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August 10, Strictly Confidential (FR) 1979 Class I FOMC 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) August 10, 1979 CLASS I - FOMC MONETARY AGGREGATES AND MONEY MARKET CONDITIONS Recent developments (1) M-1 expanded at about a 10 percent annual rate in July and, though growth is apparently slowing markedly in August, for the two months it is still expected to be above the upper end of the 2½ to 6½ percent range specified by the FOMC. annual rate of about 11 M-2 growth over July and August is projected at an percent, also above the upper end of its FOMC range. Savings deposits increased somewhat more rapidly in July than in June, after having declined almost without interruption over the preceding eight months. The time deposit component of M-2 continued to grow at about its strong second-quarter pace in July, as large time deposits included in M-2 increased for the first time since late last year. Growth in small time deposits remained strong by historical standards, but slowed from other recent months. At thrifts, however, deposit expansion decelerated from June's relatively strong pace. Comparison of FOMC Policy Ranges for July-August to Latest Staff Estimates Ranges M-1 2½ to 6½ M-2 6½ to 10½ Federal funds rate (percent per annum) 1/ 1/ 9¾ to 10¾- Latest Estimates 7.5 11.3 Avg. for statement week ending 10.28 July 11 18 10.35 25 10.63 10.75 Aug. 1 10.67 8 On July 27 the FOMC voted to raise the upper limit of the intermeeting range for the Federal funds rate from 10½ percent to 10 percent. (2) With growth in loans slowing somewhat, commercial bank credit increased at a 12½ percent annual rate in July, below the average pace for the first half of the year. Given the strong growth in demand and consumer-type time and savings deposits last month, banks reduced reliance on managed liabilities to finance credit expansion. In particular, over the course of the month banks tapped their foreign affiliates for only a minimal additional amount of funds, reflecting a relative firming of interest rates in the Durodollar market associated with weakness in the dollar. (3) rate in the 10 FOMC meeting. The Account Management continued to aim for a Federal funds percent area during the days immediately following the July On July 20, however, as projections suggested that over the July-August period M-1 and M-2 would grow at rates moderately above and about equal to the upper limits of their respective short-run ranges, the Manager began to aim for a weekly average Federal funds rate at about the 10 percent upper limit specified by the Committee. On the same morning the Board announced an increase in the discount rate from 9½ percent to 10 percent. On July 27, as projections suggested that growth in both M-1 and M-2 over July and August would exceed the upper limits of their respective ranges, the Committee raised the upper limit of the intermeeting range for the Federal funds rate to 10¾ percent and instructed the Manager to aim for a rate within a range of 10 to 10¾ percent, depending on sub- sequent behavior of the aggregates and conditions in foreign exchange markets. Initially, the Desk aimed for a rate around 10-5/8 percent. however, Most recently, with the aggregates continuing strong and with renewed pressure on the dollar in foreign exchange markets following publication of the July producer price index, the Desk has sought a funds rate a shade higher than 10-5/8 percent. (4) Total reserves, after declining at a 4 percent annual rate in the first half of the year, are projected to expand at about an 8¼ percent annual rate in the July-August period as strengthening deposit flows have been accompanied by increases in required reserves. Growth in the monetary base is projected to rise at about a 10¼ percent annual rate over July and August as currency in circulation continues to expand at a brisk pace. (5) Short-term interest rates have generally increased about 20 to 50 basis points since the July FOMC meeting, with the largest increases on private instruments. Bond yields have changed little on balance over the intermeeting period, however, as a light corporate and municipal financing calendar and widespread views that the economy is moving into recession have tended to damp reactions to the System's policy actions. Against this general background, the Treasury offerings of $2.75 billion of 3-year notes, $2.5 billion of reopened 7 -year notes, and $2 billion of reopened 29 -year issues--to refund $4.8 billion of maturing issues and raise $2.4 billion of new money--were well bid for in their respective auctions. The two shorter issues are currently trading at or close to their average prices in the auction, after having been at premiums in the days immediately after the offering, while the longer issue is now at a significant discount. Average primary market rates on conventional home loans have edged down a few basis points, perhaps reflecting some slackening in housing credit demand and the attraction of diversified investors to this market by the wide spread between mortgage and bond yields. (6) The dollar was under heavy selling pressure the first two weeks following the July FOMC meeting, reflecting market participants' apprehension over the course of U.S. economic policy, particularly in the wake of the Cabinet reshuffle. These pressures abated with the naming -4of the new Federal Reserve Chairman, but pressures have resumed in recentdays as noted in paragraph (3). has purchased $2 (7) Since the last FOMC meeting the United States billion in support of the dollar, The table on the next page shows seasonally adjusted annual rates of change, in percent, for related monetary and financial flows over various time periods. 1977 & 1978 Average Past Twelve Months July '79 over July '78 Past Six Months July '79 over Jan. '79 Past Three Months July '79 over Apr. '79 Past Month July '79 over June '79 Nonborrowed reserves 4.9 -0.3 -4.1 -0.8 19.9 Total reserves 6.0 -0.7 -3.2 1.7 11.9 Monetary base 8.7 6.7 4.9 6.7 10.9 M-1 (Currency plus demand deposits 1/) 7.6 5.0 6.9 8.6 10.1 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 2.5 3.9 6.6 10.0 M-2 (M-1 plus time deposits at commercial banks other than large CD's) 9.1 7.7 8.9 10.9 12.7 M-3 (M-2 plus deposits at thrift institutions) 10.5 8.4 8.3 9.2 10.6 M-4 (M-2 plus CD's) 10.3 6.6 4.8 5.6 11.4 M-5 (M-3 plus CD's) 11.1 7.7 5.8 6.1 Month-end basis 11.9 12.5 12.1 13.6 Monthly average 12.1 12.8 11.9 12.1 8.3 Large CD's 1.4 -0.3 -2.6 -3.4 -0.2 Nonbank commercial paper 0.3 0.6 0.9 0.8 1.1 Concepts of Money 9.9 Bank Credit Loans and investments of all commercial banks 2/ 12.5 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 the Committee's consideration three alternative specifications for the monetary aggregates and the Federal funds rate for the August-September period. The Federal funds rate specifications of alternative B are centered on the currently prevailing 10½ to 10¾ percent range. Alternatives A and C would ease or tighten, respectively, money market conditions in coming weeks. (More detailed and longer-term data are contained in the tables on pages 7 and 8.) Alt. A Alt. B Alt. C M-1 5½ to 9½ 5 to 9 4½ to 8½ M-2 8½ to 12½ 8 to 12 7½ to 11½ 9¾ to 10½ 10¼ to 11 Ranges for August-September Federal funds rate (intermeeting period) (9) 10 to 11½ Under alternative B, M-1 would be expected to expand in a 5 to 9 percent annual rate range over the August-September period. This would represent a noticeable deceleration from the 11 percent average pace of the preceding four months, but would still leave M-1 growth for the current quarter at a 9 percent annual rate. With nominal GNP projected to rise at a 7 percent rate, velocity would decline by about a 2 percent annual rate, following a 1 percent decline in the second quarter.1/ Because of the lags that ordinarily characterize the public's adjustment of its cash balances to changes in economic circumstances, some weakening in velocity would have been expected in light of the sharp deceleration of nominal GNP growth 1/ These figures somewhat understate the weakness in velocity since the shifting of demand deposits to ATS/NOW accounts is estimated to have depressed M-1 growth--and raised velocity--by about 1¼ percentage points in the second quarter, and is expected to have about ¾ percentage point impact in the current quarter. Quarterly velocity figures are shown in Appendix I. Alternative Levels and Growth Rates for Key Monetary Aggregates M-1 1/ Alt. A Alt. B Alt. C Alt. A Alt. B Alt. C 1979 July August September 372.1 373.7 376.8 372.1 373.6 376.5 372.1 373.5 376.2 914.0 921.8 929.9 914.0 921.5 929.2 914.0 921.2 928.5 1978 QIV 361.0 361.0 361.0 873.2 873.2 873.2 1979 QI 359.1 365.9 374.2 378.0 359.1 365.9 374.1 378.0 359.1 365.9 373.9 378.0 877.1 896.0 921.9 939.4 877.1 896.0 921.6 939.2 877.1 896.0 921.2 939.0 QII QIII QIV Growth Rates Monthly: 1979 August September 10.2 10.5 5.2 10.0 9.8 10.0 1.8 8.6 11.6 7.6 1.8 8.6 11.4 7.6 1.8 8.6 11.3 7.7 7.6 7.6 7.5 Quarterly Average: 1979 QI QII QIII QIV -2.1 7.6 9.1 4.1 -2.1 7.6 9.0 4.2 -2.1 7.6 8.7 4.4 Semi-Annual: QIV '78-QII '79 QII '79-QIV '79 Annual: QIV '78-QIV '79 1/ The staff has assumed that over the longer-run policy period from QIV '78 to QIV '79 M-1 growth will be reduced by about 1¾ percentage points by ATS. Alternative Levels and Growth Rates for Key Monetary Aggregates (cont'd) M-3 Bank Credit Alt. A Alt. B Alt. C Alt. A Alt. B Alt. C 1979 July August September 1566.0 1576.8 1589.0 1566.0 1576.4 1588.0 1566.0 1576.0 1587.0 1058.6 1066.8 1074.8 1058.6 1066.5 1074.1 1058.6 1066.4 1073.8 1978 QIV 1492.7 1492.7 1492.7 978.7 978.7 978.7 1979 QI QII 1510.3 1540.0 1577.3 1607.8 1510.3 1540.0 1576.8 1607.3 1510.3 1540.0 1576.3 1606.9 1009.8 1037.4 1066.7 1089.9 1009.8 1037.4 1066.4 1088.8 1009.8 1037.4 1066.3 1087.9 8.3 9.3 8.0 8.8 7.7 8.4 9.3 9.0 8.8 9.0 8.6 8.3 QIII QIV Growth Rates Monthly: 1979 August September Quarterly Average: 1979 12.7 12.7 10.9 11.3 8.7 10.9 12.0 10.1 QI QII QIII QIV 12.0 11.4 11.2 11.2 8.4 Semi-Annual: QIV '78-QII '79 QII '79-QIV '79 9.9 12.0 9.7 Annual: QIV '78-QIV '79 7.7 7.7 11.2 -9in the spring. However, the continued strength of M-1 suggests the possibility of a precautionary accumulation of liquid balances in response to unusual economic uncertainties. Such a pattern would not be expected to persist for an extended period, and the staff anticipates a return to somewhat weaker demands for M-1 over the remainder of the year--although not to the marked weakness observed in the past fall and winter. (10) Under alternative B, M-2 growth is projected to expand at about a 10 percent annual rate during the August-September period, a somewhat slower growth rate than in June and July. In addition to the slowing in growth of the M-1 component, it is unlikely that savings deposits will continue to expand at their recent rate, given the high level of market interest rates. Nonetheless, growth in small time deposits should remain brisk, with banks continuing to attract a substantial amount of MMC deposits in the absence of an inter-institutional ceiling rate differential. (11) As shown in the upper panel of the chart on page 10, under alternative B M-1 in September would be above the level implied by the upper end of the Committee's 1½ to 4½ percent growth range for the QIV '78 to QIV '79 period. This would also be true under alternatives A and C. indicated in the lower panel of the chart, if the longer-run However, as is range is adjusted to reflect the downward revision in the staff's estimate of the ATS/NOW effect from the original 3 percent to the current 1 percent, the projected September level (under alternative B) is within, though in the upper half, of the adjusted 3 to 6 percent range. For M-2, growth indicated by the alternative B range would place the aggregate in September well into the upper half of the 5 to 8 percent range established by the Committee for the period QIV '78 to QIV '79. Growth Ranges and Actual M-1 LONGER-RUN RANGE REFLECTING 3 PERCENTAGE POINT IMPACT FROM ATS ASSUMED IN FEB. '79 Billions of dollars 385 Alt. Short-Run Range B Q4 '78-Q4 '79 S9% <'«^4/, 380 - . 4 V2% -,-" -375 S370 1%% 365 t I I 1 i I I I I J ED I LONGER-RUN RANGE REFLECTING 1% PERCENTAGE POINT IMPACT FROM ATS AS CURRENTLY ASSUM ED 385 Q4 '78-Q4 '79 Aft B Short-Run Range --- 380 * S5% " ^''' / / -r' ^---" *' 375 .--- , w - 370 365 360 355 O N 1978 O~ J I F . __~I M ii i, A M. I J J A _1i I S - 1979 9%- 350 0 N- O 11 Growth Ranges and Actual M-2 and M-3 M-2 Current Longer-Run Range ----Alt. B Short-Run Range - Bilions of dollars 950 Q4 '78-Q4 '79 , 8% S 940 - 12% // -930 8% - 920 - 910 - 900 -890 -880 -870 I I I I I i I I SI 860 M-3 Current Longer-Run Range ----Alt. B Short-Run Range-- 1640 Q4 '78-Q4 '79 1620 1600 -6% % 1580 1560 1540 1520 1500 I I O L N 1978 I . . D D J I I . . F M I I_ M I J I J 1979 I I 1 1 A A I S I O I N - 0 1480 -12(12) The table on page 13 indicates the annual rates of growth of M-1 and M-2 required to reach the high ends, low ends, and midpoints of their respective longer-run ranges within certain periods. It may be noted that, assuming ATS retards M-1 growth by 1½ percentage points over the year, M-1 would need to rise at a 4.1 percent annual rate between July and the fourth quarter to hit the midpoint of its longer-run range. Growth in M-2 would have to be at a 5.3 percent annual rate over the same period to achieve the midpoint of its longer-run range. (13) With Federal funds continuing to trade around 10½ to 10¾ percent, the midpoint of alternative B, other interest rates would likely change little in the near term. Credit markets are not likely to be subject to demand pressures over the next few weeks. The Treasury's net borrowing activities during the intermeeting period may be limited to an early September cash management bill to carry it through the mid-month tax date, although the sale of a 5-year note is a possible alternative. Market participants likely will be focusing more on the greater cash needs confronting the Treasury in the fourth quarter. The forward calendars in the corporate and municipal bond markets are moderate. Loan demands at commercial banks may edge off, as inventory investment declines and household spending continues weak. Use of bank credit lines, and there- fore bank demands on the money markets, could be increased, however, by any adverse developments in the commercial paper market associated with the Chrysler situation. At thrift institutions, growth of deposits subject to rate ceilings likely will remain sluggish, leading to continued borrowing from Home Loan Banks and market sources. Growth Rates from July Levels Required to Achieve Levels Implied by FOMC Longer-run Ranges for M-1 and M-2 (Seasonally adjusted annual rates) Low End of Range Midpoint of Range High End of Range M-1 (3 percent ATS/NOW impact on M-1) Achieve level by: September 1979 (in 2 months) QIV '79 (end of longer-run period) -10.6 -4.6 -3.4 3.9 -0.2 4.1 M-1 (1½ percent ATS/NOW impact on M-1) Achieve level by: September 1979 (in 2 months) -3.4 3.9 11.3 QIV '79 (end of longer-run period) -0.2 4.1 8.5 M-2 September 1979 (in 2 months) QIV '79 (end of longer-run period) -2.9 11.4 5.3 9.6 -14(14) Alternative A involves a decline in the Federal funds rate to the midpoint of a 9-3/4 to 10-1/2 percent range. Growth in M-1 and M-2 over the August-September period would likely be in annual rate ranges of 5-1/2 to 9-1/2 and 8-1/2 to 12-1/2 percent, respectively. Other short- term market rates could decline rather considerably, since the market at present does not expect an easing in the System's posture. Given the recent data on inflation and unemployment, and the prevailing state of expectations regarding monetary policy, such a movement in domestic rates would likely lead to an appreciable weakening of the dollar on foreign exchange markets. Purchases of Treasuries by foreign official institutions associated with any substantial intervention activity might result in relatively larger declines in Treasury bill rates than in private rates. In long-term debt markets, bond yields would probably also decline, though such tendencies would be limited if an easing in the funds rate were to strengthen inflationary expectations. Thrift deposit flows would benefit from the decline in market rates, especially if bill yields fell enough to reopen a ceiling rate differential, and mortgage rates might edge downward. (15) Alternative C calls for an increase in the Federal funds rate to the midpoint of a 10-3/4 to 11-1/2 percent range. Over the August- September period, M-1 probably would grow in a 4-1/2 to 8-1/2 percent annual rate range and M-2 between 7-1/2 and 11-1/2 percent. A further tightening action at this juncture would reinforce the view that the Federal Reserve is giving relatively heavy weight to domestic inflation and the performance of the dollar abroad in formulating its policies. The dollar likely would strengthen on foreign exchange markets, and while a rise in short-term rates could be anticipated, bond yields might increase rather little, if at all. Given the already wide spread between bond yields and mortgage rates--and the minor impact of the assumed short-term rate increase on thrift institution deposit flows--mortgage rates probably might increase only moderately. (16) As noted in paragraph (9), the staff currently expects that the public's demand for M-1 will be significantly weaker over the remainder of the year than it has been in recent months. Given the out- look for nominal GNP, and assuming that the Committee adopts short-run alternative B, the projected behavior of money demand would permit a decline in the Federal funds rate to around 9-1/2 percent by year-end with M-1 growth for the QIV '78 to QIV '79 period ending up close to the midpoint of the longer-run range (of 3 to 6 percent, assuming 1-1/2 percent ATS adjustment). However, should the public's demand for M-1 not exhibit the anticipated weakening, M-1 growth might be well into the upper half of the longer-run range even if the funds rate were held at its current level. -16- Directive language (17) Given below are suggested operational paragraphs for the directive in the customary form, with alternative language related to the short-run specifications presented in the preceding section. 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 [DEL: program the exchange value of the dollar and FOREIGN EXCHANGE AND for supporting the foreign 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 (or ATTAINING A) weekly average federal funds rate (A) (B) (C) SLIGHTLY BELOW THE CURRENT LEVEL. at about the current level. SLIGHTLY ABOVE THE CURRENT LEVEL. Subsequently, operations shall be directed at maintaining the 1/ weekly average federal funds rate within the range of 9¾-to-10¾ ________ TO percent. 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 in the July-August AUGUST-SEPTEMBER period of M-1 and M-2 and the following ranges of tolerance: 2½-to-6½ ____ TO ____ 10½ to percent for M-1 and 6½ ____ TO ____ percent for M-2. If rates of growth of M-1 and M-2, given approximately equal weight, 1/ On July 27, the Committee voted to raise the upper limit of the range from 10½ percent to 10¾ percent. -17- 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 beyond the upper or lower limits 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 shall promptly notify the Chairman, who will then decide whether the situation calls for supplementary instructions from the Committee. Appendix I Implied Velocity Growth Rates Alt. C Alt. B Alt. A V-1 (GNP/M-1) 1979 QI QII QIII QIV 12.3 -1.4 -2.3 4.1 ( 9.7) (-2.8) (-3.1) ( 3.5) 12.3 -1.4 -2.1 4.0 ( 9.7) (-2.8) (-3.0) ( 3.5) 12.3 -1.4 -1.9 3.8 V-2 (GNP/M-2) 8.3 -2.4 8.3 -2.4 8.3 -2.4 -4.6 -4.5 -4.3 QIV Note: QI QII QIII 1979 0.6 0.5 0.5 Figures in parentheses reflect V-1 without ATS. ( 9.7) (-2.8) (-2.7) ( 3.7) AUG. 10, Table 1 1979 Money and Credit Aggregate Measures Blank ReeLrvesMR Bai P Period Total Bask Credit .ro Honborrowed Total Loans and Invest- Monetary Base S MItne M-1 M-1+ ments s 3 M-2 Stock Measures 7- (PER CENT ANNUAL IATES OF M-4 M-5 9 M-3 10 M-5 M-7 I1 12 GROWTH) 21 ANNUALLY: 1976 197 1978 0.6 5.3 6.6 0.8 3.0 6.7 6.7 8.3 9.1 8.0 11.3 12.4 5.8 7.9 7.2 7.6 5.5 7.6 5.6 8.8 9.0 12.7 11.3 8.0 6.1 -3.9 -6.0 4.9 12.7 1978 1971 6.2 0.5 6.7 2.4 9.8 7.3 Is OQTR.1979 24n QTR. 1979 QUIRTERLYV-AV -4.4 3R0 QT.O 1978 471T rt. 197 I 8.6 2.3 12.6 9.3 5.4 1 10.9 9.8 4 12.7 11.7 9.3 7.1 0.1 10 10 10.2 9.9 11.7 11.5 .5 105.2 9.9 11.6 11.4 6.2 4.4 7.7 8.8 8.3 9.9 10.6 9.T 10.0 10.4 2.7 -0.7 5.2 6.3 4.0 5.5 7.0 11.1 7.8 9,3 0.6 7.5 -1.6 10.9 4.7 11.4 10.7 7.7 11.3 ,' 10.9 8.4 4.2 4.7 14.1 14.0 -2.4 11.1 -5.2 7.1 1.7 11.3 4-6 9.2 2.5 4.4 5.0 5.1 6.2 6.9 6.6 4.6 9.3 1.4 11.8 10.6 1.9 4.1 6.1 2.7 9.8 7.6 10.3 9.3 9.9 9.3 10.4 10.2 9.7 9.7 -2.9 -3.3 S.7 13.1 6.2 7.1 4.0 11.8 7.6 1.8 8.6 4.5 -8.8 -5.0 3.6 4.7 -4.9 7.9 3.5 4.8 6,8 14 8 -5.0 8.6 5.1 -3.6 -0.1 0.5 0.2 11.3 -1.2 13.4 -4.9 10.6 5.2 13.5 s.0 5.7 7.9 L0.1 7,6 1S.1 10.3 12.7 0.6 6.5 7.8 13.5 1.7 -2.0 2.0 3'1 7.2 L2.1 0.5 -4.3 -1.2 8.5 11.2 12,8 6.4 4.8 2.9 9.5 11.2 13.3 8.7 4.7 5.6 9.4 9.6 12.7 5.9 12.9 4.1 10.0 10.3 13.Z 8.3 11.6 6.1 8.4 9.8 14.1 7.2 10.0 7.9 9.0 9.7 13.9 B.5 12.7 11.2 6.0 -21.0 1.8 -4.9 T4.9 -1.8 11.9 2-2 -20.6 1.3 -2.9 -34.6 8.9 19.9 0.6 -0.5 4.6 4.9 3.1 6.1 10.9 25.3 10. 5.8 13. 12.1 15.7 12.5 -5.0 -3. 1.3 17.7 0.7 14.8 10.1 -7.8 -6.0 -1.0 11.4 -2.3 L2.1 10.0 -1.1 2.3 3.8 14.1 5.4 14.2 L2.7 2.9 4.8 6.2 10.5 4.9 11.9 10.9 3. 4.1 -0.4 5.6 5.7 3.5 7,0 1.3 7.1 10.z 6.5 6.1 6.0 9.0 21 SE I-A'+HUAL V 1ST HALF 1978 2ND HALF 1978 1ST HALF 1979 10.0 9.8 11.3 I0.a 9.6 QUARTFRLY: 3RD OTR. 4T1 QT4. -5.7 -8.2 -3.9 IST QT. 199 QTR. 1979 21N -2.1 -7.1 11.0 10.S e.6 9.5 10.2 11.1 9.7 9.2 IOUNTHLY : l978-JUaL AUG. SEPT. CT. WV, DEC 1979- JAf, FEB. 4P. APR. MAY JUNE JULY P l LI BaE- ON DATA ADJUSTED FOR CHANGES 1N RESERVE REQ'URENENTS. BA UD 0'1 0ATA ADJUSTED FOE CHANGES iN RESERVE RE QUIRE14ENTS. ?.? -0.5 6.0 11.4 9.2 3.3 8.2 10.9 8.4 8.2 11.5 5.9 10.8 13.3 Table 2 AWG. 10o 1979 Money and Credit Aggregate Measures Seasonally Adjusted, Billions of Dollars Bank R 1 teserves IMUe a Stock Measures Total Period NTa onborrowed Monetary ase Loans and Invest- -1 M 1+ M-2 M3 M-4 M--6 - M - M-7 ments V U ANNUALLY: 37,013 38,923 41,271 36,960 19o7-JULY AUG. SEPT. 'ICT. 1235.6 1374.3 1500.1 801.0 883.1 972.4 1298.0 1448.0 1596.7 1436.1 1601.8 1762.6 1483.8 1658.1 1848.0 845.6 856.5 86.5. 1444.5 936.6 944.1 954.1 1532.5 1545.6 1562.6 1692.6 1706.4 1726.4 1764.3 1778.5 1799.1 870.2 873.7 875.8 1484.8 1573.4 1588.6 1596.7 1736.7 1811.9 1500.1 958.8 969.1 972.4 1751.1 1762.6 1830.9 1848.0 580.1 579.6 875.0 876.7 879.5 1503.7 1509.7 1517.5 975.5 978, q78.5 1604.2 1611.8 16L6.5 1772.1 1781*1 1790.0 1861.8 1874,8 1887.6 585.1 584.0 589.9 889.8 893.8 904.4 1530.8 364.5 369.0 1537.0 1552.3 984.8 984.4 989.3 1625.9 1627.6 1637.2 1803.7 1808.7 182k.1 1905.7 1915.1 1932.3 372.1 594.8 914.0 1566.4 998.7 1651.1 1837.7 19 5.7 144.830 1451771 1459.42 368.5 368,8 368.7 589.3 589.9 589.9 902.8 904.6 905.6 987.3 989.1 990.3 994.2 998.5 998.5 998.5 788.9 875.5 9B1.5 313.8 338.7 361.2 517.2 560.6 587.2 140.6 40,403 120,517 130,640 142,381 41,099 40,928 41,223 39,782 39,780 40,163 137,699 1301290 139,841 944.6 950.6 962.7 354.4 356.7 360.7 580.1 583.6 589.5 41.399 41,274 41,271 40,122 40,570 40,403 140,777 141 450 142.381 971.0 R61.3 981.5 361.2 360.5 361.2 5B9.9 5B7.8 41,479 40,476 39,781 39,825 143,400 143.345 149,893 1002.2 1011.3 1016.2 359.7 358.6 359.0 583.4 40,754 40.815 39,730 389716 39,004 144,486 144,862 145,601 2027.9 1038.9 1052.5 364.3 JUNE 40,647 40,481 40,421 JULY P 40,821 39,650 146,924 1163.5 38,694 39,396 38,633 1976 1977 1978 30,354 800.4 875.8 MONTHLY: NOV. DEC, 1919--JAN. FEB. AR. APR. MAY 587.2 1458.0 1474.1 1493.1 WEEKLY: 2? 39,993 40,720 40,219 JULY 4 11 18 25P 41,141 39,905 41 08 L 41.056 39,464 39,044 39,899 39,764 146,877 145,736 147,071 147,347 369.8 373.4 372.4 371.1 591.6 596.0 595.2 594.0 90.,9 913.7 014.6 913.9 AUG. LP 8P 41,006 40,780 40.160 40,016 147,717 147,478 372.3 595.1 916.5 1979-JUNE 13 20 1001.9 -- NOTES: -- ------~---' WEEKLY DATA ARE DAILY AVERAGES FOR STATEMENT WEEKS. MONTHLY DATA ARE DAILY AVERAGES. WEEKLY DATA ARE NOT AVA1LABLE M3, H5, M6, MT, TOTAL LOANS ANO INVESTMENTS AND THRIFT INSTITUTION DEPOSITS. I/ BASED ON DATA ADJUSTED FOR CHANGES TN RESERVE REQUIREMENTS. DATA SHOWN IN MILLIONS OF OOLLARS, P - PRELIE NARY FOU AUG. Table 3 10, 1979 COMPONENTS OF MONEY STOCK AND RELATED MEASURES Time and Savings Deposits Demand manOther Deposits Total Total Total 2 3 4 9.5 9.3 10.0 4.6 7.4 6.1 8.1 11.4 12.4 15.0 11.2 9.4 25.0 11.1 2.2 7.5 11.4 15.6 -23.3 12.8 32.8 1ST HALF 1978 2ND HALF 1978 9.3 10.2 7.6 4.5 12.2 12.0 7.6 10.7 2.9 1.5 11.7 18.4 1ST HALF 1979 8.7 0.6 4.8 6.9 -6.3 Period Currency 1 ANNUALLY: 2/ 1976 1977 1978 Than CD's Savings Other Other Savings CD's Mutual Savings Bank & S&L SharesJJ 5 6 7 8 (Per cent annual rates of growth) Credit Union Shares / Other Private Short Term Savings U.S.Gov't Short-term Bonds/1 Securities Assets V 1 / 9 10 11 15.4 14.0 10.2 17.8 19.5 15.0 6.9 6.6 5.4 7.1 12.6 8.9 12.1 13.5 46.7 42.6 19.0 8.5 11.5 17.0 12.0 6.3 4.3 12.5 4.9 50.9 33.9 17.4 -7.1 8.2 4.5 0.7 40.2 65.9 12 2/ SEMI-ANNUALLY: QUARTERLY: 3RD QTR. 4TH QTR. 1978 1978 11.7 9.7 8.5 -2.7 11.6 11.9 12.1 7.7 4.5 -5.3 18.5 18.1 8.3 36.6 12.1 10.7 13.5 7.7 4.6 4.0 9.3 6.2 13.7 69.3 1ST QTR. 2ND QTR. 1979 1979 7.8 8.5 -6.4 12.3 5.4 O.5 4.6 11.5 -9.5 0.2 15.6 19.4 9.9 -57.0 9.5 5.9 1.5 9.8 0.0 -0.5 35.2 45.3 58.1 55.3 2.9 0.2 17.9 18.2 12.2 25.0 10.9 11.8 13.7 10.1 4.6 4.0 2.5 7.3 21.0 44.4 QUARTERLY-AV: 3RD QTR. 4TH QTR. 1978 1978 9.6 10.6 7.3 1.7 11.3 12.3 11.0 10.2 1ST QTR. 2ND QTR. 1979 1979 9.1 8.1 -6.2 7.5 8.4 1.2 4.5 9.3 -9.6 -3.1 15.6 18.5 29.9 -41.0 9.6 6.7 0.8 8.3 1.5 0.0 28.7 48.2 67.9 54.6 9.1 9.0 16.6 7.6 10.0 11.2 5.5 7.4 12.3 -0.9 -5.9 -1.4 11.0 10.9 12.5 8.5 21.7 5.3 9.8 13.8 12.2 10.0 9.4 3.5 -3.2 6.5 10.2 -0.5 -8.5 -7.0 20.7 19.9 13.9 18.5 23.7 11.2 18.0 -5.5 12.3 1.4 92.1 15.1 11.1 11.2 13.5 12.5 9.8 9.5 11.9 11.8 16.3 9.2 4.6 9.1 6.1 3.0 4.5 4.5 3.0 4.5 -17.5 5.9 39.9 -11.4 -14.4 45.3 22.2 6.7 11.7 41.3 75.0 81.1 12.8 20.0 13.f 19.8 19.9 17.6 18 1 ERIVED 48.4 19.1 -36.4 -48.5 -55.6 -75.5 -7.8 Y AVERAGNG MONTHLY: 1978--JULY AUG. SEPT. OCT. NOV. DEC. 1979--JAN. 8.6 -10.0 9.0 FEB. 8.6 -8.3 8.6 MAR. 6.1 -0.q -1.4 APP. 9.7 21.3 2.1 MAY 6.0 -1.4 -1.4 JUNE 9.5 16.8 0.8 JULY P 5 3 122 1/GROWTH RA ES AREBAED UN EST A PREVIOUS MONTH REPORTED DATA. 2/ RASED ON QUARTERLY AVERAGE DATA. P - PRELIMINARY. 1.6 -11.8 6.5 -12.0 5.6 -4.9 11.8 0.0 8.7 -7.2 13.6 7.8 1 146 9.4 HLY AVERAGE LEVELS 9.7 9.6 8.9 5.5 3.9 8.1 -4.5 1.5 -6.8 -1.5 16.0 0.0 6.8 0.0 4.5 0.0 17.8 -1.5 .8566t 1.5 END OF C PRENT MON H AND END OF 28.1 19.2 55.5 58.2 39.5 33.4 3 61.9 53.5 51.2 51.6 53.0 54.1 Table 4 AUG. 11, 1979 COMPONENTS OF MONEY STOCK AND RELATED MEASURES Time and Savings Deposits Currency Demand Deposits Period Other Than C's Other Than CD's Total IC/ Savings Other 1 __ _Total a 5 Union Savins Shares Bods Sharest ShortTerm S. U.S. ov' Sec i i Other hortterm Assets Assets Private Tot Total Govt Funds Demad N Deposits Dsis Non- Dposit 13 14 9 10 11 12 456. 1 '8. 46.6 66.? 77,2 77.2 571.2 53.1 71.9 76.6 80.6 47.7 51P.9 291. '' 4 *. 73.7 96,6 271.2 275.7 278.9 88.0 97.6 88.5 545,0 Rn.9 79.3 29.5 556.3 51.4 52.1 80,9 91.3 84.0 283.7 288.8 291.5 88.6 95.4 96.6 562.1 566.7 52.5 80.1 52.7 83.2 75.2 74.7 80.3 79.9 -3.5 571.2 53.1 90.6 32.2 95.3 89.,3 79.7 52.9 90.7 87.3 9.7 52.6 53.3 51.6 80.6 88.7 93.7 R1.7 84.n 92.8 97.7 86.8 14.7 19.? 9.4 589.3 53.8 100.5 101. 106.4 103.3 111.2 90.0 <!.9 93.8 13.8 106. 116. 1 95.7 16.0 * .0 9.7 15.0 16.5 17.0 2 0.8 233.0 250.1 489.2 426.7 202.1 224.7 544.4 21°.7 251.0 97.5 263.7 611.2 471.7 514.6 ?23.0 93.2 582.1 494.1 222.9 224. i 4 CD Credit 8 6 1 3 Mutual Ban-& S&L Savings 7 ANNUALLY: 1976 1977 t"78 MONTHLY: gT8---JULY AUG. SEPT. 93.9 95.2 265. 5 95.8 587.4 593.5 499.8 504.9 265.3 264.0 263.7 597.7 509.1 608.5 97.5 513.1 514.6 261. 5 615.8 98.9 OCT. NOV. DEC. 259.7 620.2 619.5 96.6 1979--JAN. FEB. MAR. 98.4 259.5 611.2 226.0 225.9 224.3 223.0 515.3 518.1 520.5 220.8 218.6 217.7 2q4.6 299.5 100.5 102.1 99.0 575.8 r80.4 302.9 525.6 52-.4 217.7 95.0 90.6 84.9 587.4 593.3 54.6 SO.6 80.6 90. 5 597.5 54.9 B0.6 100.2 100.7 10] .5 264.1 263.6 267.5 620.3 535.4 217, 307.9 313.0 317,6 P 102.3 269.8 626.6 541.9 219.5 322.4 84.7 6 13 20 27 101.4 101.2 101.4 269.6 267.3 267.4 266.8 532.3 618.9 620.3 621.7 534. 3 535.8 217. 217.7 218.0 219.1 315.4 316.6 317.8 319.0 85.9 84.5 94.5 84.6 4 11 18 101.9 102.0 102.3 102.6 261.9 271.3 270.2 624.4 625.1 539.2 540.4 626.1 542.2 268.6 627.3 542.7 218.7 219.5 219.6 219.7 320.5 320.9 322.6 323.0 85.2 84.7 83.9 84.6 1072.9 269.4 6 9.6 544.3 219.7 324.6 594.7 51.0 62.0 79.7 71.6 72.0 67.5 69. 7 216.4 11.4 11.7 14.7 97.3 72,7 C 85.3 APR. MAY JUNE JULY 261.2 262.8 a"5.3 ;6. 3 (5.3 16.8 16.7 20.1 21.0 15.4 1.3 WEEKLY: 1979-JUNE JULY 25P AUG. 1/ 21 3/ 41 P - IP 101.8 537.1 93.4 94.. 92.7 94.3 96, 1 96.8 94, 7 FSTIMATED MONTHLY AVERAGE LEVELS DERIVED BY AVERAGING END OF CURRENT MONTH AND FND OF PREVIOUS MONTH REPORTED DATA. INCLUDES PRIIATE DOMESTI1 NONFINANCIAL INVESTORS' HDLDINGS OF COMiEPCTAL PNPER, BANKERS ACCEPTANCES, SECURITY PP*S AND MONEY MARKET MUTUAL FUND SHARES. BORROWINGS BY BANKS FROM OTHER THAN COMMERCIAL BANKS IN THE FORM OF FEDERAL FULOS PURCHLFEO, SECUATIIES SOLD UN ER AGREEMENTS TO REPURCHASE, AND OTHER LIABILITIES FOR BORROWED MONEY, PLUS GROSS LIABRLrrrEs TO OWN FOREfrG BPANCHES (EURODCLLAR BORROWINGS), LCANS SOLD TO AFFILIATES, LOAN RPS, AND OTHER MINOR ITEMS. INCLUDES TREASURY 0D5FAND DEPOSITS AT COMMERCIAL BANXS ANO FEOERAL RESERVE BANKS AND TREASURY NOTE BALANCES. PRELIMINAiR 15.4 14.3 15.3 17,7 17.6 STRICTLY CONFIDENTIAL (FR) CLASS II - FOMC AUGUST 10, 1979 TABLE 5 SELECTED INTEREST RATES (percent) Short-Term Treasury Bills Pederal punds (1) TIsuelarket New LAuction IYC CO m. paper 90-119 Rate k 3-mo (2) 1-yr (3) 6-mo (4) 90-da (5) day 6 (7) .S. Govt. Constant Maturity Yielde 7-yr 20-yr 3-yr (8) Long-Term MuEICorp.-Aaa cipal Utilit Recently Bond New Pri on (9) (10) Issue (11) Offered (12) Buyer (13) (14) Home Mortgages Market Seconda P. NHA GNMA Au. (15) Sec. (16) L978--High Low 10.25 6.58 9.30 6.16 9.62 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 10.75 9.93 9.69 8.85 9.68 8.64 9.63 8.87 10.46 9.46 10.57 9.66 11.75 11.50 9.60 8.78 9.34 8.74 9.30 8.79 9.87 9.42 9.94 9.40 6.58 6.08 11.13 10.38 10.88 10.42 10.05 9.51 1978--July Aug. Sept. 7.81 8.04 8.45 7.01 7.08 7.85 7.79 7.73 8.01 7.47 7.36 7.95 8.00 7.86 8.34 7.85 7.83 8.39 9.00 9.01 9.41 8.54 8.33 8.41 8.55 8.38 8.42 8.69 8.45 8.47 9.14 8.82 8.86 9.18 8.91 8,86 6.28 6.12 6.09 9.74 9.79 9.76 10.01 9.81 9.79 9.15 8.97 9.04 8.96 9.76 10.03 7.99 B.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 9.25 10.30 10.50 9.39 9.38 1979--Jan. Feb. Xar. 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 9.62 9.51 9.56 9.62 6.47 6.31 6.33 10.39 10.41 10.43 10.70 10.54 10.43 9.67 9.67 9.70 Apr. May June 10.01 10.24 10.29 9.46 9.61 9.06 9.28 9.27 8.81 9.50 9.53 9.06 9.76 9.80 9.58 9.85 9.95 9.76 11.75 11.75 11.65 9.43 9.42 8.95 9.21 9.23 8.86 9.12 9.21 8.91 9.70 9.83 9.50 9.74 9.84 9.50 6.29 6.25 6.13 10.50 10.69 11.04 10.59 10.84 10.77 9.78 9.89 9.75 July 10.47 9.24 8.87 9.19 9.70 9.87 11.54 8.94 8.92 8.92 n.a. n.a. n.a. 11.09 10.66 9.77 6.09 6.11 6.18 6.12 11.03 11.05 11.10 11.10 10.79 9.83 9.7b Oct. Nov. Dec. 1979--June July Aug. 6 13 20 27 10.23 10.23 10.28 10.32 9.48 9.06 8.98 8.85 9.03 8.76 8,82 8.74 9.43 9.05 8.87 8.90 9.69 9.46 9.58 9.60. 9.92 9.86 9.67 9.68 11.75 11.75 11.68 11.50 9.06 8.90 8.99 8.81 8.94 8.82 8.87 8,78 8.98 8.89 8.93 8.82 9.57 9.51 -9.43 9,58 9.46 9.48 9.39 4 11 18 25 10.42 10.28 10.35 10.63 B.96 9.25 9.29 9.34 8.64 8.78 8.84 9.01 8.87 9,16 9.26 9.47 9.60 9.63 9.68 9.87 9.66 9.75 9.87 9.96 11.50 11.50 11.50 11.50 8.78 8.88 8.96 9.05 8.74 8.87 8.97 9.00 8.79 8.88 8.97 8.98 9.57 9.63 9.41 9.50 9.58 9.59 6.08 6.11 6.15 6.19 11.13 11.08 11.08 11.08 10.66 10.65 9.80 9.52 9 3 . 9p 9.57 9.44p 6.14 6.13 11.08 -- 9.88 n.a. 10.64 9.82 1 8 Daily--Aug. 2 9 10.75 10.67 9.16 9.37 8.94 8.91 10.70 10.68p 9.33 9.40 8.93 8.96 9.89 9.91 9.30 9.32 - - 9.98 10.04 11.71 11.75 9.01 8.98p 8.99 8.94p 8.96 8.92p 9.98 t.10.14 11.75 11,75 8.96 9.01p 8.92 8.99p 8.92 8.95p - 9.72 - 9.69 9.82 10.74 9.69 - 9.78 --- NOTE: Weekly data for colums 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-south For columns 8 through 11, the weekly bills that will be issued on the Thursday following the end of the statement week. Data in column 5 are 1-day Wednesday quotes. Columna 12 and 13 are 1-day quotes for Friday and Thursday, repectively, following the and date is the mid-point of the calendar week over which data are averaged. meotgages with 80 percent loan-to-value ratios made Column 14 is an average of contract interest rates on commitments for conventional first of the statement week. Column 15 gives FKMA auction data for Monday preceding by a sample of insured savings and loan associations on the Friday following the end of the statement week. the end of the statement week. Column 16 is a 1-day quote for Monday preceding the end of the statement week. The FPNA auction yield is the average yield in bi-weekly auction for short-term forward commitmenta for government underwritten mortgages. GMA yields are average net yields to invetore on mortgage-backed securities for immediate delivery, assuming prepayment in 12 years on pools of 30-year FHI/VA mortgages carrying the coupon rate 50 basis points below the current UHA/VA ceiling. 1/ TABLE 6 NET CHANGES IN SYSTEM HOLDINGS OF SECURITIES (millions of dollars, not seasonally adjusted) Treasury Bills Net Bills Met1 Period Period 1972 -49D 1973 1974 1975 1976 1977 7,232 1,280 -468 863 4,361 870 hithn I ear 1 ear 87 207 320 337 472 517 1,184 5,444 Change 2/ 1978 -- Treasury Coupons Net Purchases - 31 1-5- 5 O 1 5 - 10 Over 10 - Totiti Toal - II ar 1 Year 40 3,025 2,833 4,188 129 196 1,070 642 553 1,063 1,747 6,202 5,187 4,660 7,962 468 349 250 579 797 3,284 334 235 247 2,246 1,697 1,844 93 700 -170 - 682 110 93 700 - 5 5 - 10 592 40a 1,665 824 469 792 45 253 244 659 460 -20 1978--tr. Ir Qtr. III Qtr. IV i88 1,156 3,152 -5,072 140 112 774 1,135 1979--Qtr. I Qtr. IT -3,750 465 48 42 426 640 1979--Feb. Mar. -628 1,136 48 426 134 Apr. ,3Z582 134 1,415 120 439 191 105 -47 203 428 104 Over 10 Total lot 1,059 864 3,082 101 318 138 114 213 24 June 7,267 891 1,433 127 10,035 2,252 1979--June July 6 13 20 27 4 113 266 1,384 188 Aug. 1 8 LEVEL--Aug. 8 (in bilinsei 1/ 4/ 5/ 6/ 7/ 8/ 9/ 6,227 8,724 301 7,930 -173 4,632 - '29 258 -2 -3,283 680 2,542 -- -20 ---- 52 3,713 7/ 2,135 4,290 -- -491 275 96 142 693 191 342 10L 288 10 218 237 211 96 S - .. .. 16.1 28.4 142 12.3 .. 3 -- 482 11.9 258 2 371 693 ........ 3,427 -748 -33 755 101 806 266 1,384 188 191 288 3 - 482 693 .... 68.8 1.6 1,224 266 -2,130 -882 7/ -1,795 -1,579 7/8/ 237 6/ -1,358 -46 -154 1,272 3,607 -2,892 -1,774 -399 371 --- 218 RPs -- -748 11 18 25 1 2f 104 - -105 July 127 -81 1,631 9,273 6,303 1,613 1,021 -451 May - Net Change Outright 1011 oldigs Total Torsi5/ Federal Agencies Net Purchases 4/ 539 500 434 1,510 1,048 758 1,526 789 STRICTLY CONFIDENTIAL (FR) CLASS II - FOMC AUGUST 10, 1979 4.3 1.5 -944 -2,353 5,840 -1,665 -5,513 1,230 1,830 5,723 9/ -4.853 -3.554 8,063 -3,828 1,184 -5,466 .8 8.2 119.7 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 matuL ng 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 SyeCem,and redemptions (-) of Agency and Treasury coupon issues. Includes changes in both RPa (+) 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 ike amount of cash management bills on April 3. On April 9 the bills were exchanged for new 2-year notes. This includes $75 million of matched purchase-eale agreementa,
@FedFRASER