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Strictly Confidential (FR) Class I FOMC April 13, 1979 MONETARY AGGREGATES AND MONEY MARKET CONDITIONS Prepared for the Federal Open Market Committee By the staff Board of Governors of the Federal Reserve System STRICTLY CONFIDENTIAL (FR) April 13, 1979 CLASS I - FOMC MONETARY AGGREGATES AND MONEY MARKET CONDITIONS Recent developments (1) M-1 grew in March at a ¾ per cent annual rate, but data for early April suggest an acceleration in growth. For the March-April period, M-1 is expected to increase at a 3¾ per cent annual rate, just below the low end of the range adopted by the FOMC. On the other hand, M-2 over the two months appears to be growing at around the midpoint of the range adopted by the FOMC. Recent growth of the interest-bearing component of this aggregate has been associated with a marked slowing of outflows of savings deposits and continued rapid expansion in Money Market Certificates (MMCs). at about the 9 At S&L's and MSB's, combined deposit growth remained per cent rate of the preceding four months. Comparison of FOMC Policy Ranges for March-April to Latest Staff Estimates Ranges Latest Estimates M-1 4 to 8 3.7 M-2 3½ to 7½ 5.5 Federal funds rate (per cent per annum) 10 or a bit higher Avg. for statement week ending 10.09 March 21 28 10.00 9.95 April 4 9.93 11 (2) Growth of commercial bank credit decelerated sharply to a 3 per cent annual rate in March, as real estate and business lending expanded at much reduced rates. With loan expansion weakening and inflows to deposits subject to ceilings improving, managed liabilities rose by less than one-third of the $7 billion average increase during -2the first two months of the year. Banks permitted outstanding CD's to decline in March, while continuing to rely on Eurodollars and RP's to supplement their loanable funds. (3) The Manager of the System Open Market Account has continued to aim for a weekly average Federal funds rate of 10 per cent or a bit higher. In early April, projections for the monetary aggregates indicated growth of M-1 at the bottom of its range over the March-April period and of M-2 at slightly below the midpoint of its range. On April 6, the FOMC concurred in the Chairman's view that projections at that time were not sufficiently weak to call for a change in the System's funds rate objective. (4) Despite the modest strengthening of the monetary aggregates, required reserves are expected to decline at a 3 per cent annual rate over the March-April period, reflecting the fact that deposit growth was mostly at nonmember banks and that reserves were released by a decline in outstanding negotiable CD's. Both nonborrowed and total reserves also are expected to decline--by annual rates of 1 respectively. and 3 per cent, With currency expected to grow at a 9 per cent annual rate over the March-April period, however, the monetary base is expected to expand at a 5 per cent rate, continuing this year's much reduced rate of expansion. (5) Short-term interest rates have fluctuated fairly widely since the March FOMC meeting, and on balance have risen somewhat. Rates on short-dated Treasury bills increased 15 to 20 basis points as foreign official accounts sold more than $5 billion of Treasury bills in late March and early April. CD and long maturity bill rates, in contrast, declined considerably in late March but have risen more recently, and are now 10 to 25 basis points above their levels at the time of the Committee meeting. The fluctuations of short-term interest rates appeared to be associated with shifts in market opinion on the likely response of monetary policy to incoming data on the economy. Bond and primary mortgage market yields have edged up since the March FOMC meeting. (6) The dollar has shown considerable strength in the exchange markets since the last FOMC meeting. The dollar's weighted average exchange value rose by more than 1 per cent at a time when there were also sales of $2 3/4 billion by the United States. Since the first of the year, foreign official holdings of Treasury securities have contracted by over $15 billion. (7) The table on the next page shows percentage annual rates of change in related monetary and financial flows over various time periods. 1977 & 1978 Average Past Twelve Months Mar. '79 over Mar. '78 Past Six Months Mar. '79 over Sept. '78 Past Three Months Mar. '79 over Dec. '78 Past Month Mar. '79 over Feb. ' 79 Nonborrowed reserves 4.9 1.5 -1.7 -5.7 1.4 Total reserves 6.0 3.2 -2.0 -4.4 1.9 Monetary base 8.7 7.8 5.8 4.3 4.6 7.6 4.6 -1.2 -2.8 0.7 M-1+ (M-1 plus savings deposits at commercial banks, NOW accounts at banks and thrift institutions, credit union share draft accounts, and demand deposits at mutual savings banks) 7.3 2.1 -3.8 -5.7 -1.7 M-2 (M-1 plus time deposits at commercial banks other than large CD's) 9.2 6.9 3.1 1.6 3.6 M-3 (M-2 plus deposits at thrift institutions) 10.6 8.4 5.8 4.5 6.0 M-4 (M-2 plus CD's) 10.3 8.3 5.0 2.4 -0.6 M-5 (M-3 plus CD's) 11.1 9.1 6.8 4.8 3.2 Month-end basis 11.3 11.1 8.6 11.2 2.9 Monthly average 11.4 10.9 9.7 11.6 3.5 Large CD's 1.4 1.5 1.8 0.8 -3.1 Nonbank commercial paper 0.3 4.3 0.5 0.4 1.5 Concepts of Money M-1 (Currency plus demand deposits)1/ Bank Credit Loans and investments of all commercial banks 2/ Short-term Market Paper (Monthly average change in billions) 1/ Other than interbank and U.S. Government 2/ Includes loans sold to affiliates and branches. NOTE: All items are based on averages of daily figures, except for data on total loans and investments of commercial banks, commercial paper, and thrift institutions--which are derived from either end-of-month or Wednesday statement date figures. Growth rates for reserve measures in this and subsequent tables are adjusted to remove the effect of discontinuities from breaks in the series when reserve requirements are changed. Prospective developments (8) The table below presents for Committee consideration three alternative specifications for the monetary aggregates and the Federal funds rate for the April-May period. Alternative B would maintain the Federal funds rate at about the 10 per cent level that has prevailed since late last year, while alternatives A and C, respectively, would ease and tighten money market conditions in coming weeks. (More detailed and longer-term data are contained in the tables on pp. 6 and 7.) Alt. A Alt. B Alt. C M-1 3½ to 7½ 3 to 7 2½ to 6½ M-2 5 to 9 4½ to 8½ 4 to 8 9¼ to 10 9¾ to 10 10¼ to 11 Ranges for April-May Federal funds rate (Intermeeting period) (9) As noted in the last Bluebook, the staff is assuming that the downward shift of money demand that became apparent late last year will not last as long or be as large as that which began in late 1974. Thus, we have projected some strengthening of M-1 growth for the policy period immediately ahead. Under alternative B, with the funds rate remaining at the prevailing level of about 10 per cent, we expect M-1 to increase over the April-May period in a 3 to 7 per cent annual rate range. For the second quarter as a whole, staff projections call for M-1 expansion under alternative B at about a 3¼ per cent annual rate, following the 2½ per cent rate of decline in the first quarter. expected to expand at an 11 With nominal GNP per cent annual rate, the implied growth of V-1 in the second quarter, as shown in the Appendix, would be around a 7½ per cent annual rate, as compared with a 13 per cent rate in the first Alternative Levels and Growth Rates for Key Monetary Aggregates M-l_ 1 M-2 Alt. A Alt. B Alt. C Alt. A Alt. B Alt. C 1979 March April May 359.0 361.1 362.3 359.0 361.0 362.0 359.0 360.9 361.7 879.7 885.5 889.7 879.7 885.2 889.0 879.7 884.9 888.3 1978 QIV 361.4 361.4 361.4 873.8 873.8 873.8 1979 QI QII QIII QIV 359.2 362.5 368.4 373.7 359.2 362.2 368.1 373.7 359.2 361.9 367.8 373.7 877.4 890.0 906.5 923.6 877.4 889.4 905.8 923.5 877.4 888.7 905.1 923.4 7.0 4.0 6.7 3.3 6.4 2.7 7.9 5.7 7.5 5.2 7.1 4.6 -2.4 3.7 6.5 5.8 -2.4 3.3 6.5 6.1 -2.4 3.0 6.5 6.4 1.6 5.7 7.4 7.5 1.6 5.5 7.4 7.8 1.6 5.2 7.4 8.1 0.6 6.2 0.4 6.4 0.3 6.5 3.7 7.6 3.6 7.7 3.4 7.8 3.4 3.4 3.4 5.7 5.7 5.7 Growth Rates Monthly: 1979 April May Quarterly Average: 1979 QI QII QIII QIV Semi-Annual: QIV '78-QII '79 QII '79-QIV '79 Annual: QIV '78-QIV '79 i/ The staff has assumed that over the longer-run policy period from QIV '78 to QIV '79 M-l growth will be reduced by about 2k percentage points by ATS. Alternative Levels and Growth Rates for Key Monetary Aggregates (cont'd) Bank Credit M-3 Alt. A Alt. B Alt. C March 1517.5 1517.5 1517.5 999.4 999.4 999.4 April May 1527.7 1535.9 1527.3 1534.7 1526.9 1533.6 1006.1 1012.9 1006.1 1012.6 1006.1 1012.4 1978 QIV 1493.3 1493.3 1493.3 967.4 967.4 967.4 1979 QI QII QIII QIV 1510.5 1536.1 1563.5 1590.9 1510.5 1535.1 1562.1 1590.6 1510.5 1534.1 1560.7 1590.4 993.1 1013.3 1035.8 1060.3 993.1 1012.8 1035.1 1058.4 993.1 1012.3 1033.6 1056.1 1979 Alt. A Alt. B Alt. C Growth Ratep Monthly: 1979 April 8.1 7.7 7.4 8.0 8.0 8.0 May 6.4 5.8 5.3 8.1 7.8 7.5 4.6 6.8 7.1 7.0 4.6 6.5 7.0 7.3 4.6 6.2 6.9 7.6 10.6 8.1 8.9 9.5 10.6 7.9 8.8 9.0 10.6 7.7 8.4 8.7 5.7 7.1 5.6 7.2 5.5 7.3 9.5 9.3 9.4 9.0 9.3 8.7 6.5 6.5 6.5 9.6 9.4 9.2 Quarterly Average: 1979 QI QII QIII QIV Semi-Annual: QIV '78-QII '79 QII '79-QIV '79 Annual: QIV '78-QIV '79 -8quarter. About 2 to 2 percentage points of the projected second quarter increase in V-1 reflects the prospective continued shift of demand deposits to ATS and NOW accounts. The remaining increase in velocity is still quite large and assumes a continued downward drift of money demand, though at a sharply decelerated pace. Growth Rates from March Required to Achieve Levels Implied by FOMC Longer-run Ranges for M-1 and M-2 Low End of Range Midpoint of Range High End of Range Achieve level by: M-1 May 1979 (in 2 mos.) September 1979 (in 6 mos.) 8.5 3.8 13.0 6.4 17.5 8.9 QIV '79 (end-point of longer-run range) 3.3 5.5 7.8 M-2 May 1979 (in 2 mos.) September 1979 (in 6 mos.) QIV '79 (end-point of longer-run range) (10) 10.8 6.9 15.3 9.4 19.8 11.9 6.4 8.7 10.9 As shown in the table above and in the chart on page 9 M-1 and M-2 under alternative B, would be unlikely by May to reach levels implied by the lower ends of their longer-run ranges. This is also true for alternatives A and C. The shortfall of growth in these aggregates since late last year requires that M-1 would have to expand at about an 8 per cent annual rate from March, and M-2 at an 11 per cent rate, to reach levels by May that are on the low end paths of the longer-run QIV '78 to QIV '79 ranges. Over a period as long as six months (March to September) the 9 Growth Ranges and Actual M-1 and M-2 M-1 Billions of dollars 1385 Alt. B. Range- . Q4 '78-Q4 '79 375 S4%% -a- 370 V % 365 -^ 21- % _ ---S**" -- -- '2 360 355 I I I I I I I I SI I 350 M-2 950 Q4 '78-04 '79 s8% 940 % 930 S % %- 920 --. 5% 910 - -- .- 900 - 890 880 870 I II O N 1978 D I J I F I M I A I M I 1979 I I J J A S . O 860 N D -11shortfall could be made up, and the level implied by the midpoint path of the longer-run ranges could be achieved, by M-1 growth at a 6 rate and M-2 growth at a 9 per cent rate. per cent annual Unless the downward shift in money demand continues to be very strong, or the economy weakens much more than projected, the staff believes that M-1 is likely to move into the Committee's longer-run range by late summer, given the current Federal funds rate. (11) a 4 to 8 Under alternative B, M-2 is expected to accelerate into per cent annual rate range in April-May. This reflects the expected strengthening of M-1, as well as continuation of the recent pick-up in growth of the interest-bearing component of M-2. The decline in outstanding savings deposits appears to be abating. And banks are expected to continue to be more active in the MMC market, as seems to be the case since the mid-March elimination of the rate ceiling differential on these deposits. Thrift institutions' deposit inflows, on the other hand, are expected to moderate in the months ahead, largely reflecting the mid-March regulatory actions.1/ Thus, their commitment activity is likely to remain limited over the near term, and in order to finance mortgage takedowns and continue to borrow. thrifts will likely reduce their liquidity Primary mortgage rates may continue to edge upward as deposit inflows to thrift institutions diminish. (12) Financial markets in the weeks ahead may be subject to some of the same conflicting pressures as in recent weeks--continued high 1/ Our projections have not taken into account any offsetting boost to deposit flows that might result from changes in deposit rate ceilings that have been proposed for public comment. -12- inflation, a strengthened dollar, and increased uncertainty about the future course of economic activity. In such an environment, even stability in the funds rate, as contemplated under alternative B, could be associated with relatively wide fluctuations in interest rates arising from changing expectations. Apart from expectational factors, underlying demand-supply forces appear in reasonable balance. A large paydown of Treasury cash management bills in the latter part of April may exert downward pressures on very short-term interest rates, but this could be offset by continued sales of bills by foreign official institutions should the dollar continue strong. Despite a seasonal budgetary surplus, the Treasury's (13) marketable coupon borrowing in the current quarter is expected to be moderately higher than in the first quarter as the Treasury builds up its cash balance and finances redemptions of nonmarketable issues by foreign accounts. On April 25, the Treasury will announce terms on its mid-May refunding--a routine operation to refund only $1.7 billion of maturing publicly held debt and probably also to raise about $2 to 3 billion of new cash. Borrowing by Federally-sponsored credit agencies this quarter is projected to recede from the high levels of the first quarter, and the slate of new corporate security offerings likely will remain moderate. (14) Alternative C contemplates a rise in the Federal funds rate to the midpoint of a 10¼ to 11 per cent range. would likely be in an annual rate range of 2 respectively. to 6 Growth in M-1 and M-2 and 4 to 8 per cent, Short-term interest rates probably would increase in line with the rise in the funds rate. to long-term rates. It is less clear what might happen They may rise some in sympathy with the increase in -13short rates. But it is equally likely that they may show little net change, or perhaps even decline some, if the market comes to believe that interest rates may peak sooner than otherwise. (15) Alternative A calls for a decline in the funds rate over the intermeeting period to the midpoint of a 9¼ to 10 per cent range. Growth in M-1 and M-2 would likely be in annual rate ranges of 3 and 5 to 9 per cent, respectively. to 7 An easing action might tend to reinforce views that a considerable weakening in economic activity is in prospect. As a result, short-term interest rates could decline sharply. Bond yields would be expected to decline in the short-run, as investors might feel that interest rates had peaked. However, such strength could be short-lived because many market participants would question the System's resolve to restrain inflationary pressures. Reflecting this latter concern, the dollar probably would lose strength in exchange markets. (16) The staff would expect that maintenance of the Federal funds rate at about 10 per cent over the remainder of the year would be consistent with M-1 growth for the QIV '78 to QIV '79 policy period at about the midpoint of the Committee's 1½ to 4½ per cent range.- A near- term increase in the funds rate,as under alternative C,likely would necessitate some decline of interest rates in the second half of the year in order to induce strength in the aggregates as the rate of growth of nominal GNP decelerates further. 1/ Under alternative A, however, On the basis of recent evidence, the staff has lowered somewhat its assumption regarding the impact of ATS shifts on M-1 growth, and now believes that such shifts will reduce M-1 by about 2½ percentage points over the QIV '78 to QI '79 period. In addition to ATS effects, we have assumed a downward shift of money demand for the entire year of 2 percentage points, most of which has already occurred, as indicated by the Board's quarterly econometric model. -14we would expect interest rates to rise later in the year to offset the stimulative effect on the aggregates of the near-term easing of money market conditions, if M-1 growth over the longer-run policy period is to be near the midpoint of its 1½ to 4 per cent range. -15- Directive language (17) Given below are suggested operational paragraphs for the directive in the customary form. Alternative language consistent with the short-run specifications of the alternatives discussed in the preceding section is shown for the Committee's objective for the Federal funds rate early in the period. At a later point, alternative language is also provided for placing main emphasis either on monetary aggregates or on money market conditions. The specifications adopted last month are shown in strike-through form. In the short run, the Committee seeks to achieve bank reserve and money market conditions that are broadly consistent with the longer-run ranges for monetary aggregates cited above, while giving due regard to the program for supporting the foreign exchange value of the dollar and to developing conditions in domestic financial markets. Early in the period before the next regular meeting, System open market operations are to be directed at maintaining the (A) (B) (C) (or ATTAINING A) weekly average Federal funds rate SLIGHTLY BELOW THE CURRENT LEVEL. at about the current level, SLIGHTLY ABOVE THE CURRENT LEVEL. Subsequently, operations shall be directed at maintaining the 9¾ to weekly average Federal funds rate within the range of [DEL: ____ TO ____ per cent. 10½] In deciding on the specific objective for the Federal funds rate the Manager shall be guided mainly by the relationship between the latest estimates of annual rates of growth March-April]APRIL-MAY period of M-1 and M-2 and the following in the[DEL: 4 to 8] ____ TO ____ per cent for M-1 and ranges of tolerance: [DEL: -16[DEL: 7½] to 3½____ TO ____ per cent for M-2. If, with approximately equal weight given to M-1 and M-2, their rates of growth appear to be Monetary aggregates emphasis significantly above or below the midpoints Money market emphasis CLOSE TO OR BEYOND THE UPPER OR LOWER LIMITS of the indicated ranges, the objective for the funds rate is to be raised or lowered in an orderly fashion within its range. If the rates of growth in the aggregates appear to be above the upper limit or below the lower limit of the indicated ranges at a time when the objective for the funds rate has already been moved to the corresponding limit of its range, the Manager will promptly notify the Chairman, who will then decide whether the situation calls for supplementary instructions from the Committee. Appendix Implied Velocity Growth Rates Alt. A Alt. B Alt. C 1978--III IV 10.2 1979--1 II III IV 12.9 (10.1) 7.1 (4.6) 1.8 (-0.5) 3.6 (1.3) 12.9 (10.1) 7.5 (5.0) 1.8 (-0.6) 3.3 (1.0) 12.9 (10.1) 7.8 (5.3) 1.8 (-0.6) 2.9 (0.7) 1978--II1 IV -0.6 6.9 -0.6 6.9 -0.6 6.9 1979--I II III IV 8.7 5.1 0.9 1.8 1.2 (9.1) 1.2 10.2 (9.1) 1.2 10.2 V-2 (GNP/M-2) Note: Figures in parentheses reflect V-I without ATS. (9.1) APR. 13, 1979 Table 1 Money and Credit Aggregate Measures Period Total Nonborrowed Money Stock Measures Bank Bank Reserves Credit Monetary Base Total Loans and M-1 M 1+ M-2 M-3 M-4 M 5 M6 M-7 5 6 7 8 9 10 11 12 Invest1 0.6 5.3 6.6 1976 1977 1978 2 3 rnents 4 (PER 0.8 3.0 6,7 6.7 8.3 9.1 8.0 11.3 11.3 CENT ANNUAL RATES OF GROWTH) 12.6 9.3 5.3 10.9 9.8 8.5 12.7 11.7 9.4 7.1 10.1 10.5 10.2 11.7 10.5 9.9 11.5 10.3 9.9 11.6 11.5 SEMI-ANNUALLY: 2ND HALF 1977 6.9 3.0 9.2 10.7 8.1 7.5 9.1 11.1 10.3 11.8 12.0 12.0 1ST HALF 1978 2ND HALF 1978 7.6 5.5 7.6 5.6 8.8 9.0 12.7 9.4 8.0 6.3 6.2 4.2 7.7 B.9 8.3 10.0 10.6 9.8 10.0 10.5 10.1 10.0 11.5 10.9 2.7 6.7 2.4 9.0 9.8 7.3 17.0 8.7 5.9 10.8 9.8 0.4 8.6 7.5 -2.0 9.7 11.2 4.7 9.4 11.6 7.0 11.2 11.0 T.6 10.3 11.4 8.7 10.2 10.9 8.9 11.2 10.8 11.3 4.3 11.2 -2.8 -5.7 2.4 4.8 5.1 5.9 7.6 9.3 8.4 14.9 10.8 7.7 9.2 8.1 4.4 5.7 10.2 -2.4 -5.4 QUARTERLY: 2ND TR. 1978 3RD QTR. 19T8 4TH QTR. 1978 10.4 6.2 0.5 1ST QTR. -4.4 1979 -5.7 1.6 4.5 8.4 9.9 7.7 8.4 10.4 9.3 10.6 10.1 9.4 9.8 10.5 10.2 9.8 9.8 10.0 10.9 10.0 1.6 4.6 4.3 6.1 7.1 8.5 QUARTERLY-AV: 2ND QTR. 3RD QTR. 4TH QTR. 1978 1978 1978 1ST QTR. 1979 7.2 6.0 2.4 6.2 8.6 2.3 0.6 6.6 4.6 -2.9 -3.3 -5.2 8.3 11.0 11.6 14.8 -5.0 8.6 5.1 -3.6 -0.1 -2.9 1.3 -8.9 15.6 8.5 0.2 11.3 -1.2 13.4 -4.9 3.1 7.8 10.5 8.6 10.6 5.2 13.4 8.0 5.7 7.9 7.9 19.9 16.6 13.7 11.0 5.1 9.7 9.8 6.7 1.1 2.8 16.4 9.7 6.2 6.8 8.5 13.8 1.7 -2.0 1.7 2.3 12.1 8.4 5.2 2.9 7.0 12.3 0.6 -5.1 -1.6 4.7 11.2 9.2 8.5 8.7 11.6 13.0 6.5 4.7 2.7 6.4 9.9 8.6 9.4 0.6 11.5 13.4 8.8 6.7 5.5 7.6 13.0 11.9 8.3 9.6 10.0 13.1 6.0 12.6 4.0 8.1 11.0 10.4 9.2 10.1 10.5 13.4 8.4 11.5 6.1 7.6 11.0 10.6 8.8 8.3 9.9 14.3 7.1 9.8 9.7 8.9 12.2 11.6 9.7 8.6 9.4 14.1 8.9 12.6 12.0 6.0 -20.9 2.2 -20.6 1.4 8.6 -0.4 4.6 19.0 11.3 2.9 -5.3 -3.7 0.7 -8.4 -7.0 -1.7 -1.2 2.8 4.7 6.0 3.7 4.1 -0.6 5.5 5.7 3.2 7.3 4.7 3.4 8.6 5.1 4.0 11.4 MONTHLY: 1978--MAR. APR. MAY JUNE JULY AUG. SEPT. OCT. NOV. DEC. 1979--JAN. FEB. MAR. P 1.q 1/ BASED ON DATA ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS. 21 BASED ON QUARTERLY AVERAGE DATA. P - PRELIMINARY 2.3 3.6 APR. Table 2 13, 1979 Money and Credit Aggregate Measures Seasonally Adjusted, Billions of Dollars Credit Period Total Nonborrowed Money Stock Measures Bank Bank Reserves 1 Monetary Base Total Loans and M M2 M1+ M-2 M-3 M - - M4 M4 M-5 M M-6 M6 M M Investi. __.. ments - - . , -- 1 ,. 3 ANNUALLY: 37,013 38,923 41,271 36,960 38,354 40,403 120t572 130,640 142,381 788.9 875.5 971.1 313.8 338.7 361.5 517.2 560.6 586.4 740.6 809.4 876.3 1235.6 1374.3 1500.6 803.0 883.1 972.9 1298.0 1448.0 1597.3 1436.1 1601.8 1766.5 1483.8 1658.1 1850.8 1978--MAR. 39,570 39,242 133,480 898.6 343.2 566.4 822.6 1400.3 904.0 1481.7 1639.9 1704.9 APR. MAY JUNE 39,843 40,208 40,597 39,286 38,996 39,503 134,350 135,525 913.5 926.1 936.7 347.9 350.7 352.5 572.1 576.1 578.6 830.3 836.7 842.6 1411.9 1422.0 1433.1 913.8 922.9 929.3 1495.3 1508.2 1519.8 1655.0 1669.6 1681.9 1722.2 1738.8 1752.8 JULY AUG. SEPT. 41,099 40,928 41,223 39,782 39,788 40,163 137,699 138,290 945.3 949.3 957.0 354.5 357.0 361.1 580.0 583.4 589.4 848.7 956.9 866.2 1444.6 1458.4 1474.7 936.7 944.5 954.8 1532.6 1846.0 1563.2 1693.5 1707.5 1727.9 1765.3 1779.2 1800.1 OCT. NOV. DEC. 41,399 41,274 41,271 40,122 40,570 40,403 140,778 964.8 970.2 971.1 361.6 361.0 361.5 589.7 587.2 586.4 870.9 874.3 876.3 1485.5 1493.8 1500.6 959.6 969.7 972.9 1574.1 1589.2 1597.3 1738.1 1752.3 1766.5 1813.5 1832.5 1850.8 1979--JAN. FEB. 41,478 40,754 40,817 40,476 39,781 39,826 143,399 143,347 986.5 995.8 998.2 359.9 358.8 359.0 582.3 578.9 578.1 875.4 877.1 879.7 1504.1 1510.0 1517.5 975.9 979.2 978.7 1604.6 1612.2 116.5 1777.2 1784.1 1789-2 1864.1 1872.0 1878.2 14 21 28 40,699 41,029 40,126 39,645 40,091 39,043 142,991 143,038 360.3 358.3 356.4 580.5 578.3 576.3 878.7 876.9 876.0 980.5 979.3 978.4 7 14 21 28P 41,288 40,742 40,949 40,295 40,261 144,436 143,586 143,972 143,578 360.2 358.8 359.7 358.9 580.0 578.3 578.6 577.3 879.7 879.1 879.7 880.8 979.2 4P lip 40,802 40,178 144,457 143,562 359.4 578.0 882.4 978.7 1976 1977 1978 MONTHLY MAR.P 136,494 139,840 141,450 142,381 143,898 WEEKLY: 1979-FEB. MAR. APR. WEEKLY DATA M3, M5, M6, 1/ BASED ON DATA P - PRELIMINARY NOTES: 39,860 39,925 39,213 39,934 39,550 143,500 981.0 978.5 977.8 ARE DAILY AVERAGES FOR STATEMENT WEEKS. MONTHLY DATA ARE DAILY AVERAGES. WEEKLY DATA ARE NOT AVAILABLE FOR M7, TOTAL LOANS AND INVESTMENTS AND THRIFT INSTITUTION DEPOSITS. ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS. DATA SHOWN IN MILLIONS OF DOLLARS. APR. Table 3 13, 1979 COMPONENTS OF MONEY STOCK AND RELATED MEASURES Mutual Time and Savings Deposits Currency Period Demand Deposits Total a Total 1 2 3 4 2/ ANNUALLY: Other Than CD's Savings Other Credit Bank & S&L Union Shares.1 Shares- 5 6 7 8 (Per cent annual rates of growth) 9 Other Private Savings U.S.Gov't Short-term Bonds1/ Securities Assets 11 1/ 10 11 12 7.5 11.4 16.1 -23.3 12.8 32.8 15.4 14.0 10.2 17.8 19.5 15.0 6.9 6.6 5.5 7.1 12.6 10.8 12.1 13.5 46.5 6.4 12.9 25.6 13.6 20.1 6.5 22.9 12.5 2.9 0.7 11.7 19.3 42.6 19.0 8.5 11.5 17.0 12.0 6.0 4.8 14.8 6.3 53.1 31.5 9.5 9.3 10.0 4.6 7.4 6.3 8.1 11.4 12.5 15.0 11,2 9.4 25.0 11.1 1.8 2ND HALF 1977 10.0 7.3 11.7 9.8 1ST HALF 2ND HALF 9.3 10.2 7.6 4.9 12.2 12.0 7.6 10.8 1976 1977 1978 CD's Short Term Savings 2/ SEMI-ANNUALLY: 1978 1978 QUARTERLY: 2N0 QTR. 3RD QTR. 4TH QTR. 1978 1978 1978 7.9 11.7 9.7 11.9 9.1 -2.7 11.4 11.7 11.9 8.9 12.2 7.7 4.7 3.6 -6.2 12.5 19.5 18.9 25.5 8.3 36.6 8.3 12.1 10.7 14.0 13.5 7.7 5.7 4.6 4.0 13.9 8.2 17.9 36.3 7.3 67.0 QTR. 1979 7.8 -6,8 5.4 4.6 -10.3 15.8 9.9 9.5 0.0 0.5 14.9 22.3 1ST QUARTERLY-AV: 2NO QTR. 3RD QTR. 4TH QTR. 1978 1978 1978 8.0 9.6 10.6 9.7 7.6 2.1 11.5 11.3 12.4 7.9 11.1 10.2 3.8 2.3 -0.9 11.4 18.5 19.2 33.5 12.2 25.0 7.8 10.9 11.8 15.9 13.7 10.1 5.7 5.1 4.5 12.5 1.9 10.6 42.2 16.2 45.1 1ST QTR. 1979 9.1 -6,6 8.4 4.4 -10.2 15.9 29.9 9.6 0.8 1.5 31.0 39.5 6.7 7.9 9.2 6.5 9.1 9.0 16.6 7.6 10.0 11.2 1.0 19.5 10.3 5.6 6.0 7.8 13.2 -0.5 -6.3 -1.4 10.6 10.9 13.4 9.6 11.2 10.9 12.7 8.5 21.9 5.1 6.0 7.8 8.7 10,1 9.8 14.1 12.5 10.0 9.4 3.5 9.8 10.7 11.0 15.5 21.6 21.2 14.8 19.3 24.5 12.0 39.5 28.0 40.3 7.0 18.0 -5.5 12.3 1.4 2.1 15.1 7.8 7.5 7.2 10.1 11.1 11.2 13.5 12.5 9.8 9.5 20.0 14.8 12.2 14.5 11.9 11.8 16.3 9.2 4.6 9.1 6.2 6.2 4.6 6.1 6.1 3.0 4.5 4.5 4.5 3.0 0.0 16.4 19.1 5,8 -21.6 4.4 42.4 -14.1 -17.2 87.1 46.0 40.6 37.5 27.7 13.5 0.0 8.4 51.5 79.7 59.8 12.7 20.3 48.4 19.1 9.7 9.6 1.5 -1.5 43.3 -7.8 I4,0 AVERA E LEVELS DERIVER -36.4 8,9 MONTHLY: 1978--MAR. APR. MAY JUNE JULY AUG. SEPT. OCT. NOV, DEC. 1979--JAN. 8.6 -10.9 9.0 FEB. 8.6 -8.3 8.6 MAR P 6,1 -1j -1.4 1/ GROWrH RAES AARESAED ON TESTMNATED MONHLY PREVIOUS MONTH REPORTED DATA. 2/ BASED ON QUARTERLY AVERAGE DATA. P - PRELIMINARY. 1.6 6.5 5.6 1.6 4.3 6.0 3.8 -3.8 4.8 9.7 -1.6 -9.6 -7.5 -13.0 -12.0 -61 BY VERAGING E OF w CI -4.5 -6.8 91 1 RENT NH AD E OF 37.0 13.8 1.0 Table 4 APR. 13, 1979 COMPONENTS OF MONEY STOCK AND RELATED MEASURES Mutual Time and Savings Deposits Time and Savings Depots Currency Demand Deposits Period 1 2 Total Savings Other Than CD's Totl Sai Otr Total Savings 3 4 5 CD's Bank & S&L hare 7 8 ShortTerm Private Union Savings Shares Bonds U.S. Gov't Sec Short term Assets Non Total Deposit Gov't Funds Demand Deposits y Otheraresec 6 Other Credit 9 10 11 12 66.2 77.2 47.7 76.6 56.3 84.3 51.0 62.0 77.0 11.4 11.7 15.4 13 14 ANNUALLY: 80.8 88.6 97.5 233.0 250.1 264.1 489.2 544.4 611.4 426.7 470.7 514.8 202.1 219.7 222.0 224.7 251.0 292.8 62.4 73.7 96.6 456.1 518.3 571.2 38.9 46.6 53.1 71.9 80.6 88.7 MONTHLY: 1978--MAR. 90.7 252.5 560.8 479.4 220.9 258.5 81.5 529.0 48.7 77.8 80.4 65.0 65.4 9.3 APR. MAY JUNE 91.3 92.0 92.5 256.6 258.8 260.0 565.9 572.2 576.8 482.5 486.0 490.1 221.7 222.8 223.5 260.8 263.2 266.6 83.4 86.2 86.7 532.3 535.5 540.0 49.3 49.8 50.4 78.2 78.5 78.9 91.5 67.2 69.3 70.9 65.7 66.2 66.4 10.2 8.3 13.4 JULY AUG. SEPT. 93.2 93.9 95.2 261.3 263.0 265.9 582.2 587.5 593.7 494.1 499.9 271.4 276.2 279.6 88.0 87.6 88.5 545.0 550.1 556.3 50.9 51.4 52.1 79.3 79.5 79.8 81.7 71.7 71.7 72.2 66.7 68.8 69.8 14.7 16.9 505.1 222.8 223.7 225.5 OCT. NOV. DEC. 95.8 96.6 97.5 265.8 264.4 264.1 597.9 608.8 611.4 509.3 513.3 514.8 225.2 223.4 222.0 284.1 289.9 292.8 88.6 95.4 96.6 562.1 566.7 571.2 52.5 52.7 53.1 80.1 80.4 90.6 83.9 75.3 80.3 84.3 74.9 73.0 77.0 2n.l 20.1 98.2 616.0 620.4 619.7 515.5 518.3 219.6 217.4 216.3 295.9 300.9 304.4 100.5 102.1 99.0 575.8 580.4 584.7 52.9 52.6 53.1 80.7 80.6 80.7 91.9 86.9 87.9 89.0 81.7 84.6 99.4 261.7 259.9 259.6 90.4 14.8 10.2 9.5 7 14 21 28 98.9 98.6 98.8 99.1 261.2 261.7 259.5 257.3 618.6 620.2 621.0 622.0 516.8 217.6 217.5 217.3 217.1 299.2 300.9 301.4 302.4 101.8 101.8 102.4 102.4 82.9 87.3 86.0 82.5 11.8 0.7 9.4 9.4 7 14 21 28P 99.5 99.1 99.4 99.6 260.7 259.7 260.3 259.3 620.8 620.5 618.8 618.9 519.5 520.3 520.0 521.8 216.9 216.7 216.2 215.6 302.5 303.6 303.8 306.3 101.3 100.2 98.8 97.0 86.4 95.1 94.4 85.6 10.4 7.2 10.9 9.5 4P 99.9 259.5 619.3 523.0 215.8 307.2 96.3 1976 1977 1978 1979--JAN. FEB. MAR. P 98.9 520.7 82.8 83.2 82.0 84.9 82.7 88.7 91.3 92.0 16.8 21.0 15.4 WEEKLY: 1979-FEB. MAR. APR. 518.4 518.6 519.6 ESTIMATED MONTHLY AVERAGE LEVELS DERIVED BY AVERAGING END OF CURRENT MONTH AND END OF PREVIOUS MONTH REPORTED DATA. INCLUDES PRIVATE DOMESTIC NONFINANCIAL INVESTORS' HOLDINGS OF COMMERCIAL PAPER, BANKERS ACCEPTANCES, SECURITY RP'S AND MONEY MARKET MUTUAL FUND SHARES. 31 BORROWINGS BY BANKS FROM OTHER THAN COMMERCIAL BANKS IN THE FORM OF FEDERAL FUNDS PURCHASED, SECURITIES SOLO UNDER AGREEMENTS TO REPURCHASE, AND OTHER LIABILITIES FOR BORROWED MONEY, PLUS GROSS LIABILITIES TO OWN FOREIGN BRANCHES (EURODOLLAR BORROWINGS), LOANS SOLD TO AFFILIATES, LOAN RPS, AND OTHER MINOR ITEMS. 4/ INCLUDES TREASURY DEMAND DEPOSITS AT COMMERCIAL BANKS AND FEDERAL RESERVE BANKS AND TREASURY NOTE BALANCES. P - PRELIMINARY 1/ 2/ 7.9 STRICTLY CONFIDENTIAL (FR) CLASS II - FOMC APRIL 13, 1979 TABLE 5 SELECTED INTEREST RATES (per cent) Federal Funds (1) Short-Term s CD's New T y B IssueNYC Auction Market 90-Day 6-mo 3-mo 1-yr (5) (3) (4) (2) Comm. Paper 90-119 Day (6) an prime Rat (7) U.S. Govt. Constant Maturity Yields 20-yr 3-yr (9) (10) (8) Long-Term MuniCorp.-Aaa cipal Utility New Recently Bond Buyer ssue Offered (12) (13) (11) Home Mortgages y econdary Market GNMA FNMA Sec. Auc. (16) (14) (15) r C 10.25 9.30 9.62 6.58 6.16 6.55 9.58 6.42 10.65 6.65 10.52 6.68 11.57 7.75 9.59 7.40 9.22 7.72 9.00 8,01 9.30 8.61 9,54 8.48 6.67 5.58 10.38 8.98 10.60 9.13 9.68 8.43 1979--High Low 10.59 9.93 9.64 9.23 9.68 9.29 9.57 9.31 10.46 9.75 10.57 9,76 11.75 11.75 9.60 9.15 9.23 8.93 9.12 8.89 9.68 9.42 9.67 9.40 6.58 6.22 10.48 10.38 10.73 10.42 9.75 9.54 1978--Mar. 6.79 6.29 6.82 6.64 6.73 6.75 8.00 7.70 7.95 8.21 8.71 8.67 5.61 9.20 9.35 8.60 Apr. 6.89 6.29 6.96 6.70 6,84 6.82 8.00 7.85 8.06 8.32 8.90 8.85 5.80 9.36 9.44 8.71 May 7.36 6.41 7.28 7.02 7.20 7,06 8.27 8.07 8.25 8.44 8.95 8.98 6.03 9.57 9.66 8.90 June 7.60 6.73 7.53 7.20 7.66 7.59 8.63 8.30 8.40 8.53 9.09 9.07 6.22 9.70 9.91 9.05 9.14 8.82 9.18 8.91 6.28 6.12 9.74 9.79 10.01 9.81 9.15 8.97 1978--High Low July Aug. 7.81 8.04 7.01 7.08 7.79 7,73 Sept. 7.47 7,36 8.00 7.86 7.85 7.83 9.00 9.01 8.54 8.33 8.55 8.38 8.69 8.45 8.45 7.85 8.01 7.95 8.34 8.39 9.41 8,41 8.42 8.47 8.86 8.86 6.09 9.76 9.79 9.04 Oct. Nov. Dec. 8.96 9.76 10.03 7.99 8.64 9.08 8.45 9.20 9.44 8.49 9.20 9.40 9.12 10.15 10.44 8,98 10,14 10.37 9.94 10.94 11.55 8.62 9.04 9.33 8.64 8.80 9.03 8.69 8.75 8.90 9.17 9.27 9.28 9.13 9.27 9.41 6.13 6.19 6.51 9.86 10.11 10.35 10.03 10.30 10.50 9.25 9,39 9.38 1979--Jan. peb. Mar. 10.07 10.06 10.09 9.35 9.32 9.48 9.54 9.39 9.38 9,50 9.35 9.46 10.20 9.81 9.86 10.25 9.95 9.90 11.75 11,75 11.75 9.50 9.29 9.38 9.14 9.11 9.15 8.98 9.03 9.08 9.54 9.53 9.62p 9.51 9.56 9.62p 6.47 6.31 6.33 10.39 10.41 10.43 10.70 10.54 10.43 9.67 9.67 9.70 1979--Feb. 7 14 21 28 10.06 10.15 9.97 10.06 9.23 9.28 9.34 9.45 9.29 9.36 9.40 9.52 9.31 9.34 9.37 9.50 9.76 9.77 9.76 9.96 9.94 9.96 9.96 9.96 11.75 11.75 11.75 11.75 9.20 9.28 9.39 9.45 9.05 9.12 9.21 9.22 9.00 9.04 9.09 9.12 9.42 -9.59 9.64 9.51 9.55 9.63 9.67 6.31 6.33 6.38 6.42 10.43 10.40 10.40 10.43 10.61 -10.47 -- 9.54 9.66 9.71 9.75 Mar. 7 14 10.07 10.21 9.41 9.50 9.43 9.42 9,42 9.46 9.88 9.89 9.96 9.97 11.75 11,75 9.39 9.39 9.13 9.16 9.08 9.07 9.61 -- 9.60 9.65 6.35 6.30 10.40 10.40 10.43 -- 9.69 9.70 21 10.09 9.52 9.40 9.48 9.85 9.95 11.75 9.38 9.15 9.08 9.64 9.63 6.29 10.45 10.42 9.72 28 10.00 9.51 9.31 9.44 9.82 9.81 11.75 9.33 9.13 9.05 9.60 9.59 6.28 10.45 Apr. 4 11 18 25 9.95 9,93 9.48 9.64 9.30 9.31 9.50 9.57 9.75 9.83 9.76 9.97 11.75 11.75 9.34 9.47p 9.127 9.23p 9.05 9.10p 9.59 9.68p 9.61 9 6 . 7p 6.25 6.33 10.48 n.e. Daily--Apr. 5 12 10.00 10.OOp 9.49 9.69 9.17 9.37 9.88 10.10 11.75 11.75 9.32 9.50p 9.09 9.25p 9.02 9,12p --- --- -10.44 -- 9.69 9.72 9..72 -- NOTE: Weekly data for columns 1, 2, 3, 6, and 7 are statement week averages of daily data. Weekly data in column 4 are average rates set in the auctions of 6-month bills that will be issued on the Thursday following the end of the statement week. Data in column 5 are 1-day Wednesday quotes. For columns 8 through 11, the weekly date is the mid-point of the calendar week over which data are averaged. Columns 12 and 13 are 1-day quotes for Friday and Thursday, respectively, following the end of the statement week. Column 14 is an average of contract interest rates on commitments for conventional first mortgages with 80 per cent loan-to-value ratios made by a sample of insured savings and loan associations on the Friday following the end of the statement week. Column 15 gives FNMA auction data for Monday preceding the end of the statement week. Column 16 is a 1-day quote for Monday preceding the end of the statement week. The ENMA auction yield is the average yield in bi-weekly auction for short-term forward commitments for Government underwritten mortgages. GNMA yields are average net yields to investors on mortgage-backed securities for immediate delivery, assuming prepayment in 12 years on pools of 30-year FHA/VA mortgages carrying the coupon rate 50 basis points below the current FIHAVA ceiling. 1 TABLE 6 NET CHANGES IN SYSTEM HOLDINGS OF SECURITIES($ million, not seasonally adjusted) FedersLi Agencies FederaIl Agencies Net Pu rchases 4/ Coupons Treasury Bills Net Change 2/ I- Treasury Treasury Coupons Net Purchases 3/ 1 - 5 -490 7,232 1,280 -468 863 4,361 870 87 207 320 337 472 517 1,184 789 579 797 3,284 3,025 2,833 4,188 539 500 434 1,510 1,048 758 1,526 167 129 196 1,070 642 553 1,063 1,582 1,415 1,747 6,202 5,187 4,660 7,962 -2,655 5,444 3,152 -5,072 345 288 340 212 1,123 1,156 774 1,135 459 468 349 250 247 334 235 247 2,175 2,246 127 1,697 -81 1979--Qtr. I -3,750 48 426 134 93 700 1978--Oct. -170 -2,151 -2,751 73 139 507 62B 87 163 139 108 807 1,037 48 426 1972 1973 1974 1975 1976 1977 1978 1978--Qtr. Qtr. Qtr. Qtr. I II II: IV Nov. Dec. -4,258 -628 1,236 1979--Jan. Feb. Mar. 1979--Feb. 7 14 21 28 Mar. Apr. Total 1 - 5 5 - 10 Over 10 Total I 592 400 1,059 864 3,082 1,613 891 1,433 127 1,665 824 469 792 45 1,844 -170 -229 -- S - S - -1,154 ------2,754 4 440 - 11 -625 -- -- 640 -- - 52 3,713- -20 -- -520 598 102 -- - - - - - - - -128 ---- ---- ---- ---- ----- ----- ----- -278 -- -- -- -- -- -- -- -- -- -- 640 -- -- -- -- -- ---- -350 S -4,647 --- -- ---- 625 ---- -- -255 641 1,300 -882- --- - 7 14 21 28 -1,133 1,224 266 -2,130 ----20 -61 32 6/ -555 7,930 4,632 -3,283 -598 102 64 70 426 Net RP's -1,358 -46 -154 1,272 3,607 -2,892 -1,774 ------ - (FR) 1,631 9,273 6,303 7,267 6,227 10,035 8,724 - -20 ----- 48 Net Change Outright Holdings Total 5/ -399 -- -379 ---- -500 -128 Over 10 Swithin 1 year L Within 1 year 5 - 10 STRICTLY CONFIDENTIAL CLASS II - FOMC APRIL 13, 1979 641 1,300 -350 -200 8/ 15 680 -1,594 -1,265 728 -5,745 2,135 4,290 4,824 1,655 -12,126 7,781 -6,673 10,940 -12,298 7,914 -8,683 7,387 18 25 11 40,1 10,5 34.1 11.9 11.6 68,0 1.6 3.5 1.6 .8 7.5 115.6 n-) LL Change from end-of-period to end-of-period. Outright transactions in market and with foreign accounts, and redemptions (-) in bill auctions. 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. Outright transactions in market and with foreign accounts only. Excludes redemptions and maturity shifts. In addition to net purchases of securities, also reflects changes in System holdings of bankers' acceptances, direct Treasury borrowings from the System, and redemptions (-) of Agency and Treasury coupon issues. Includes changes in both RP's (+) and matched sale-purchase transactions (-). The Treasury sold $2,600 million of special certificates to the Federal Reserve on March 31 and redeemed the last of them on April 4. $640 million of 2-year notes were exchanged for a like amount of cash management bills on April 1. On April 9 the bills were exchanged for new 2-year notes. LEVEL--Apr. ; I,L n& bllnns1 UA
@FedFRASER