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Strictly Confidential (FR) Class I FOMC August 15, 1975 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) CLASS I - FOMC August 15, 1975 MONETARY AGGREGATES AND MONEY MARKET CONDITIONS Recent developments (1) Growth of M1 slowed markedly in July, as expected, but was a little stronger than the slightly negative number that had been projected in the last blue book. Data for the first week of August showed only a moderate pick-up in M1 expansion. For the July-August target period, M 1 growth is now projected at an annual rate of about 3½ per cent, in the lower part of the range of tolerance specified by the FOMC at its last meeting. Inflows of consumer-type time and savings deposits also moderated significantly in July and slowed still further in early August. For July and August combined, M2 now appears likely to expand at an annual rate of 8½ per cent, also in the lower part of the Committee's specified growth range. Growth in Monetary Aggregates and RPD's over July-August period Reserve and monetary aggregates (Growth at SAAR in per cent) Ranges of Tolerance Latest Estimates M1 3 to 5½ 3.7 M2 8 to 10½ 8.6 RPD Memo: Federal funds rate (per cent per annum) -2 to ½ 5 -6¾ -4.6 Avg. for statement week ending 5.93 July 16 6.09 Aug. 6 6.08 Aug. 13 (2) Early in the intermeeting period, incoming deposit data seemed to be indicating a substantially less pronounced slowdown than had been forecast, and the key aggregates seemed likely to expand at rates close to or above the upper limits of the Committee's two-month ranges of tolerance. In these circumstances, the Desk raised its operating target for the Federal funds rate from around 6 per cent to a range of 6-1/8 to 6-1/4 per cent. In the final week of July, although an over- shoot in monetary growth still seemed likely, the Desk sought no further increase in the funds rate because of uncertainties with respect to the behavior of the monetary aggregates and the approach of the Treasury's August refunding. The average funds rate did, nevertheless, move up to 6-1/4 per cent in that week. Since late July, incoming deposit data have been weaker than expected and projected aggregate growth rates have been moved down progressively to the lower part of their ranges of tolerance. Consequently, there was no further tightening of the funds rate, and most recently the Desk did not overtly respond when the rate tended to edge down to a little below 6-1/8 per cent. (3) Other short-term rates responded to the initial rise in the funds rate and have increased appreciably further in recent weeks, due in part to the announcement of larger than expected Treasury financing operations. Over the full period, Treasury bill rates have advanced 3/8 to 3/4 of a percentage point, and private short-term rates have moved up 1/4 to 1/2 of a percentage point. Bank prime rates have also -3been raised, to 7-3/4 per cent, notwithstanding the persistence of generally weak business loan demands. (4) In longer-term securities markets, interest rates have also moved higher since the July FOMC meeting. Quotes on Treasury issues have led the advance, reflecting the weight of Treasury financings-including the three-part August refunding of two- and four-year notes. and the subsequent auctions Upward pressures on corporate bond yields have been dampened to some extent by the July drop-off in new-issue volume. More recently, unsettled market conditions resulted in the postponement or cancellation of about 1/2 a billion of new issues that had been scheduled for marketing in August. In the municipal market, yields have risen to new records, reflecting the combination of a continued sizable volume of offerings and the impact on market attitudes of the financing problems of New York City and the New York State agencies. The last-minute coverage of August financing requirements for "Big Mac" and the New York State Housing Finance Agency may have provided some temporary relief, but both borrowers will require large additional amounts of credit again in September. (5) The table on the following page shows (in percentage annual rates of change) selected monetary and financing flows over various time periods. Appendix Table III compares money supply growth rates computed on a quarterly-average basis with those computed on a last-month-of-quarter basis. Twelve Months July'75 over July'74 Past Six Months July'75 over Jan.'75 Past Three Months July'75 over Apr.'75 Past Month July'75 over June'75 8.5 -0.3 -4.2 -0.1 4,2 10.7 9.1 -3.7 -2.3 1.7 8.9 0.5 -2.4 -1.1 -2.0 M1 (currency plus demand deposits) 1/ 4.8 5.0 8.7 10.3 2.0 M2 (M1 plus time deposits at commercial banks other than large CD's) 7.2 8.7 11.8 13.6 8.3 M 3 (M2 plus deposits at thrift institutions) 6.8 10.2 14.2 15.7 12.4 (M2 plus CD's) 10.7 7.4 7.2 8.4 4.3 M5 (M3 plus CD's) 9.0 9.2 11.0 12.2 9.3 10.2 4.2 3.9 4.2 -5.0 9.2 2.2 3.7 3.3 5.3 2.2 -.1 -1.8 -2.1 -2.0 Calendar Year 1974 Total reserves Nonborrowed reserves Reserves available to support private nonbank deposits Concepts of Money M4 Bank Credit Total member bank deposits (bank credit proxy adj.) Loans and investments of commercial banks 2/ Short-term Market Paper (Monthly average change in billions) Large CD's Nonbank commercial paper .4 .1 -.2 -.4 .5 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 investments of commercial banks, commercial paper, and thrift institutions--which are derived from either end-of-month or last Wednesday-of-month 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. -5Prospective developments (6) Summarized below for Committee consideration are specifica- tions for three alternative short-run policy courses. More detailed figures--including levels and quarterly growth rates of the monetary aggregates associated with the Committee's 5-7½ per cent long-run growth target for M1--are presented in the tables on pages 5a and 5b. Alternative operating guides expressed in terms of nonborrowed reserves, as well as other related reserve measures, are shown in appendix table IV. Alt. A Alt. B Alt. C M1 5 to 7½ 4½ to 7 4 to 6½ M2 9 to 11½ 8¼ to 10¾ Ranges of tolerance for Aug.-Sept. -1 to -3½ RPD Federal funds rate (intermeeting range) (7) 5½ to 6¾ -1½ to -4 6 to 7½ 7½ to 10 -2 to -4½ 6¼ to 8¼ Since nominal GNP is now projected to expand at an average rate of 15 per cent through the second quarter of 1976, it seems highly probable that longer-run growth in M1 can be contained within the Committee's 5-7½ per cent long-term target range only if money market rates rise further as the period progresses. For this reason none of the short-run policy options presented contemplates an easing of money market rates from recent levels. Under alternative A, the average funds rate would remain close to recently prevailing levels for the time being, but -5aAlternative Levels and Growth Rates for Key Monetary Aggregates M1 M 2 M 3 Alt. A Alt. B Alt. C Alt. A Alt. B Alt. C Alt. A Alt. B Alt. C 1975 July August September 294.5 295.8 297.6 294.5 295.7 297.4 294.5 295.7 297.1 651.8 656.6 662.8 651.8 656.4 662.1 651.8 656.3 661.3 1057.0 1066.1 1076.2 1057.0 1065.9 1075.1 1057.0 1065.7 1073.9 1975 QII QIII QIV 290.3 296.0 302.1 290.3 295.9 301.1 290.3 295.8 300.4 638.3 657.1 673.6 638.3 656.8 671.8 638.3 656.5 670.1 1031.1 1066.4 1094.2 1031.1 1066.0 1091.2 1031.1 1065.5 1088.8 1976 QII Growth Rates 311.6 311.6 308.6 697.3 696.9 689.9 1135.6 1133.1 1124.2 5.3 4.9 4.9 8.8 8.5 8.3 10.3 10.1 9.9 9.2 Levels 1975 August September 7.3 6.8 5.7 11.3 10.4 9.1 11.4 10.4 QIII QIV 7.9 8.2 7.7 7.0 7.6 6.2 11.8 10.0 11.6 9.1 11.4 8.3 13.7 10.4 13.5 9.5 13.3 8.7 QII '75-QIV '75 8.1 7.4 7.0 11.1 10.5 10.0 12.2 11.7 11.2 QIV '75-QII '76 6.3 7.0 5.5 7.0 7.5 5.9 7.6 7.7 6.5 QII '75-QII '76 7.3 7.3 6.3 9.2 9.2 8.1 10.1 9.9 9.0 MEMO Committee Target Ranges 5-7½ 8½-10½ 10-12 -5b- Alternative Levels and Growth Rates for Key Monetary Aggregates (cont'd) Credit Proxy M4 Alt. A Levels 1975 July August September Alt. B Alt. C Alt. A Alt. B Alt. C Alt. A Alt. B Alt. C 733.9 733.9 734.8 738.8 733.9 734.7 1139.1 1144.5 1152.7 1139.1 1144.3 1151.7 1139.1 505.4 503.5 504.8 505.4 503.4 504.5 505.4 503.4 504.1 724.3 1117.1 1145.0 1168.0 1117.1 1144.7 1166.2 503.0 512.1 503.0 504.4 511.2 503.0 747.5 1117.1 1145.4 1170.5 771.7 1214.5 1212.1 1206.0 525.0 524.8 522.7 5.7 8.6 5.5 7.8 5.3 7.0 -4.5 3.1 -4.7 2.6 -4.7 1.7 10.0 8.0 9.9 7.5 1.4 5.9 1.1 5.4 1.1 5.1 9.1 7.6 8.8 6.8 3.6 5.0 8.5 8.0 4.4 4.3 3.9 734.9 739.3 QIV 749.9 724.3 735.8 748.5 1976 QII 776.3 776.0 1975 QII QIII 724.3 736.1 Growth Rates 1975 August September 738.2 735.6 1.5 6.5 6.4 6.9 QIII QIV 1.3 5.7 6.2 6.5 QII '75-QIV '75 QIV '75-QII '7 6 7.1 7.0 6.7 7.3 7.2 7.1 6.5 8.8 6.4 6.5 QII '75-QII '76 10.1 8.7 1144.1 1150.8 504.6 504.3 510.7 Alternatives B and C would both involve some immediate further tightening of money market conditions. (8) The short-run specifications for alternative C--which contemplate a near-term rise in the Federal funds rate to around 7-1/4 per cent (the mid-point of the range presented)--are thought to be consistent with a policy strategy geared to ultimate attainment of the 6-1/4 per cent mid-point of the Committee's 5--7-1/2 long-run target range for M1. more rapid growth in If per cent the staff projection of significantly nominal GNP proves correct, we believe that efforts to hold M1 expansion to the 6-1/4 per cent long-run target will require further substantial increases in the Federal funds rate during the fall and early winter--perhaps to 10 per cent or more by early 1976. (9) Alternative B--which contemplates a rise in the Federal funds rate during the intermeeting period to 6-3/4 per cent (the mid-point of the 6--7-1/2 per cent range presented)--is thought to be consistent with the first stage of a possible longer-run strategy that would hold M1 growth within the Committee's 5--7-1/2 per cent target range--but near the top end of that range. It conforms with the monetary assumptions underlying the Greenbook economic projection and is thought likely to imply a Federal funds rate approaching 9 per cent by early 1976. As noted in the Greenbook, rate of money growth in the upper part of the Committee's long-run target range would help accommodate the special price a -7- effects resulting from decontrol of old oil and the worsening international outlook for food prices. (10) Alternative A is also consistent with a longer-run strategy that would allow growth in M1 near the top of the 5--7-1/2 per cent target range. In this case, however, some delay is envisaged in moving to limit monetary growth, in order to avoid near-term money market tightening while the economy is still in the beginnings Holding money market conditions about unchanged for the of recovery. present, however,would probably require a more aggressive tightening later on, after the recovery gathers momentum. Therefore, the staff believes that this strategy would imply somewhat higher money market rates early in 1976 than under alternative B. (11) During the immediate August-September period, growth in the monetary aggregates is expected to pick up from the depressed July pace. The limited data available for early August suggests only a moderate acceleration, but the improvement in economic activity apparently underway seems likely to result in monetary expansion later in the month and in September. more rapid Under the unchanged money market conditions contemplated for alternative A, M1 growth in September is thought likely to rise to around a 7-1/2 per cent annual rate--resulting in an August-September average of about 6-1/4 per cent. Under alternative B, the average 50 basis point advance in the funds rate would probably exert only a small dampening influence on the aggregates during the two month projection -8- period; the average M1 growth rate for August-September might be reduced to nearly 5-3/4 per cent. The steep rise in the funds rate contemplated under alternative C--to a 7-1/4 per cent average in the weeks immediately ahead--would be expected to exert a more pronounced restraint on nearterm monetary growth. about 5-1/2 per cent in M1 expansion might be held to an annual rate of September, giving an August-September average of 5-1/4 per cent. (12) Although we anticipate that interest rates would need to rise substantially as the year progresses under any of the longerrun scenarios described above, the unchanged money market conditions of alternative A would probably encourage general interest rate stability for a time. In the absence of additional money market firming there might even be some little financial developments. rally if there are no disquieting Private credit demands remain quite weak on balance, although there have been some fragmentary indications of the beginnings of a pickup in made its recent weeks. The market appears to have adjustment to the higher funds rate now prevailing, Treasury announcement of its and the somewhat increased third quarter needs has already been taken into account by market participants. (13) The 50 basis points rise in the Federal funds rate contemplated under alternative B would probably trigger roughly commensurate advances in other short-term rates, and long-term markets would also come under renewed upward rate pressure. Moderate further tightening would tend to confirm the widespread expectation that interest rates are now in a firming trend, and market professionals could be expected to continue their recent generally cautious approach to underwriting of new issues. Rising market interest rates would exert further pressure on the bank prime rate, and rates on Treasury and Federal agency securities would become increasingly competitive for savings funds now flowing into the thrift institutions. Market repercussions from the rise in the Federal funds rate of 100 basis points or more contemplated under alternative C, of course, would be more extreme. Securities markets for a time might experience difficulties in handling flows of new debt offerings. The problem of disintermediation at depositary institutions would become more serious and would arise sooner than anticipated in the staff economic projection. This would make early action on Regulation Q ceilings more urgent but, even with such action, the general availability and cost of mortgage financing could be significantly affected. (14) Under any of the alternatives time deposit inflows would be expected to moderate from those of the recent past. Some slowing is already evident in the recent data, mainly because the special Treasury payments to individuals have terminated. Increasingly, however, higher market interest rates will come to impinge on savings inflows to the intermediaries, and under alternative C this impact would probably be quite pronounced by the fourth quarter. Because of the developing squeeze, we have assumed an increase in Regulation Q ceilings amounting to one-half a percentage point for longer-term certificates (to become effective by year-end) under all alternatives presented. This assumption reduces, but does not eliminate, the marked slowing that would otherwise have been projected in the rate of expansion of consumer-type time deposits and the more broadly defined measures of money supply. (15) In the August-September period, we would expect savings inflows to continue at the more moderate recent pace, but perhaps to be drifting lower, particularly under alternative C. proxy is expected to remain quite weak, to become aggressive in and non-deposit liabilities The bank credit since banks are unlikely seeking funds through issuance of CD's until business loan demand strengthens materially. (16) The continuing serious financing problems of New York City--and, increasingly, of the State--pose major uncertainties for the intermeeting period, with respect to both credit market developments and necessary policy responses. It is not inconceivable that the System would have to give temporary priority to general liquidity needs rather than to its objectives for the monetary aggregates. Short of this, directive phrase calling for account to be taken of developments in financial markets may assume particular importance in of Desk operations in this period. the conduct the -11- Proposed directive (17) Presented below are four alternative formulations for the operational paragraph of the directive. The first three are intended to correspond to the similarly lettered policy alternatives discussed in the preceding session, while the fourth may be associated with any of the policy alternatives. In all of the alternatives the reference to "the forthcoming Treasury financing" included in the July directive is deleted, since the Treasury's August refunding has been completed. Alternative A the To implement this policy, while taking account of[DEL: developments in domestic of] and Treasury forthcoming and international financial markets, the Committee seeks to maintain about the prevailing bank reserve and money market conditions monetary in] growth over the period immediately ahead, provided that [DEL: appears]APPEAR to be GROWING AT ABOUT THE RATES aggregates [DEL: CURRENTLY EXPECTED [DEL: during bulge the from substantially slowing quarter]. second the Alternative B the To implement this policy, while taking account of [DEL: of] and financing Treasury forthcoming developments in domestic and international financial markets, the Committee seeks to prevailing] the about maintain [DEL: ACHIEVE SOMEWHAT FIRMER bank reserve and money market conditions over the period immediately -12in] growth monetary ahead, provided that [DEL: appears aggregates DO NOT [DEL: APPEAR to be GROWING AT RATES BELOW THOSE CURRENTLY EXPECTED quarter]. second during bulge the from substantially slowing [DEL: Alternative C the To implement this policy, while taking account of [DEL: developments in domestic of] and financing Treasury forthcoming and international financial markets, the Committee seeks to prevailing] the about maintain [DEL: ACHIEVE FIRMER bank reserve and money market conditions over the period immediately ahead, in] growth provided that [DEL: appears monetary aggregates DO NOT [DEL: APPEAR to be GROWING AT RATES BELOW THE SPECIFIED SHORTbulge the from substantially slowing RUN RANGES OF TOLERANCE [DEL: quarter]. second the during Possible substitute wording for all alternatives To implement this policy, while taking account of [DEL: the of] and financing Treasury forthcoming developments in domestic and international financial markets, the Committee seeks to prevailing] the about maintain [DEL: ACHIEVE bank reserve and money market conditions CONSISTENT WITH MODERATE GROWTH IN MONETARY proahead immediately period AGGREGATES over the MONTHS AHEAD [DEL: slowing be to appears aggregates monetary in growth vided that quarter]. second during bulge the from substantially CONFIDENTIAL FR) CLASS II--FOMC 8/15/75 CHART I RESERVES AVAILABLE TO SUPPORT PRIVATE NONBANK DEPOSITS BILLIONS OF DOLLARS -134 - 34 ! M JI M iI I 1 J 1974 I S -L D I I I M I II I J 1975 S I I r I i J J 1975 j 2 .,I D RPD series has been adjusted to remove discontinuities associated with changes in reserve requirement ratios I A }4' S CONFIDENTIAL (FR) CLASS II-FOMC CHART 2 8/15/75 MONETARY AGGREGATES 305 300 5%% growth for July-August 295 grofth BROADER MONEY SUPPLY M2 290 7 650 640 630 1974 1975 M J J 1975 A S CHART 3 8/15/75 MONETARY AGGREGATES ADJUSTED CREDIT PROXY BILLIONS OF DOLLARS -520 - 500 40 4- - RESERVES 480 BILLIONS OF DOLLARS 39 -37 TOTAL S35 NONBORROWED Sv V31 Si - 33 "' 0 1974 1975 Total and nonborrcwed reserve setes have been adjusted to remove discontinuities associated with changes in reserve requirement ratios 8/15/75 CHART 4 MONEY MARKET CONDITIONS AND INTEREST RATES MONEY MARKET CONDITIONS PER CENT 14 INTEREST RATES Short-term PER CENT 13 FUNDS - 10 F.R DISCOUNT RATE - 8 7 1874 1975 1974 1975 1974 1875 CONFIDENTIAL (F.R.) CLASS II-FOMC TABLE 1 BANK RESERVES AUG. 1975 15, (ACTUAL AND CURRENT PROJECTIONS) RESERVES AVAILABLE FOR PRIVATE Period NONBANK DEPOSITS NSA SA Period 1 REQUIRED RESERVES AGGREGATE RESERVES SEASONALLY ADJUSTED Total Reserves Nonborrowed Reserves Total Required Private Demand 3 4 5 6 2 Other Time CD's and Gov't. and Nondeposits Interbank Deposits 7 MONTHLY LEVELS-$MILLION 1975--APR. MAY JUNE JULY AUG. PERCENT 33,032 32,748 329995 32,941 132,7401 33,098 32,604 32,734 32,815 132,4921 35,003 34.574 34872 34,994 (34,509) 34,892 34,508 34.645 34,693 (34,3181 34,845 34,419 34,671 349803 (34,378) 19,474 19,406 19,799 199847 (19,837) ( 8,796 8,715 8,665 8,612 8,688) 8 4,602 4,471 4,330 4,290 ( 4,685) 9 I 1,973 1,827 1.877 2,053 1,768) ANNUAL GROWTH QUARTERLY 1974--3RD QTRe 4TH OTR. 9.1 0.8 8.2 3.6 5.5 36.0 8.3 2.9 0.0 5.3 1975--1ST OTR. 2ND OTR. -4.7 0.5 -8.3 1.2 -1.4 -0.2 -7.7 1.2 -4.2 11.7 -7.6 -9.2 1974-3RD OTA. 4TH OTR. 12.1 2.5 11.3 1.4 1.2 27.3 11.4 1.2 0.3 2.6 10.3 8.7 1975-1ST QTR. 2ND OTR. -1.4 -2.5 -0.9 -3.7 11.5 -2.8 -0.7 -3.6 -3.3 8.0 -0.1 -12.0 8.3 -14.7 10.3 4.2 -16.61 8.1 -13.2 4.8 1.7 f -13.01 9.8 -14.7 8.8 4.6 4 -14.7) ( 1408 -4.2 24.3 2.9 -0.6) -9.7 -11.1 -6.9 -7.3 4 10.6) 4 I ( 11.0 6.5 OUARTERLY-AV MONTHLY 1975--APR. MAY JUNE JULY AUG. I JULY-AUG. I 2.9 -10.3 9.1 -2.0 -7.31 ( I -4.61 -6.2) -5.7 -5.11 1.2) ( 1.6) WEEKLY LEVELS-SMILLIONS 1975--JUNE 329754 33,114 32,941 32,188 32,956 32,787 34.047 35,110 35,019 34,009 35,033 34,831 34083 34,776 34,928 19,760 19,804 199884 8,701 8,676 8 645 4,329 4,300 4,320 1,293 1,996 2,079 JULY 2 9 16 23 30 33.251 33,025 32,888 329752 33,017 33*217 329596 32,766 32,769 33,039 359639 34,924 34,916 34,896 35,091 34,768 34,702 34,714 34,514 34,838 35,243 34,791 34,843 34*693 34,796 199913 19,962 19,866 19,675 19,865 8.616 8,600 89618 8,604 8,622 4,326 4,330 4,330 4,271 4,236 2,388 1,899 2*028 2.143 29074 AUG* NOTE: 11 18 25 6 32,904 32.635 34.761 34.585 34,543 19.857 8.652 4.176 RESERVE SERIES HAVE BEEN ADJUSTED TO REMOVE DISCONTINUITIES ASSOCIATED WITH CHANGES DATA SHOWN IN PARANTHESES ARE CURRENT PROJECTIONS. AT THE FOMC MEETING OF JULY 15, RANGE OF -2.0 TO 0.5 PERCENT FOR THE JULY-AUG. PERIOD. l.ai IN RESERVE REQUIREMENT RATIO. 1975 THE COMMITTEE AGREED ON A RPD CONFIDENTIAL (F.R.) Table 2 CLASS MONETARY AGGREGATES AUG. ACTUAL AND CURRENT PROJECTIONS, SEASONALLY ADJUSTED MONEY SUPPLY Narrow Broad Period Adjusted Credit U.S. Govt TIME AND SAVINGS DEPOSITS Other (Ml) MONTHLY (M2) Proxy Deposits Total Than CD's 2 3 4 5 6 15, Nondeposit Sources of Funds CD's 1 IIFOMC 7 8 LEVELS-$BILLIONS 1975--APR. MAY JUNE JULY AUG. 287.1 289.7 294.0 294.5 1295.8) 630.4 637.3 647.3 651.8 (656.6) 500.2 501.2 507.5 505.4 1503.5) 1 2.1 2.1 3.8 2.5 2.4) 431.7 433.1 437.3 439.4 (439.1) 343.3 347.6 353.3 357.2 (360.8) 88.4 85.5 84.1 82.1 1 78.4) ( 6.7 7.4 7.0 6.8 6.9) PERCENT ANNUAL GROWTH QUARTERLY 1974--3RD OTR. 4TH QOR. 1.0 5.3 4.2 6.7 6.7 4.2 9.1 11.7 7.1 7.9 1.2 25.9 1975--1ST QTR. 2ND Q7R. QUARTERLY-AV 2.4 11.0 8.4 13.3 3.1 7.5 10.1 6.8 13.6 15.3 -2.2 -25.4 1974-3RD OTR. 4TH OTR. 3.5 3.9 6.0 6.2 9.9 3.5 12.9 9.7 8.3 8.2 31.8 15.2 1975--1ST OTR. 2ND OTR. 1.0 9.0 6.4 11.3 4.1 5.2 12.8 5.3 11l1 13.4 19.2 -24.0 ( 4.2 10.9 17.8 2.0 5.3) I 7.7 13.1 18.8 8.3 8.6) ( 5.1 2.4 15.1 -5.0 -4.5) 4 4.7 3.9 11.6 5.8 -0.81 ( 10.6 15.0 19.7 13.2 12.1) -18.7 -39.4 -19.6 -28.5 ( -54.1) I 3.7) I 8.6) ( -4.7) I 2.5) ( 12.7) I -40.7) MONTHLY 1975--APR. MAY JUNE JULY AUG. JULY-AUG. WEEKLY LEVELS-SSILLIONS 294.2 294.1 294.8 JULY AUG. 2 9 16 23 30 6 P 646.3 647.6 649.1 509.0 509.2 507.3 5.7 5.0 2.6 436.2 437.7 438.5 352.1 353.5 354.3 84.1 84.1 84.2 7.4 6.8 6.8 293.7 293.5 295.3 295.0 293.5 1975--JUNE 11 18 25 648.7 649.6 652.5 652.8 652.0 505.4 504.6 506.3 505.9 504.0 1.3 2.9 2.9 2.5 2.0 439.2 439.7 440.1 439.5 439.0 355.0 356.1 357.2 357.8 358.5 84.2 83.6 82.9 81.6 80.5 6.5 6.5 6.6 7.0 7.0 295.4 653.7 503.6 2.7 437.8 358.3 79.5 6.8 NOTE: S1W NOTE: DATA IN PAETEE SHOWN IN AR1URN 1AT PARENTHESES ARE RLMNR RJCIOS CURRENT PROJECTIONS. P - PRELIMINARY 1975 CONFIDENTIAL (FR) CLASS II - FOMC AUGUST 15, 1975 TABLE 3 RESERVE EFFECT OF OPEN MARKET OPERATIONS AND OTHER RESERVE FACTORS (Millions of dollars, not seasonally adjusted) r S. r I- A t ccep (1) (2) ----ai RP's W T t L 4 I (4) (5) l- (6) (7) A A Target In Reserve Categories .. .. U available res. 53 available A 4 Unta (fl\*lrf+f-(Q9' 1trsrvs55/ reserves ''7"'''' Req. res. against IT C (10) (8) 112 1.097 714 -1,758 387 309 -136 -636 -1,241 53 -313 -243 -41 1,548 -499 -773 341 -1,627 -774 1,319 197 -413 1,070 50 958 5,442 -3,357 -1,855 7,829 -3,207 -1,317 2,229 5,064 -3,165 4 -50 215 -1,767 -5,747 3,442 412 -734 588 -2,926 -832 -- -1,062 3,987 84 -3,019 113 -385 462 -62 -1,740 2,472 1,871 -651 372p 345 -250 84 31 -155p 1,013p 1,061p - p 39 - p -1.102 -1,015 Apr. May June -2,302 July Aug. Sept. 4 11 18 25 -724 -582 222 9 2 9 23 30 15 -192 -214 -1,206 -337 6 13 -382 -573 16 Aug. Coupon Agency I l 8 9ue 1Lsue vrnes Reserve Effects 2/ I ----------Other 4/ Open Market Member S l B k, BM i, W . j ila 4J =ara [I M . 1 flatly 406 316 1,301 1975--Jan. Feb. Mar. July . i/i s .. Bills 1975--June iT -I Onen Market Oneratinn 20 -623 333 -4,652 -3,571 4,054 3,968 -5,383 -4,153 4,276 4,310 -1,364 -4,745 1,107 2,678 624 -4,183 -5,357 5,094 569 -300 -3,545 -5,549 4,880 -638 -637 1,832 -2,692 -1,599 505 -3,822 2,488 -3,238 -1,154 1,349 * -1,521** 966 -566* -128 -46 39 110 683 -649 -20 180 -129 -77 2 46 -2,539 -419 768 -169 430 -619 168 3 270p -172p -419p 27 Represents change in System's portfolio from end-of-period to end-of-period; includes redemptions in regular bill auctions. 2/ Represents change in daily average level for preceding period. 3/ Includes matched sale-purchase transactions as well as RP's. 4/ Sum of changes in vault cash, currency in circulation, Treasury operations, F.R. float, gold and foreign accounts, and other F.R. accounts. 5/ Reserves to support private nonbank deposits. Target change for July and Aug. reflects the target adopted at the July 15, 1975 FOMC meeting. Target change for previous months reflects the bluebook patterns that are consistent with target ranges that were adopted during the month. * Special certificate (Direct Treasury borrowing from F.R.) ** Reflects special certificate purchase. p - Preliminary. 1/ CONFIDENTIAL (FR) CLASS II--FOMC AUGUST 15, 1975 TABLE 4 NET CHANGES IN SYSTEM HOLDINGS OF SECURITIES 1/ ($ millions, not seasonally adjusted) 490 87 789 539 167 1,582 46 592 253 168 1,059 1,631 -1,358 7,232 1,280 207 320 579 797 500 434 129 196 1,415 1,747 120 439 400 1,665 244 659 101 318 864 3,082 9,273 6,303 - 46 154 874 945 - 232 118 215 109 62 131 54 73 45 555 302 492 106 195 138 430 726 371 229 165 130 103 117 53 870 1,203 691 2,188 2,620 1,402 - 358 986 238 1974--Qtr. II Qtr. III Qtr. IV - 43 160 49 102 1975--Qtr. I Qtr. II -2,093 1,086 33 795 625 312 1,765 69 169 285 61 584 508 53 218 973 454 273 1,917 -- -- -2 -- -2 3,076 230 1975--Feb. Mar. -1,003 115 -19 129 361 113 451 74 212 316 1,043 69 -- 167 2 121 166 19 42 376 210 -404 1,620 714 -1,758 Apr. May June 1,295 - 148 50 20 485 488 274 -180 164 -109 1,070 -797 -- --- -2 - --- -2 --- 2,387 150 539 5,442 -3,357 -1,855 July -2,305 -- -- - - - - - - - -2,304 -- --- ----- -- -731 --582 ---- 1975--June July 143 4 11 18 25 2 9 - 352 704 560 5 188 208 23 - 113 335 - 67 - -1.199 30 4 S 153 6 13 20 27 -- -- -- -52 333 -- -- - -- - 57 S 16 16 Aug --- 248 - - 462 -- --- -- --- --- ----- ----- ------- --- ------- -- -- - -- -- 337 S - ---- - -- -623 222 342 -4,652 -3,571 4,054 3,968 638 -192 -214 ----1,207 -337 -- -4,183 -5,357 5,094 569 -300 584 -1,138 -3,822 2,488 1/ Change from end-of-period to end-of-period. 2/ Outright transactions in market and with foreign accounts, and redemptions (-) in bill auctions. 3/ Outright transactions in market and with foreign accounts only. Excludes redemptions, maturity shifts, exchanges between bills and coupons, and direct Treasury borrowings from the System. 4/ Outright transactions in market and with foreign accounts only. Excludes redemptions and maturity shifts. 5/ In addition to net purchases of securities, also reflects changes in System holdings of bankers' acceptances, direct Treasury borrowings from the System, and redemptions 6/ Includes changes in both RP's (-) of Agency and Treasury coupon issues. (-). (+) and matched sale-purchase transactions CONFIDENTIAL (FR) CLASS II - FOMC AUGUST 15, 1975 TABLE 5 SECURITY DEALER POSITIONS AND BANK POSITIONS (millions of dollars) U.S. Govt. Security Dealer Positions Period Bills (1) Dealer Positions Municipal Corporate Bonds Bonds Coupon Issues Excess** Reserves (2) Member Bank Reserve Positions Basic Reserve Deficit Borrowing at FRB** Total Seasonal 8 New York 38 Others (9) (5) (6) (8) -309 628 -168 3.906 647 -7,870 -2,447 -12,826 - 6,046 6,094 1,586 2,845 532 577 -50 871 18 -7,387 -1,757 -11,390 - 8,070 -- July Aug. Sept. 457 1,758 2,309 -214 398 552 162 197 180 3,075 3,337 3,282 -3,522 -4,231 -4,235 - 9,555 - 9,224 - 8,250 Oct. Nov. Dec. 2,174 2,900 2,985 654 1,608 1,836 197 205 258 1,813 1,252 727 -4,602 -6,322 -5,960 - 8,689 - 9,715 -10,169 2,501 3,329 3,143 2.050 2,121 2,521 147 198 195 398 -5,378 -6,318 -5,732 - 9,744 - 9,533 Apr. May June 2,737 4,744 5,201 1,617 1,752 1,351 143 155 201 110 -4,079 -3,965 -5,821 -10,426 July *4,231 *1,246 2 68 -5,546 - 9,896 5--June 4,634 1,445 1,163 334 -4,709 -6,399 -6,006 -6,013 - 9,295 -10,957 -11,131 - 9,639 -5,652 -6,593 -6,582 -4,759 -4,306 - 8,267 -10,124 -10,928 - 9,773 - 8,785 -4,202p 5 09 5 - , p - 9,733p -10,713p 4 197 -- High Low 3,678 -289 2,203 1975--High Low 19 74 1975--Jan. Feb. Mar. 97 1 5,013 2 9 16 23 30 Aug. 6 13 20 27 -- -~---~ NOTE: 96 66 227 p -36 334 91 6,094 5,289 July 147 1,286 4,197 4,029 .,426 *4,237 396 *4,241 1,791 1,310 1,064 *1,295 * 963 *3,958 *4,007 *1,995 *1,150 218p 1,282 133 73 203 295p -50p " Y ~II -10,302 - 9,567 - 9,344 ---~ Government security dealer trading positions are on a commitment basis. Trading positions, which exclude Treasury bills financed by repurchase agreements maturing in 16 days or more, are indicators of dealer holdings for sale over the near-term. Other security dealer positions issues still in syndicate, excluding trading positions. The basic reserve deficit is excess reserves less borrowing at Federal Reserves less net Federal funds purchases. Weekly data are daily averages for statement weeks, except for corporate and municipal issues in syndicate which are Friday figures. STRICTLY CONFIDENTIAL ** Monthly averages for excess reserves and borrowings are weighted averages of statement week figures. STRICTLY CONFIDENTIAL (FR) AUGUST 15, 1975 TABLE 6 SELECTED INTEREST RATES (Per Cent) Federal Funds Period Short-Term 90-119 Day Treasury Bills Commercial 90-day 1-year Paper (1) AAa Utility New Recently Issue Offered CD's New Tsue-NYC 90-119 Day 60-89 Day 12.25 7.88 12.25 8.00 (6) 12.00 7.88 7.15 5.46 9.34 5.38 9.00 5.25 9.00 5.38 9.80 12.92 12.01 11.34 8.04 8.88 8.52 11.93 11.79 11.36 11.83 11.69 11.19 11.83 11.91 11.38 10.20 10.06 9.45 8.53 7.59 9.55 8.95 9.18 9.35 8.78 9.00 9.33 7.29 6.79 8.72 8.84 1975--Jan. Feb. Mar. 7.13 6.24 6.27 7.39 6.36 6.06 7.43 6.00 Apr. May June July 5.49 6.40 5.91 5.86 6.64 6.11 5.70 5.67 5.85 5.44 5.34 6.32 6.05 5.79 5.63 5.53 6.13 5.43 5.55 1974--High Low 13.55 8.45 (3) 9.54 6.39 1975--ligh Low 7.70 5.13 1974--July Aug. Sept. Oct. Nov. Dec. 1975--June July Aug 5.54 5.22 5.55 6.10 NOTE: (5) U.S. Government (20-yr. Constant Maturity) (10) Municipal Bond Buyer (8) 10.52 8.14 7.15 5.16 8.68 7.40 10.59 8.43 9.71 9.06 7.22 6.27 8.47 7.63 9.47 8.78 10.04 10.19 10.30 6.68 6.69 6.76 8.26 8.60 8.60 9.84 10.25 10.58 10.16 9.21 9.53 10.23 6.57 6.61 7.05 8.37 7.99 7.91 10.22 9.87 9.53 7.45 6.25 6.03 9.36 8.97 9.35 9.45 6.82 6.39 6.74 7.88 7.71 7.99 9.25 6.03 5.63 5.51 6.25 9.67 9.63 9.20 9.66 8.36 8.22 8.04 9.06 9.27 9.09 9.42 9.33 9.43 6.94 6.97 6.94 7.06 8.17 9.14 5.25 5.25 5.40 9.41 9.53 9.22 5.53 5.78 5.25 5.50 5.75 8.95 9.07 9.37 9.14 6.93 9.41 7.00 8.16 7.95 7.99 8.07 9.14 5.38 7.05 6.80 6.20 6.28 6.25 6.35 6.38 5.88 6.00 6.13 9.62 9.30 9.38 9.45 6.13 9.53 6.25 6.50 6.50 9.25 9.37 9.57 9.33 9.35 6.96 6.98 7.09 6.38 6.25 6.50 6.63 9 9.44 3 .4 p 9.51 52 9. p 2 9 16 23 30 6.31 6.06 5.93 6.14 6.25 6.72 6.83 6 13 20 27 6,09 6.08 6.99 7.15 6.50 6.58 7.23 7.24 5.88 8.05 8.89 10.07 10.38 9.34 9.56 9.09 9.38 9.65 (9) 6.50 6.63 6.14 6.05p 6.45 6.51 6.49 6.44 6.45 (11) (7) 5.24 5.15 5.31 5.72 FNMA Auctions Yields 10.61 4 11 18 25 Daily--Aug. 7 14 - 5.56 5.70 (4) ___Lng-Tan 5.63 6.00 6.00 6.13 7.09 8.82 9.06 8.13 8.16 8.13 8.18 8.27 7.16 7.17 8.93 8.49 8.47p 7.22 8.54 n.a. L " Weekly data for columns 1 to 4 are statement week averages of daily data. Columns 5 the weekly date is the mid-point of the calendar week over which data are averaged. the statement week. Column 11 gives FNMA auction data for the Monday preceeding the average yield in bi-weekly auction for short-term forward commitments for Government Preliminary. " and 6 are one-day Wednesday quotes. For columns 7, 8, and 10 Column 9 is a one-day quote for Thursday following the end of and of the statement week. The FNMA auction yield is the underwritten mortgages. APPENDIX TABLE 1-B MONEY AND CREDIT AGGREGATE MEASURES AUG. 15. 1975 SEASONALLY ADJUSTED, BILLIONS OF DOLLARS Period NonTotal borrowed Available to Support pt Deposits BANK CREDIT MONEY STOCK MEASURES RESERVE RESERVES MEASURES Adl Credit proxy Total Loans and Invest ments 5 Mi M2 M M4 MS M6 M7 6 7 8 9 10 11 12 1 2 30,327 32,711 29,278 31,413 28,039 30,610 406.4 448.7 559.0 634.6 255.8 271.5 525.7 572.2 844.9 919.6 569.7 636.0 888.8 983.4 985.5 L095.4 1013.1 1133.6 359101 34,988 35.187 31,800 31,652 31,904 32,770 33,064 33,278 484.9 487.5 489.2 692.9 699.2 695.2 280.4 280.5 280.7 599.6 601.9 603.4 959.6 962.6 965*0 683.2 685.7 688.2 1043.2 1046.4 1049.9 1163.1 1167.2 1171.0 1204.6 1209.9 1214.9 35,097 35,050 35,503 33,284 33,798 34,776 33,236 33,160 339341 488.3 491.2 494.3 696.0 697.4 691.9 281.6 263.6 284.4 607.6 611.6 613.5 970.7 976.9 981.7 693.8 697.1 703.8 1056.9 1062.5 1072.0 1180.1 1185.8 1195.2 1223.5 1227.2 1234.8 615.5 620.3 626.4 987.0 995.6 1007.2 708.3 712.4 716.1 1079.8 1087.6 1097.0 1204.1 1211.4 1219.9 1243.1 1250.7 1259.6 1105.6 1115.3 1130.4 1229.8 1240.2 1256.7 1269.8 1280.5 1297.3 1266.2 1307.1 ANNUALLY: 1972 1973 MONTHLY: 1974--JULY AUG. SEPT. OC1. NOV. DEC. z975--JAN. FEB. MAR. 35,737 34.925 34,764 35.339 34,777 34,658 33,341 33,103 329951 495.8 495.7 498.1 693.9 695.5 699.4 282.2 283.5 286.1 APR. MAY JUNE 35,003 34,574 34,872 34,892 34,508 34,645 33,032 32,748 32.995 500.2 501.2 507.5 700.8 703.0 703.5 287.1 289.7 294.0 630.4 637.3 647.3 1017.2 1029.7 1046.3 718.8 722.9 731.3 JULY P 34,994 34,693 32,941 505.4 706.6 294.5 651.8 1057.1 733.9 4 11 18 25 34,682 34,047 35,110 35,019 34,598 34,009 35,033 34,831 32,986 32,754 33,114 32,941 505.7 509.0 509.2 507.3 292.4 294.2 294.1 294.8 643.2 646.3 647.6 649.1 727.0 730.4 731.8 733.3 2 9 16 23 30P 35,639 34,924 34,916 34,896 35,091 34,768 34,702 34,714 34,514 34,838 33,251 33,025 32,888 32.752 33,017 505.4 504.6 506.3 505.9 504.0 293.7 293.5 295.3 295.0 293.5 648.7 649.6 652.5 652.8 652.0 732.9 733.3 735.4 734.5 732.5 6P 34*761 34,585 32.904 503.6 295.4 653.7 733.2 1139.2 WEEKLY2 1975--JUNE JULY AUG. NOTES: P 1/ - REQUIREMENTS, RESERVE TO SUBJECT DEPOSITS BANK MEMBER TOTAL MAINLY INCLUDES PROXY CREDIT ADJUSTED LOANS SOLD TO BANK- RELATED INSTITUTIONS, AND EURODOLLAR BORROWINGS OF U.S. BANKS. WEEKLY DATA ARE DAILY AVERAGES FOR STATEMENT WEEKS. DATA ARE DAILY AVERAGES. WEEKLY DATA ARE NOT AVAILABLE FOR M3, M5, M6, M7, TOTAL LOANS AND INVESTMENTS AND THRIFT TION DEPOSITS. ESTIMATED MONTHLY AVERAGE LEVELS DERIVED BY AVERAGING END OF CURRENT MONTH AND END OF PREVIOUS MONTH REPORTED DATA. PRELIMINARY MONTHLY INSTITU- Aug. APPENDIX TABLE 2-B 15, 1975 COMPONENTS OF MONEY STOCK AND RELATED MEASURES Period Currency 1 Demand Total Time Dep s 2 3 Time Other Mutual Savings Bank Cs epostsand S & L Shares 4 5 Credits Union Shares CD's 6 7 Short Term Inss U Bonds es Securit1es 8 Commercial Comera Papery Nondeposit Funds U.S. Gov't Demand 9 10 11 12 ANNUALLYe 56.9 61.6 198.9 209.9 313.8 364.5 269.9 300.7 297.5 322.8 21.6 24.6 43.9 63.8 57.0 59.9 39.8 52.1 27.6 38.3 64.8 65.5 65.9 215.6 215.0 214.8 402.8 405.2 407.5 319.2 321.5 322.7 333.7 334.2 335.0 26.3 26.5 26.7 83.6 83.8 84.8 61.0 61.7 62.0 "8.4 59.1 59.7 41.5 42.6 43.3 OCT. NOV. DEC. 66.5 215.2 216.2 216.5 412.1 413.6 419.4 325.9 328.0 329.1 336.2 338.2 340.8 26.9 27.2 27.5 86.2 85.5 90.3 62.3 62.6 62.8 60.9 60.8 60.3 43.4 1975--JAN. FEB. MAR. 68.2 214.0 214.7 216.6 426.0 428.9 430.0 333.3 336.8 340.3 343.6 68.8 69.5 346.9 27.9 28.3 352.0 28.9 92.7 92.1 89.8 63.2 63.5 63.8 61.1 60.3 59.2 39.1 39.3 39.7 APR. MAY JUNE 69.6 70.3 71.2 217.5 219.4 222.8 431.7 433.1 437.3 343.3 347.6 353.3 357.4 362.5 368.6 29.4 29.9 30.4 88.4 85.5 84.1 64.1 64.4 64.7 60.2 60.5 61.6 40.0 40.3 40.6 JULY P 71.5 223.1 439.4 357.2 374.4 30.9 82.1 65.0 62.0 40.9 4 11 18 25 70.6 71.1 71.2 71.4 221.9 223.1 222.9 223.4 434.6 436.2 437.7 438.5 350.7 353.5 354.3 83.9 84.1 84.1 84.2 2 9 16 23 30P 71.0 71.5 71.6 222.7 222.0 223.9 223.5 221.9 439.2 439.7 440.1 439.5 439.0 355.0 356.1 357.2 357.8 358.5 84.2 83.6 82.9 81.6 80.5 6P 71.8 223.6 437.8 358.3 79.5 1972 1973 MONTHLY: 1974--JULY AUG. SEPT. 67.4 67.9 41*4 39.6 WEEKLY: 1975--JUNE JULY AUG. NOTES: 1/ 71.6 71.4 352.1 ADJUSTED CREDIT PROXY INCLUDES MAINLY TOTAL MEMBER BANK DEPOSITS SUBJECT TO RESERVE REQUIREMENTS, LOANS SOLD TO BANKMONTHLY WEEKLY DATA ARE DAILY AVERAGES FOR STATEMENT WEEKS. RELATED INSTITUTIONS, AND EURODOLLAR BORROWINGS OF U.S.BANKS. WEEKLY DATA ARE NOT AVAILABLE FOR M3, M5, M6, M7, TOTAL LOANS AND INVESTMENTS AND THRIFT INSTITUDATA ARE DAILY AVERAGES. TION DEPOSITS. ESTIMATED MONTHLY AVERAGE LEVELS DERIVED BY AVERAGING END OF CURRENT MONTH AND END OF PREVIOUS MONTH REPORTED DATA. Appendix Table III Growth Rate in Money Supply (Per cent change in an annual rate) (Revised Series) M M2 M3 M Q M Q M I 3.4 6.8 7.3 9.1 8.8 II 11.3 7.3 10.6 8.6 10.5 9.1 III 0.6 5.5 5.6 7.8 5.2 7.5 IV 8.7 5.0 10.8 8.9 9.8 7.9 QIV '72-QIV '73 6.1 6.3 8.8 8.9 8.8 9.0 1974 I 5.5 5.8 9.3 9.6 8.9 9.1 II 7.0 7.3 7.9 8.3 6.8 7.6 III 1.0 3.5 4.2 6.0 3.8 5.2 IV 5.3 3.9 6.7 6.2 6.9 5.8 QIV '72-QIV '74 4.8 5.2 7.2 7.7 6.8 7.1 1975 I 2.4 1.0 8.4 6.4 10.4 8.3 II 11.0 9.0 13.3 11.3 15.5 13.8 1973 Q 10.4 M = Annual rates of growth calculated from average levels in the final months of the quarters. Q = Annual rate calculated from average levels in all three months of the quarters. Appendix Table IV SHORT-TERM OPERATING GUIDES* Total Reserves RPD Nonborrowed Reserves Alt. A Alt. B Alt. C Alt. A Alt. B Alt. C Alt. A Alt. B Alt. C 32,941 32,740 32,989 32,941 32,740 32,764 1975 July August September 34,994 34,508 34,441 34,994 34,508 34,416 34,994 34,509 34,390 34,693 34,309 34,216 34,693 34,306 34,116 34,693 34,294 33,980 32,941 32,740 32,814 1975 July August September 4.2 -16.7 -2.4 4.2 -16.7 -3.2 4.2 -16.7 -4.1 1.7 -13.3 -3.3 1.7 -13.4 -6.7 1.7 -13.8 -11.0 -2.0 -7.3 2.7 -2.0 -7.3 1.8 -2.0 -7.3 0.9 -9.5 -9.9 -10.4 -8.2 -10.0 -12.4 -2.3 -2.8 -3.2 August-September Excess Reserves Alt. A 1975 Alt. B Borrowings Alt. C Alt. A Alt. B Alt. 192 192 192 301 301 301 August 131 131 131 199 202 215 September * July 175 175 175 225 300 410 Adjusted for changes in reserve requirements. C
@FedFRASER