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(CONFIDENTIAL FR) August 11, 1972 MONETARY AGGREGATES AND MONEY MARKET CONDITIONS Prepared for the Federal Open Market Committee By the Staff BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM CONFIDENTIAL (FR) August 11, 1972 MONETARY AGGREGATES AND MONEY MARKET CONDITIONS Recent developments (1) Reserves available to support private non-bank deposits now appear to be growing at about a 6.5 per cent annual rate over the July-August target period, at the upper end of the 3-7 per cent annual rate range desired by the Committee. Over the past two weeks it had appeared that RPD growth was running slightly above the target range, but various technical revisions as well as lower than projected excess reserves in the week just ended reduced the RPD level somewhat. (2) During most of the interval since the previous Committee meeting, the Federal funds rate averaged around 4-1/2 per cent, down slightly from the 4-5/8 per cent level that had prevailed briefly early in July. With RPD growth appearing to be on the high side of the target range and M 1 expanding substantially more than projected, however, the Desk began to hold back on its reserve supplying operations, forcing banks to meet a larger share of their reserve needs through borrowing at the discount window. edged the funds rate back to the 4-5/8 per cent level. This Since the large-scale Treasury refunding was in progress at the time, the Desk felt constrained by even-keel considerations from putting pressure on the funds rate much beyond that point. Most recently, although dealer inventories of the new refunding issues are still large, the favorable general performance of securities -2markets has made it possible for the Desk to press a little harder on reserves, and the funds rate has moved up to about 4-3/4 per cent. (3) The early July bulge in private demand deposits evident at the time of the last Committee meeting receded somewhat over the latter part of the month, but this drop-off was significantly smaller than expected. As a result, M 1 rose at a 15 per cent annual rate during the month, even faster than the 10.4 per cent rate estimated for the policy alternative approved at the last meeting.1/ Data for the first two weeks of August indicated that M 1 is continuing to exceed levels thought likely a month ago, although the differences are not so sharp as in July. During the second quarter, the demand for cash balances had seemed on the low side, given the rapid expansion of nominal GNP and the marked earlier decline of interest rates extending into early 1972. Thus, the stronger July and August perform- ance may be signaling a catch-up to more normal relationships between changes in M1, interest rates, and GNP. (4) In contrast to M1, growth of M2 was about as projected in July, as slower than forecast growth in time deposits other than large CD's offset the stronger advance in demand deposits. While savings inflows appear to have strengthened a bit in early August and are tending--in combination with demand deposits--to boost M 2 a little above earlier expectations, growth in other time and savings deposits has remained below the rapid pace set earlier in the year. (5) The adjusted credit proxy expanded much more in July than thought likely at the time of the Committee meeting, and in early August it continues 1/ Various technical factors during July increased somewhat the volume of private demand deposits supportable by a given level of reserves. In particular, a greater than expected share of the demand deposit increase lodged at country banks, where reserve requirements are lower. -3to show somewhat greater strength than anticipated. The strength in private demand deposits and a larger than projected increase in negotiable CD's accounted for much of this overshoot, but the principal factor at work was the failure of U. S. Treasury deposits to decline as expected from their relatively high June level. Large foreign central bank acquisitions of special Treasury issues and lower than estimated Federal spending accounted for this relative stability in Treasury balances. (6) Investors responded enthusiastically to the Treasury's August refunding package, and the consequent attrition of only $630 million was readily met out of the Treasury's ample cash position. Exchange offers accepted totaled $8.1 billion, of which $4.1 billion was in the longer seven and twelve year options. The new issues have performed well thus far in the after-market, although dealer holdings of these issues still totaled $910 million on August 10. (7) Interest rates on market securities--both long and short-term-- have declined on balance during the interval between Committee meetings, in some cases by as much as 25 basis points. Treasury bill yields have edged up recently from the lows reached during the Treasury refunding--when holders of "rights" not wishing to make the exchange were switching into other shortterm Treasury issues--but they are a touch below the levels prevailing at the time of the last meeting. The 3-month bill, for example, was bid at 3.84 per cent on Friday, down 5 basis points from the last meeting. (8) The following table compares seasonally adjusted annual rates of change in major financial aggregates for recent periods with the average annual rate of growth over the past two and a half years. Past 2-1/2 Years QIV '71-QI '72 June '72 over Dec. '69 March 1972 over Sept. 1971 June over Mar. '72 Total Reserves 8.1 6.2 12.8 3.0 Nonborrowed Reserves 10.1 9.0 13.0 - 1.5 8.7 7.9 7.1 8.6 6.5 5.2 5.3 15.2 (M1 plus time deposits at commercial banks other than large CD's) 13.2 10.8 8.6 11.7 (M2 plus deposits at thrift institutions) 12.1 12.7 10.8 13.9 10.1 10.6 11.1 12.9 10.9 13.3 7.3 10.2 Reserves available to support private nonbank deposits July over June 1972 Concepts of Money M1 M2 M3 (currency plus demand deposits) 1/ Bank Credit Total member bank deposits (Bank credit proxy adj.) Loans and investments of commercial banks 2/ Short-term market paper (Actual $ change in billions) Large CD's Nonbank commercial paper $ 26.1 1.7 3.7 2.2 1.6 1.0 n.a. 1/Other than interbank and U.S. Government. 2/Based on month-end figures. Includes loans sold to affiliates and branches. NOTE: All items are based on averages of daily figures, except for data on total Loans and investment of commercial banks, commercial paper, and thrift institutions-which are either end-of-month or last Wednesday of month figures. Prospective developments (9) The persistent recent tendency for M 1 levels to come in higher than projected has led the staff to raise its money demands in both the third and fourth quarters. estimates of likely While some of the early July bulge in private demand deposits does seem to have been transitory, continued rapid GNP expansion over the months ahead, along with the lagged influence of the relatively stable interest rate levels since spring, can be expected to generate sizable further growth in money demands. Special factors that may add to money demand in the coming quarter include the large boost in social security payments and the prospect of a retroactive revenue sharing payment to States and localities by the Federal government. For the third quarter, the deposit data thus far available suggests that expansion in M 1 is moving along a path that will produce an annual growth rate of about 9 per cent. This is well above the 6-1/2 per cent rate thought to be consistent with the policy specifications adopted at the last meeting, and is close to the 9-1/2 per cent expansion rate now projected for nominal GNP. (10) Adherence to an RPD target at this juncture that might achieve 6-1/2 per cent M 1 growth rate in the third quarter would produce a drastic tightening in money market conditions. Moreover, money market conditions would have to ease markedly after the third quarter in keep growth in first quarters. conditions, the aggregates from falling too sharply in order to the fourth and To avoid the resulting whip-sawing effect on credit the suggested policy alternatives that follow are designed to -6achieve a moderation in growth of the aggregates over a longer interval. Since even a policy directed at slowing money growth substantially in the fourthquarter would be likely to generate significant lagged interest rate effects on money demands during early 1973, the staff has carried its projection of M1 changes under the three directive alternatives through the first quarter. Estimates this far ahead, of course, are subject to considerable uncertainty. (11) Patterns of monetary aggregates, RPD, and money market conditions are summarized for the three suggested directive alternatives in the table below, with details in the tables on the two following pages. Alternative C would set an RPD growth path designed to slow expansion in M1 down to a 6-1/2 per cent annual rate by the fourth quarter. The staff's best judgment is that this RPD would be associated with a sharply higher Federal funds rate, perhaps fluctuating around 6 per cent. General interest rate increases resulting from such a change would be expected to lead to further reduction in money growth to about 4-1/2 per cent rate in the first quarter of 1973. Alternative B would move less aggressively to slow growth in the aggregates--moderating the expansion of M1 to an annual rate of 7-1/2 per cent in the fourth quarter and 6 per cent in the first. Under this approach, the response of interest rates would be less marked than under Alternative C; the Federal funds rate would be expected to fluctuate around 5-1/4 per cent, about 50 basis points above its recent level. Alternative A would achieve the least moderation in M1 growth, and would -7be associated with little change in money market conditions. Under this alternative, M 1 would be expected to grow over the fourth and first quarters combined at about a 7-1/2 per cent rate, the same rate as had been specified for the third quarter under alternative A in the last bluebook. Under all three of the policy alternatives outlined, M2 and the bank credit proxy are expected to average close to a 9 per cent annual rate of growth in the third quarter. Thereafter, the rate of growth in M 2 is expected to slow, as rising interest rates on market securities become increasingly attractive to savers. Anticipated more aggressive bank issuance of large CD's, however, would be expected to sustain the rate of growth in the credit proxy during the fall. Alt. A Alt. B Alt. C Growth in M1 (SAAR) August September 3.5 8.0 3.5 7.5 3.5 7.0 3rd Q. 4th Q. 1st Q. 9.0 8.5 7.0 8.7 7.5 6.0 8.5 6.5 4.5 4th - 1st Q. 7.7 6.7 5.5 4.0 11.1 3.8 10.8 3.5 9.9 7.6 7.3 6.7 4--5-1/2 4-1/2--6 Near-term growth in RPD (SAAR) August September August-September Federal funds rate 5-1/4--6-3/4* Member bank borrowings ($ millions) * Assumes prompt (in 75-500 200-600 350-850 1 or 2 reserve weeks) movement from the present 4-3/4 to a new minimum 5-1/4% weekly average. Alternative Monthly and Quarterly Patterns for Key Monetary Aggregates M1 1972 Alt. A Alt. B July August Sept. 239.6 240.3 241.9 239.6 240.3 241.8 Oct. Nov. Dec. 243.3 244.7 247.0 243.0 244.3 246.3 Alt. A (Billions of Dollars) 239.6 495.2 240.3 498.2 241.7 501.9 C Alt. 242.7 243.8 245.5 505.1 508.4 512.4 Alt. B Alt. 495. 2 498.1 501.4 495.2 498.1 501.1 504.0 506.5 509.4 503.1 505.0 507.3 Per Cent Annual Rates of Growth July Aug. Sept. 15.2 3.5 8.0 Oct. Nov. Dec. 6.9 6.9 11.3 9.0 8.5 3rd Q. 4th Q. 15.2 3.5 7.5 15.2 3.5 7.0 11.7 7.3 8.9 11.7 7.0 8.0 6.0 6.4 9.8 5.0 5.4 8.4 7.7 7.8 9.4 6.2 6.0 6.9 8.7 7.5 8.5 6.5 9.4 8.4 Adjusted Credit Proxy Alt. A B Alt. Alt. C (Billions of Dollars) 1972 July Aug. Sept. 386.5 388.0 391.5 386.5 388.0 391.4 386.5 387.9 390.9 Oct. Nov. Dec. 394.0 399.6 402.5 393.8 399. 1 401.4 392.9 398.1 400.2 Per Cent Annual Rates of Growth July Aug. Sept. 12.9 4.7 10.8 12.9 4.7 10.5 12.9 4.3 9.3 Oct. Nov. Dec. 7.7 17.1 8.7 7.4 16.1 6.9 6.1 15.9 6.3 3rd . 4th Q. 9.5 11.2 9.4 10.2 8.9 9.5 11.7 7.0 7.2 C Alternative Monthly and Quarterly Patterns for Reserve Aggregates RPD1/ Total Reserves 2/ Alt. A Alt. B Alt. C Alt. A Alt. B Alt. C (Millions of Dollars) 1972 July Aug. Sept. 33,141 33,297 33,299 33,141 33,290 33,286 33,141 33,285 33,258 30,365 30,467 30,748 30,365 30,461 30,735 30,365 30,455 30,707 Oct. Nov. Dec. 33,694 34,051 34,508 33,653 33,975 34,386 33,584 33,878 34,259 31,027 31,329 31,670 30,986 31,254 31,551 30,917 31,158 31,426 (Per Cent Rate of Growth) July Aug. Sept. 1/ 3.0 5.6 0.1 3.0 5.4 -0.1 3.0 5.2 -0.9 8.6 4.0 11. 1 8.6 3.8 10.8 8.6 3.5 9.9 Oct. Nov. Dec. 14.2 12.7 16.1 13.2 11.5 14.5 11.7 10.5 13.5 10.9 11.7 13.1 9.8 10.4 11.4 8.2 9.3 10.3 3rd Q. 4th Q. 2.9 14.5 2.7 13.2 2.4 12.0 8.0 12.0 7.8 10.6 7.4 9.4 Reserves available to support private nonbank deposits. 2/ The dollar level of total reserves and RPD for September and thereafter are not adjusted for the effect of changes in Regulation J and D scheduled to take effect in the statement week ended September 27. In the next Bluebook, dollar levels of reserves and RPD will be made consistent with the impacts of the changes in Regulations D and J and the percentage rates of change shown above. The RPD level and rate of change shown for September does assume an increase in the level of excess reserves (adjusted for waiver of penalty for deficiencies under Regulation J) during the late month transition period. -10(12) Under all three of the alternatives, short-term rates are likely to be moving upward in credit demands. the fourth quarter under pressure from rising Some of this pressure will come from business demands on banks and the commercial paper market, but the major factor will be the heavy anticipated Federal cash borrowing--which will undoubtedly be mainly in short-term markets. until October, (The period of heavy Treasury borrowing will not come but some financing may be needed in September, possibly close to the time when the System will also be selling Treasury issues to absorb the excess reserves released by the combined effects of changes in Regulation D and J.) Even under alternative A, although little change would be anticipated in the Federal funds rate, the 3-month Treasury bill rate might rise from its recently depressed rate by 50 basis points or so during the fourth quarter, and very likely will advance further in early 1973. Upward pressure on short-term rates, of course, would be considerably greater under alternative B-and more so under C. Thus, the 3-month bill rate might rise to 5 per cent or more by the end of the fourth quarter under B and could be approaching 6 per cent under C. (13) Rising short-term interest rates would begin to have an increasing impact on rates of growth in M1 as the fourth quarter progressed, but their major restraining effects on M1 would probably not occur until the early months of 1973. The temporary slowing shown for August in average M 1 growth rate is a statistical consequence of the early July bulge; from the last week in July to the last week of August, growth rate in M1 is the monthly over 9 per cent. the projected annual -11(14) As money market instruments rise in yield, their increasing relative attractiveness can be expected to dampen fourth quarter flows into consumer-type time and savings deposits. a moderate slowing of inflows to accounts is Even under alternative A expected to occur; under alternative B the higher level of short-term market rates would have a more noticeable effect. The money market rates associated with alternative C would reduce inflows still further, and given present rate ceilings, they could also make all but the highest yielding longerterm accounts non-competitive with market instruments by the time of the year-end interest-crediting period. As shown in the table on page 8, growth in M 2 over the fourth quarter is expected to slow progressively more than M1 under alternatives B and C. (15) Under alternatives B or C, banks could be expected to take a more aggressive stance in the CD market, as inflows of other time deposits decelerate and as business loan demands rise. Additional borrowing in the Eurodollar market would be expected to remain modest, however, so long as the 20 per cent marginal reserve requirement borrowings remains in effect. on such The latitude for bank issuance of CD's should be a major factor tending to sustain the rate of growth of the credit proxy even under the firmer money market conditions associated with alternatives B or C. (16) Under alternative A, interest rates in longer-term markets would probably remain relatively stable until late in the year. It is likely that corporations, with relatively high liquidity and increased emphasis on equity financing, private placements, and short-term borrowing, -12will continue their relatively moderate pace of bond offerings, and that State and local borrowings will remain below last year's high Mortgage demands are expected to moderate in and in in line with the decline in any event, both seasonally housing starts. However, the increases money market rates associated with alternative B could produce an earlier advance in long-term rates, and under alternative C the upward movement in long rates would undoubtedly be both large and prompt. In the latter circumstances investors would tend to withdraw from the market to await anticipated higher yields and issuers could be expected to accelerate offerings now planned for 1973. The tax-exempt market would be adversely affected by reduced bank purchases, and the impact on the mortgage market could be quite substantial as institutional lenders began to experience a slowing of savings inflows in of outstanding commitments. the context of a record volume -13Proposed directives (17) Three alternative formulations for the operational paragraph of the directive are presented below. They might be associated with the correspondingly lettered patterns of growth in the aggregates described in the preceding section. (18) Alternative A. "To implement this policy, while taking account of capital in developments financing Treasury forthcoming the [DEL: and] markets international developments, the Committee seeks to achieve bank reserve and money market conditions moderate] growth in monetary aggregates that will support [DEL: over the months ahead AT ABOUT THE AVERAGE RATES RECORDED IN THE FIRST HALF OF THE YEAR." (19) Alternative B. "To implement this policy, while taking account of financing,] Treasury forthcoming the [DEL: developments,] international and markets, [DEL: developments in capital the Committee seeks to achieve bank reserve and money market conditions that will support moderate growth in monetary aggregates over the months ahead." -14(20) Alternative C. "To implement this policy, while taking account of [DEL: the forthcoming financing,] Treasury developments in capital markets, [DEL: developments,] international and the Committee seeks to achieve bank reserve and money market conditions that will support [DEL: moderate] SOMEWHAT SLOWER growth in monetary aggregates over the months ahead." (21) In all three alternatives it is proposed to delete the reference to the Treasury financing, now that it is completed. The Committee has interpreted a reference to international developments in other recent directives as calling for use of operating techniques designed to minimize downward pressures on short-term interest rates. Retention of this reference is proposed only in alternative A, since that is the only policy course herein described under which there is believed to be any significant possibility for short-term rate declines. It is proposed to delete the reference to capital market developments in alternative A, since generally stable long-term rates are foreseen under that alternative. Retention of this reference in alternative B could be construed, as in past directives, to call for the types of operations best calculated to minimize upward pressure on long-term rates. In alternative C the same language could be interpreted as calling for adopting Desk operations as necessary to facilitate orderly market adjustments to the higher long-term rate levels foreseen. CHART 1 STRICTLY CONFIDENTIAL (FR) 8/11/72 RESERVES AVAILABLE TO SUPPORT PRIVATE NONBANK DEPOSITS BILLIONS OF DOLLARS 133 7% growth for -129 I I I I I II J M J 1971 I I I D I i S A M 1972 M 1972 I J 1972 J A CHART 2 STRICTLY CONFIDENTIAL (FR) 8/11/72 MONETARY AGGREGATES NARROW MONEY SUPPLY M1 BILLIONS OF DOLLARS 240 I I I I1 1 I1 I1 1I I 1 I1 11I I i I 1 1 J I 1 I 1 1 1 1 I J 11I I I -i BROADER MONEY SUPPLY M2 -1520 (8/9/72) I 1971 1972 I j A M J J 1972 I A S CHART 3 STRICTLY CONFIDENTIAL(FR) 8/11/72 MONETARY AGGREGATES ADJUSTED CREDIT PROXY BILLIONS OF DOLLARS 400 -400 390 (8/9/72) 380 380 -360 370 1340 RESERVES -1 36 -34 (8/9/72) 33 -32 J I, 1 1971 1972 A M J J 1972 A i S CHART 4 MONEY MARKET CONDITIONS AND INTEREST RATES MONEY MARKET CONDITIONS [WEEKLY AVERAGES PER CENT INTEREST RATES Short-term WEEKLY AVERAGES FEDERAL ATE FEDERAL FUNS FUNDS RATE 1971 1972 1971 1972 1971 1972 Table 1 STRICTLY CONFIDENTIAL (FR) Bank Reserves Reserves Available for Private Nonbank Deposits Seasonally Adjusted Not Seasonally Adjusted Target and Actual Target and Actual and Associated Associated and Patterns Projected Patterns Projected Period (2) 1972--Mar. Apr. May June July Aug. 30,172 30,371 1 30,323-30,524- 29,625 29,798 29,951 30,148 30,365 (30,480) (4) 29,812 30,173 30,023-30,224-l 29,347 29,890 29,775 29,788 30,167 (30,178) Aug. 11, 1972 Required Reserves Seasonally Adjusted Time U. S. Gov't. and and Private Nonborrowed Reserves Demand Nondeposits Interbank (6) (7) (8) (9) Aggregate Reserves Total Reserves (5) 32,032 32,643 32,830 33,059 33,141 (33,297) 31,931 32,525 32,728 32,967 32,927 (33,013) 20,669 20,859 20,874 20,874 21,052 (21,142) 8,748 8,762 8,934 9.059 9,136 (9,217) 2,407 2,845 2,879 2.911 2,776 (2,817) Annual Rates of Change Quarterly: 1971--3rd Qtr. 4th Qtr. 1972--Ist Qtr. : !il .. :::: .!!! 2nd Qtr. 1972--Mar. Apr. May June July Au. Jufy-Aug. weekly: 1972--Apr. 5 12 19 26 8.0 2.0 3.0-7 10 ........... 17 |i!iill 7 14 21 28 July Aug. NOTE: 1/ 5............ 12 19 26 2 9 15.6 7.0 6.2 7.9 8.6 ............. 29,787 29,990 30,011 29,820 30,055 30,187 ::::::::::::::::::::::::::::::: 30,054 30.323 29,943 ..... .... "'.........°°, , .° . o. °.. -°.......................... ... .... .... ... .................. °...... °,.o° .•.°°•. ...................... ..... .° .....,° ...o... °.° • ....... ............. ... ....°°.. ........................... ............. ,.°... ° .. .. .. .. .. . . . .. . . ... .. ..,° °o . ..... °.. ..... ... . .. °...o °° .. •.°° ............. , .. .... .. ..... °°, ....,.° ........ ' ".... . ........ .... ..... .. .,,° '"""".. °.. .... ..... .., ,.° ..... ,° ................... .... ..... , °.,....°.°° °.............. ..°,.° ..... ..°°,.°°,..°...°. ....................... . . ' ,,°...•..°.°. ...... ....... ,°°° .................... ..... ..... ..... ... , ,. ..o°. .................. , ..... ..... .° ....°°. .,.. .................. ° .. ... .. ......... °..°. ................•,,..,., ....... ... ......... °°...°°."" ................. ° ....... .o°°°° °.°. ..•... • ..... .... .. °.. ,°°. .................. ....... .. ... .... .,.. ..... .................. ..°.... .. .. .° ......... .°•.....,•••,.° .°°..° ,°.,..o• .•...... • .... • ,• .. .. °° . .. .. ,..• °°.. ............. ........ •o.,.°°°°°,. ... •.....•.......,°•°.. ...... .. . .... •°.°°°.°.••. 7.2 2.2 10.1 12.8 6.0 6.8 11.0 13.0 13.3 22.2 7.5 8.8 -1.5 (3.0) 15.8 22.9 6 9 8.4 3.0 (5.5) (4.5) ( 4.5) (6.5) Hi i 29,898 ::::::::::::::::::::: 29,728 . . . 29,632 29,971 .... ••......... June 4.3 4.8 10.8 7.1 29,728 29,525 29,850 30,198 ....... ,..........°° ° •• . ........ °........ ........... 'i..•...... ,.° °.° ,°° w:,•......°.,•.o ,..°, ......... °.°,°.°°•... °...°.°o.,....°••.°°.•...,° .............. •°,••°°,,°,. ... . ..... °.................. ° .. ° , ..... °........°... .° , °.• , . . . ,, • ° ° °..° ....... .°,°°.•..°•,.°. °°,•.....,....,..°,..,•.°.~ .°°•.,°..°....°•..,°••.,°•• ....... °°•..°°°•.°..•..••• o.°°....,.,.°°••.°,o..°°••• 30,263 30,004 29,908 ••...°°°....°.....•.°o°..°. °,, ...... ,o.,...°.•.,,°,.• 29,373 29,605 °,.... ...• ., .• •. °• . ~ °•.. ...... o.•,...••.°..•.° ••..°°,.,.°•..,.,.°,.°••.,, ,,,.°.....°•.,.,••°.°..•... ••....°.°.°....°••,°°.°,°.. ••...... ..°....°...°°..,,° •...°oo.,.°•.°..•..°..•,..° •..,°°°,.°,•°.......°••.°°. •..°°.•°.°°•..,°.°..•..,,.. 29,589 29,606 29,94 29,906 (1.0) 2.4 2.8 6.8 4.0 13.5 11.0 0.9 10.2 6.7 14.5 18.0 14.2 13.2 1.9 23.6 16.8 10.2 ( 5.0) (7.5) (10.5) (10.5) 32,655 32,526 32,615 32,845 32,519 32,512 32,568 32,569 20,824 20,765 20,988 20,843 8,713 8,744 8,751 8,780 2,757 2,798 2,983 2,874 32,529 32,638 32,995 32,783 33,033 32,415 32,555 32,960 32,723 32,819 20,866 20,914 20,884 20,717 20,987 8,840 8,891 8,931 8,961 8,992 33,217 32,953 33,213 32,761 33,163 32,864 33,158 32,649 20,766 20,912 20,975 20,803 9,024 9,052 9,058 9.092 2,742 2,647 2,985 2,963 2,978 3,030 2,899 2,890 2,818 30,449 30,055 30,357 30,488 30, 155 29,883 30,239 30,251 33,383 32,671 33,301 33,145 33,119 32,462 33,143 32,990 21,020 20,854 20,983 21,273 9,092 9,119 9,156 9,137 2,934 2,616 2,944 2,657 30,555 30.390 30,358 33,327 31 330 33,000 21,149 9,176 33.087 087 .31 LI. 1-0 ~~Y ---- o-- 109 -- 2,772 2.960 ---- , 7. 0m1 0 1 Data shown in parentheses are current projections. The range is centered on the 5.0 per cent rate of growth in these reserves from July to August thought to be consistent with growth in monetary aggregates as shown under Alternative B in the Bluebook of July 14, 1972. Annual Growth Rates consistent with alternative B 1/ July 10-1/2 11-1/2 MI M2 STRICTLY CONFIDENTIAL (FR) Table 2 QIII 6-1/2 8-1/2 Aug. 2 6 Monetary Aggregates (Actual and current projections, seasonally adjusted) Aug. 11, 1972 Credit Proxy 6-1/2 5 (Adj.) 8-1/2 Period i of Dollars 483.0 486.1 490.4 495.2 (498.2) (501.9) 235.0 235.5 236.6 239.6 (240.3) (241.9) 1972--Apr. May June July Aug. Sept. 376.3 380.9 382.4 386.5 (388.0) (391.5) 7.4 7.4 5.3 5.3 (4.7) (4.8) 282.8 287.0 290.9 293.7 (296.7) (299.8) 248.1 250.7 253.8 255.6 (257.9) (260.0) 15.9 14.7 17.1 11.8 (10.0) 7.8 12.6 14.8 8.5 (11.0) (10.0) 3.5 3.7 3.8 3.9 (3.7) (3.6) 34.7 36.3 37.1 38.1 (38.8> (39.8) Annual Percentage Rates of Change--Quarterly and Monthly 1971--4th Qtr, 1.1 8.0 1972--1st Otr. 2nd Qtr. 3rd Qtr. 9.3 5.3 (9.0) 13.3 8.6 (9.5) 9.7 ( 9.5) 14.8 15.7 (12.0) 1972--Apr. May June July Aug. Sept. 7.7 2.6 5.6 15.2 (3.5) (8.0) 7.2 7.7 10.6 11.7 (7.5) (9.0) 13.5 14.7 4.7 12.9 (4.5) (11.0) 12.4 17.8 16.3 11.6 (12.5) <12.5) 11.3 11.1 ii.... . iii iii ....... 4.1 3.9 .......... iii iii ii iiiii ......... !!! .......... !!! :::: ................ .................. !!i ...................... : 3.6!!!!!!!!!i! Weekly Pattern in Billions of Dollars 3 10 17 24 31 234.7 234.5 236.8 235.0 236.3 484.2 484.5 387.4 486.3 488.4 379.1 378.8 381.4 381.4 382.2 7.9 6.9 6.9 7.6 7.3 285.2 286.0 286.9 287.9 288.7 249.5 250.0 250.7 251.3 252.1 35.6 36.0 36.2 36.6 36.7 3.6 3.6 3.8 3.9 3.7 June 7 14 21 28 236.6 236.6 237.3 236.1 489.3 490.0 491.5 490.7 383.2 381.6 383.7 381.3 6.9 5.1 5.6 3.3 289.5 290.7 291.2 291.9 252.7 253.4 254.2 254.6 36.8 37.3 37.0 37.3 3.7 3.5 3.8 4.0 July 5 12 19 26 238.0 240.9 239.7 239.6 493.7 495.8 495.0 495.5 384.4 384.4 386.6 388.2 5.4 3.5 5.2 6.2 293.1 292.8 293.5 294.4 255.7 255.0 255.3 255.9 37.4 37.9 38.2 38.5 3.8 3.5 4.1 4.0 496.2 497.4 387.6 388.3 5.5 6.4 295.1 295.6 256.5 257.2 38.6 36.4 38.4 3.9 1972--May Aug. r 239.7 240.1 2 pe 9 pe I _ _ _ _ _ _ _ ___ II __ __ _ 1 A __ _ __ _ pe - Partially estimated. Data shown in parentheses are current projections. Annual rates of change other than those for the past are rounded to nearest half per cent. 1/ As shown in the July 14, 1972 Bluebook. NOTES: CONFIDENTIAL (FR) Appendix Table I RESERVES AND MONETARY VARIABLES S -Renre Period Total Nonborrowed Bank Credit Measures Adjusted Total Credit Loans and Proxy Investments Stock Measures __Money Available to Support Pvt. Deposits Annually: M M2 M3 (3) (4) (5) + + + 7.6 1.2 6.0 7.3 + + + 5.6 2.7 9.2 8.0 S7.8 3.2 S5.4 + 6.2 + 9.3 2.3 + 8.1 + + 11.1 - Total Time (6) (Per Cent Annual Rates of 1968 1969 1970 1971 Aug. Time Other than CD's Other Thrift Institution Deposits (9) 8.3 + 9.7 + 2.8 + 0.6 + 7.8 + 13.3 + + 8.3 9.5 CD's Nondeposit Funds U.S. Gov't. Demand (11) (12) S(13) (Dollar Change in Billions) Growth) + 11,1972 + 11.0 + 3.9 + 8.1 + 11.3 + 11.3 4.9 + + 17.9 + 17.9 + 11.1 + 1.4 + 11.0 + 16.2 + 6.4 + 3.4 + 7.7 + 17.5 + 6.0 + 15.6 + 4.7 + 10.6 + 0.7 - 9.1 + 20.1 + 13.5 - 7.1 0.4 - 2.8 - 12.6 - 14.5 + 7.9 + 2.6 + 13.0 8.4 7.6 Semi-AnnuallyIst Half 1970 2id Half 1970 + 0.4 + 11.6 + 3.0 + 15.2 + 5.2 +10.6 - 5.6 5.2 + 5.8 + 10.1 + 4.8 + 11.4 + + 1st Half 1971 2nd Half 1971 + + + + 9.3 6.5 +10.9 +4.6 - 10.0 - 2.4 + 15.5 + 6.3 + + 9.7 8.8 + 11.5 + 10.6 + 12.2 + 21.2 + 10.1 + 12.1 + 9.0 -7.4 + + 11.3 + 11.3 + 15.6 + 14.7 + 17.9 - 0.3 + 9.5 + 9.6 + 6.0 + 6.8 + 11.0 +10.8 +10.6 + 4.3 + 10.9 + 8.4 + 7.6 + 9.7 + 11.3 + 11.1 4.6 2.6 0.4 + 7.3 + + + + + + - + 12.3 10.3 9.7 11.1 15.1 + 28.8 + 14.7 +4.8 + + + + + + 21.9 + 14.4 + 7.8 + 10.2 + 12.8 + 11.9 + 10.3 + 14.6 + 9.1 + 8.5 + + 8.8 7.7 1st Half 1972 Q + 11.6 11.1 8.4 + 26.3 + 22.3 tarQter 1: 1st 2nd 3rd 4th l~t 2nd 1971: 1972: NOTE: p - 9.6 4.7 5.2 10.8 Qtr. Qtr. Qtr. Qtr. Qtr Qtr. 1971 1971 1971 1971 1972 1972 + 8.9 + 10.0 + 7.2 + 2.2 + 10.1 + 12.8 + 13.0 +10.8 + 7.1 Jan. Feb. Mar. + 10.6 + 8.6 + 7.3 + 8.1 + 11.7 + 8.4 +8.2 Apr. May June + 8.5 + 13.4 + 7.9 + 16.9 + 9.9 +11.6 July Aug. Sept. + 4.4 + 4.1 + 12.9 - 7.6 + 2.8 Oct. Nov. eec. Jan. Feb. Mar Apr. May June July p 9.6 + 15.5 + 10.8 + 13.2 + 15.5 + 14.8 + 16.0 + 13.6 + 11.8 + 22.5 + 12.9 + 15.8 + 10.7 + + 4.1 + 11.9 + + 7.9 + 10.9 + 10.7 4.8 3.2 7.9 + 16.7 + 10.3 + + + + + 4.8 + 11.9 + 17.1 + 13.0 + 11.2 + 13.1 + + + 14.9 + 20.8 + 13.7 + 13.0 + 17.0 + 15.4 + 16.7 + + + 20.0 + 17 7 + 13.5 + 14.7 4.7 + + 24.4 + 15.4 + 10.8 + 7.8 + 23.9. + + + + + + + + + + + 17.8 + + 16.3 + 11.6 + 14.8 + 8.5 + + + +11.3 + 22.9 + 6.8 + 6.9 -0.8 + + + 7.5 2.9 2.9 + 10.5 + 6.6 + 6.2 7.4 + 3.4 + 10.7 2.8 + 2.0 + 21.4 + 3.6 + 5.9 + 4.8 + 7.1 + 6.5 + 10.2 + 9.1 + 8.7 + 11.0 + 20.2 5.9 + 15.8 + 22.9 + 23.1 3.6 + + + + + + + + + + 6.9 8.4 3.0 + 13.3 + 22.2 + 7.5 + - 8.8 1.5 13. 14.3 11.6 7.2 7.7 10.6 11.7 + 20.5 + 14.5 + 7.4 + 9.7 + 13.6 + 15.5 + 15.2 + 9.2 + 7.4 + 15.6 + 7.0 +6.2 +7.9 + 8.6 + 13.7 + 12.8 + 26.0 + 12.1 + 13.9 + 10.7 + 8.7 + 17.3 + 23.9 + 15.7 + 20.9 +14.9 + 8.2 + 15.9 + 14.8 + 15.7 27.5 14.0 5.3 14.7 17.1 11.8 + 26.0 + 28.3 + 26.5 + 14.1 + 20.7 + 18.7 + 9.0 Reserve requirements on Eurodollar borrowings beginning October 1, 1970. Preliminary + 18.9 + 19.3 + 12.0 13.8 10.9 9.7 11.5 13.9 9.9 5.9 + 12.9 are included beginning October 16, 1969, 6.2 6.2 14.2 12.4 18.0 3.6 18.4 + 10.2 + 28.8 + 29.7 9.4 4.2 9.1 + 16.2 + 7.8 + 12.4 12.6 + 18.5 + 22.1 + 13.8 + 11.4 + 13.7 + 17.6 + 19.0 + 15.8 10.6 16.6 19.3 and requirements on bank-related commercial paper are included - 0.3 - 0.1 + + 6.3 1.1 - 0.3 Appendix Table II RESERVES AND MONETARYVARIABLES (Seasonally adjusted, Billions of dollars) CONFIDNTIAL (FR) Aug. 11,1972 Annually: Dec. 1968 Dec. 1969 Dec. 1970 Monthly: 1971--Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. 1972--Jan. Feb. Mar. Apr. May June July p Weekly: 1972--Apr. 5 12 19 26 May 3 10 17 24 31 June 7 14 21 28 July 5 12 19 26 p Aug. NOTES: 2 p Reserve requirements on Euro-dollar borrowings are included beginning October 16, 1969, and requirements on bank-related commercial paper are included beginning October 1, 1970. Adjusted credit proxy includes mainly total member bank deposits subject to reserve requirements, bank-related commercial paper, and Euro-dollar borrowings of U.S. banks. Weekly data are daily averages for statement weeks. Monthly data are daily averages except for nonbank commercial paper figures which are for last day of month. Weekly data are not available for M3, total loans and investments and thrift institution deposits. p - Preliminary.
@FedFRASER