 6.0 4 / DEC. 1986--JA8. r B. HAR. 12.2 8.0 8.6 Bank credit total loans and Invetmente'_ 7 M3 14.5 10.6 7% 614.1 620.0 626.5 627.1 630.9 1985--OCT. Money stock measures and liquid assets nontransactions components I___ n M2 In M3 only 1 3 1 4 31, 8 9 10 8.5 13.8 13.6 11.2 14.3 13.9 12.5 14.6 15.0 12.0 12.3 14.2 12.1 12.9 14.4 8.7 11.9 15.8 14.4 Ib.7 13.9 1.9 8.9 24. 1 29.1 11.9 11.2 12.3 12.5 12.4 13.1 13.0 12.1 12.4 15.9 21.8 15.8 17.0 9.5 1518.0 1548.5 1586.0 60 8. 5 162 .3 12.4 11.5 11.7 12.0 12.8 13.3 13.4 13.4 19.6 18.5 10.8 5076.1 5132.9 5216.7 5297.2 5344.9 18.2 10.5 6594.2 6681.5 6802.7 6905.7 6966.2 631.9 637.6 638.4 ARNUAL RATES FOR BANK CREDIT ARl ADJUSTBD FOR A TRANSfBR Or LOANS FRO CONTIBETAL ILLINOIS NAtIOEAL BANK TO THE FDIC BEGINNING SEPTEBBBER 26, 1984. DBBT DATA AlE O0 A BONTBLI AVERAGE 8ASIS, DEB(IBD B! ATERAGING EtD-OP-HOWTH LEVELS OF ADJACKRT auuTHS. AND HAVE BERN ADJOSTD2 TO RBEOVB DISCONTINUITIES. P-PRBLIINART PE-PRELIINARE BSTINATE Components of Money Stock and Related Measures Billions of dollars, seasonally adjusted unless otherwise noted Period Currency Other Overnight Demand checkable RPs and MMDAs deposits deposits Eurodollars NSA Savings deposits NSA 1 2 3 4 5 147.2 157.8 169.7 243.4 247.1 268.4 130.2 144.2 176.2 53.6 56.1 66.5 376.2 405.1 508.6 309.7 291.0 160.7 161.3 251.2 251.4 152.2 154.1 64.6 63.4 APR. AAI JUNE 161.9 163.2 164.4 251.8 255.4 259.0 156.5 158.4 161.8 JULT AUG. SEPT. 165.3 166.9 167.7 260.4 263.1 266.4 OCT. 168.7 169.8 170.6 171.9 172.9 ANMUALLr (412 1983 1984 1985 6 MAR. Small denomlnation time Money market mutual funds, NSA gineral Institupurpose, tions Large denomination time deposits' nd broker dealer' only deposit9 7 8 9 10 11 12 13 1 Term RPs NSA Term Eurodollars NSA Savings bonds 31, 1986 Shortterm CommerTreasury clal paper securities 14 Bankers acceptances 15 16 QTR): 303.2 775.0 881.8 877.3 138.2 161.7 176.8 43.2 57.7 64.1 325.2 409.8 433.0 48.0 65.6 62.7 89.3 81.8 78.8 70.9 74.0 79.0 211.1 268.6 295. 1 127.5 158.7 199.6 44.0 44.2 42.7 450.5 400. I 489.9 289.7 885.2 885.0 175.1 177.6 62.2 59.5 416.9 421.0 58.4 58.7 81.3 84.7 74.9 75.3 270.4 274.8 164.8 169.8 45.0 46.3 57.8 61.3 60.8 462.5 466.4 478.1 289.0 293.6 887.6 889.5 890.3 176.2 172.2 175.4 59.6 63.5 67.1 425.9 425.0 422.7 59.8 57.7 57.1 80.9 81.4 79.2 75.7 76. 1 76.5 276.0 277.4 282.6 168.9 168.6 164.7 45.9 44.5 42.8 164.8 169.0 171.5 60.7 63.6 64.1 487.2 495.2 499.8 296.7 299.7 300.3 888.0 880.9 878.3 175.8 176.8 176.7 65.0 63.6 62.3 418.3 421.0 425.6 55. 7 57.1 58.5 78.8 80.0 80.2 76.7 77.2 78.0 279.9 278.1 281.3 171.1 182.0 186.6 42.2 42.2 42.5 266.0 267.8 271.5 173.6 17b.b 178.5 64.6 65.6 69.2 504.2 509.6 512.1 302.3 303.7 303.6 875.7 876.0 880.3 177.0 176.8 176.5 63.3 64.5 64.6 429.7 432.9 436.4 59.5 63.0 65. 7 79.4 79.8 77.2 78.5 79.0 79.5 281.4 299.5 304.4 191.7 196.8 210.2 43.9 43.1 41.1 268.9 269.1 180.4 183.U 67.2 67.0 515.8 53b.5 304.0 304.9 886.1 891.1 177.7 180.9 66.0 67.2 447.8 451.0 68.5 70.4 75.9 78.7 HOTHLY 1985-F7B. DEC. 1986-JAN. FEB. 1/ 290. 8 INLUUES RETAIL REPURCHASE AGREEBBNTS. ALL IRA AND KWUGU ACCUUNTS AT COHBIRCIAL BANKS AND THRIFT INSTITUTIONS ABE SUOTBACTED FROM SHALL TIBE DEPOSITS. 2/ EXCLUDES IRA AND KEOGH ACCOUNTS. 3/ NST OF LARGE DENORINALUN TIME DEPOSITS HELD B P-PBELIlINABR HONI MAARKET MUTUAL FONDS AND THRIFT INSTITUTLUNS. STRICTLY CONFIDENTIAL (FR) II-FOMC Net Changes in System Holdings of Securities 1 CLASS Millions of dollars, not seasonally adjusted March 31, Treasury coupons net purchases 3 Treasury bills net change eriod Perio n1-5 Federal agencies net purchases4 5-10 over 10 total 5-10 over 10 total 1-year 1-5 5-10 over 10 total 29 - 24 - 668 494 - - - -- - 1980 1981 1982 -3,052 5,337 5,698 912 294 312 2,138 1,702 1,794 703 393 388 811 379 307 4,564 2,768 2,803 217 133 -- 398 360 1983 1984 .1985 13,068 3,779 14,596 484 826 1,349 1,896 1,938 2,185 890 236 358 383 441 293 3,653 3,440 4,185 -- -- -2,044 7,183 4,027 5,431 961 245 -143 465 846 6 868 -100 108 6 345 -96 -197 1,326 1,295 12 1,552 1,171 - - -- -- .. - - - - - -- -- - - - -- - - - -- 1985--QTR. I II III IV 1985--Sept, - - - - 143 868 --345 197 1552 -- - - - -868 - 345 - 197 - Oct. Nov. Dec. -265 1,180 4,515 1986--Jan. Feb. 61 -3,277 -- 3,699 442 170 -- 1985--Dec. 4 11 18 - 143 -- Feb. Mar. LEVEL-Mar. 1 8 15 22 29 216 5 12 19 26 -940 -1650 -195 -717 134 152 -- -- 5 12 19 26 138 26 81.7 -- - -- - -- 22.9 -- 32.3 - -- - -- -- - -- - 15.1 --- 22.0 1. Change from end-of-period to end-of-period. 2. Outright transactions In market and with foreign accounts, and redemptions (-) In bill auctions, 3. Outright transactions In market and with foreign accounts, and short-term notes acquired In exchange for maturing bills. Excludes redemptions, maturity shifts, rollovers of maturing coupon Issues, and direct Treasury borrowing from the System. 4. Outright transactions In market and with foreign accounts only. Excludes redemptions and maturity shifts. - - - 92.4 2,462 684 1,461 16,342 6,964 18,619 -5,445 --735 8,409 3,962 462 -350 -3,446 6,336 1,450 3,001 -- - .. -- -- - 6,983 -- -- -- - 1,171 -1,578 - - - - -265 1,180 6,068 -732 -718 7,785 _- -- - - -- -- - - - - --- 2,035 8,491 8,312 -- - Net RPs - 1,552 -- " --- - - 5 1986--Jan. - - Net change outright holdings total' 1986 - - - - - - --- --- - -- -- --- --- -- -- - - - - 2.7 3.8 1.3 .4 8.2 61 3,466 -3,277 198 3,699 1,995 170 15 12,098 -6,194 607 -2,548 216 134 152 -- 5,075 -4,999 3,037 4,896 -4,768 -940 -1,650 -195 -717 -7,440 3,646 119 1,576 -----138 -1,308 4,809 187.0 -5,405 3,644 -1.0 5. In addition to the net purchase of securities, also reflects changes In System holdings of bankers' acceptances, direct Treasury borrowing from the System and redemptions (-) of agency and Treasury coupon Issues. 6. Includes changes In RPs(+), matched sale-purchase transactions-)and matched purchase sale transactiona(+).
@FedFRASER