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Prefatory Note The attached document represents the most complete and accurate version available based on original copies culled from the files of the FOMC Secretariat at the Board of Governors of the Federal Reserve System. This electronic document was created through a comprehensive digitization process which included identifying the bestpreserved paper copies, scanning those copies, 1 and then making the scanned versions text-searchable. 2 Though a stringent quality assurance process was employed, some imperfections may remain. Please note that some material may have been redacted from this document if that material was received on a confidential basis. Redacted material is indicated by occasional gaps in the text or by gray boxes around non-text content. All redacted passages are exempt from disclosure under applicable provisions of the Freedom of Information Act. 1 In some cases, original copies needed to be photocopied before being scanned into electronic format. All scanned images were deskewed (to remove the effects of printer- and scanner-introduced tilting) and lightly cleaned (to remove dark spots caused by staple holes, hole punches, and other blemishes caused after initial printing). 2 A two-step process was used. An advanced optical character recognition computer program (OCR) first created electronic text from the document image. Where the OCR results were inconclusive, staff checked and corrected the text as necessary. Please note that the numbers and text in charts and tables were not reliably recognized by the OCR process and were not checked or corrected by staff. Content last modified 6/05/2009. CONFIDENTTAL (FR) December 9, 1966. MONEY MARKET AND RESERVE RELATIONSHIPS Recent developments Since the last meeting of the Committee on November 22, there has been a modest easing of day-to-day money market conditions and a more marked decline in longer-term bill rates. The 3-month bill rate has moved down into a 5.10 - 5.20 per cent range and the 6-month rate to around 5.25 per cent; Federal funds have traded at an average effective rate of slightly below 5-1/2 per cent; net borrowed reserves of member banks have averaged $221 million during the two full statement weeks in the interval; and borrowings have averaged $542 million. Dealer loan rates in New York have usually been in a 6 - 6-1/2 per cent range, and financing has been generally available out of town at rates in a 5-1/4 - 5-3/4 per cent range. This configuration of money market elements represents a substantial easing from the rather tight conditions that had developed in the first half of November when the 3-month bill had risen to 5.45 per cent, Federal funds were often trading at around 6 per cent, and member bank borrowings from the System were ranging between $600 and $700 million on average. But the day-to-day conditions at the time of the last Committee meeting were already considerably easier-when, to illustrate, the 3-month bill was about 5-1/4 per cent, and Federal funds were trading near 5-1/2 per cent. Longer-term money market rates, however, were still relatively high at that time--the FINANCIAL MARKET RELATIONSHIPS IN PERSPECTIVE (Monthly averages and. Period where vailable. weekly avprappns Money Market Indicators Free Borrow- Federal 3-month Bond Yields Corporate Munici- ings Reserves (In millions of dollars) Funds Rate Treasury Bill U.S. Gov't. (20 yr.) S-- New Issues (Aaa) I/ pal (Aaa) f daily fnrp-- Flow of Reserves, Bank Credit and Money NonTotal Bank Time Deposits2 upply Credit Reborrowed y Proxy S Reserves serves (In mil ions (In billions of dollars) I of dollars) + 93 + 11 + 1.1 + 0.4 + 1.8 +182 +262 + 1.8 + 1.6 + 1.4 1965--Nov. Dec. - 77 - 22 418 452 4.09 4.28 4.08 4.37 4.40 4.50 4.72 4.85 3.34 3.39 .L66--Jan. Feb. Mar. Apr. May June July - 51 -117 -210 -277 -339 -352 -359 431 474 545 638 653 722 739 4.32 4.58 4.64 4.64 4.83 5.13 5.18 4.58 4.65 4.58 4.61 4.63 4.50 4.78 4.52 4.71 4.72 4.65 4.69 4.73 4.84 4.81 4.96 5.09 5.03 5.16 5.35 5.48 3.40 3.48 3.55 3.46 3.53 3.60 3.77 Aug. -374 740 5.45 4.95 4.95 5.64 3.91 -302 -400 - 0.7 -- Sept. -390 765 5.30 5.36 4.94 5.82 3.93 + +129 - 0.1 + 0.9 + 0.4 Oct. Nov. p -425 -243 766 605 5.46 5.75 5.33 5.31 4.83 4.88 5.77 5.72 3.82 3.78 -134 +101 -195 - 42 - 0.7 - 1.1 - 0.9 - 0.4 - 0.3 + 0.1 -315 -268 594 646 5.90 5.81 5.25 5.36 4.78 4.84 5.61 -- 3.72 3.72 - - Nov. 2 9 +173 + 58 - 88 +206 + 1 - 16* +135* 5 +129 + 78 + 57 +256 + 6 + 3* +224* + + + + + + + 1.6 0.7 1.1 3.1 1.0 0.9* 2.1* 0.1 0.3 + + + + + - 0.8 0.2 0.9 1.6 0.7 0.9 1.5 + + + + + + + 0.9 0.7 1.0 1.9 1.6 1.5* 1.9* + 1.4 -0.1 + 0.1 - 0.1 16 p -162 711 5.94 5.43 4.90 5.85 3.81 - 1.3 + 0.1 + 0.1 23 p 30 p -272 -198 439 636 5.50 5.60 5.28 5.20 4.90 4.89 -5.86 3.87 3.89 - 1.4 + 0.3 + 0.5 + 0.1 7 p -245 449 5.30 5.16 4.87 5.77 3.84 + 1.3 + 0.7 Year 1965 First Half 1966 - 90 -228 467 576 4.05 4.69 3.95 4.59 4.27 4.67 Averages 4.69 5.12 3.16 3.51 Recent variations in growth May 11-July 6 July 6-Aug. 10 Aug. 10-Dec. 7 -365 -345 -343 719 738 690 5.05 5.32 5.48 4.56 4.81 5.27 4.72 4.85 4.90 5.32 5.55 5.80 3.61 3.80 3,87 Dec. 1/ 2/ 3/ * - + 4.3 + 3.0 Annual rates of increase 3/ + 5.3 + 9.1 + 4.7 + 4.6 + 7.1* + 4.7 + 8.8* -4.2 - 2.1 + 2.3 -13.4 + 2.5 From January 19Yo to aate, issues carry a 5-year call protection. Time deposits adjusted at all commercial banks. Base is average for month preceding specified period or in the case of weekly periods, the first week shown. Changes have been adjusted for redefinition of time deposits effective June 9, 1966. p - .Preliminary. December 9, 1966. +16.0 +10.3* +12.8* +12.7 + 1.4 CONFIDENTIAL (FR) -2- December 9, 1966. 6 month bill rate was around 5-1/2 per cent--and they have shown the most easing since then (including a decline in yields on Federal agency issues). The somewhat easier money market conditions of recent weeks were accompanied by an expansion in certain monetary aggregates, though by a little less than was implicit in the projections in the last Blue Book. The money supply has been growing since mid-November, with growth apparently in part accounted for by a reduction in U.S. Government deposits (after rough allowance for shifting seasonal patterns in tax receipts). Commercial banks have also had a less unfavorable experience with respect to CD's as the decline in bill rates made CD's more competitive. Even with these recent developments, however, the bank credit proxy (total member bank deposits) decreased at a 5.4 per cent annual rate for the month of November as a whole. Money supply also declined about 2 per cent on average in November, as compared with a slight increase expected by the staff at the time of the last FOMC meeting. There was an increase in nonborrowed reserves in November, but total and required reserves declined further as member banks reduced outstanding borrowings at the Federal Reserve by about $160 million on average between October and November. After rising sharply in early November, bank borrowings in the Euro-dollar market were reduced as the month progressed, but again rose markedly in early December. The average November level CONFIDENTIAL (FR) -3- December 9, 1966. of such borrowings was substantially above October, and after allowance for them, the bank credit proxy in November would have shown a smaller decline -- about 3 per cent. The behavior of the various reserve and monetary aggregates considered in conjunction with the easing of money market conditions in recent weeks is consistent with the hypothesis that demands for bank credit have been less strong, whether deterred by reported tight lending standards or by less confident business prospects. Business loan increases at banks were relatively moderate in early fall, and slowed further in November (although a part of the recent slowing may have reflected the speed-up into earlier months of corporate payments to the Treasury of withheld income taxes). With loan increases smaller, and given current administrative restrictions at the discount window, banks have been willing to use some fraction of available funds to strengthen their liquidity positions by reducing their borrowings from the System. There have also been some reports of renewed bank interest in acquiring municipal securities. Still, the easing of money market conditions that has taken place has not yet had much impact on reserve and bank credit growth. Prospective developments Assuming money market rates continuing about unchanged from those prevailing currently (see first paragraph on page one), the outlook for December suggests that bank credit is not likely to show much, if any, expansion on average. The annual rate of change CONFIDENTIAL (FR) -4- December 9, 1966. in the bank credit proxy is likely to be within two percentage points of zero, plus or minus, with aggregate reserves projected as correspondingly weak. The money supply is likely to increase, but projections of the amount are clouded by the intermixture of usual mid-December and year-end money market churning with rather special Treasury financing patterns and general economic and Federal budgetary uncertainties. A reasonable guess at present would put money expansion at a 5-10 per cent annual rate in December, reflecting a further shift out of U.S. Government deposits. This range allows for a bulge in borrowing from banks by businesses, finance companies, and Government security dealers related in part to December tax period pressures and for some further run-offs in CD's. Individual banks' expectations as to December CD experience are diverse, with estimates for attrition at individual large money market banks ranging up to about one-third of maturities. The staff has assumed a run-off in a $700 million - $1 billion range during the month, given the record volume maturities in the month ($5.5 billion), present rate relationships, and the usual sluggish reflow of private funds into money market instruments after the tax date. Total time and savings deposits at all commercial banks are likely to rise at a 2-3 per cent annual rate in December, reflecting projected continued growth of other time deposits. CONFIDENTIAL (FR) December 9, 1966. With respect to the impact of rate relationships on CD's, it should be pointed out that investors have recently exhibited an increased preference for extending maturities, as indicated in the bill market by the relatively narrow spread that has emerged between 3- and 6-month bills. As a result, bank CD experience may be relatively more influenced in the period ahead by rates on longerterm bills, especially those maturing around the March, April and June tax dates. At the moment, the investment yield on a 6-month bill is just under 5-1/2 per cent, while a 3-month bill yields about 25 basis points less. Upward bill rate pressures could develop between now and year-end. For one thing, System outright buying of bills in the market has been reduced by the provision of reserves through reduction in the Treasury balance at the Federal Reserve, through sales of special certificates to the Treasury, and through foreign drawings on System swaps to supply funds to the Euro-dollar market. This, in conjunction with aggressive dealer bidding in recent Treasury bill financings, has contributed to unusually large dealer bill inventories, especially of longer-term bills. These bills may weigh heavily on the market going into the dividend and tax period unless financing continues to be readily available. Yet another factor tending to add to market pressures in the period ahead may be increased bank demand for Federal funds to replace any Euro-dollars lost as a result of foreign year-end window dressing operations. In view of prospective year-end CONFIDENTIAL (FR) -6- December 9, 1966 money market churning, the level of net borrowed reserves consistent with steady money market conditions may fluctuate widely in the weeks ahead, and sometimes may have to be close to zero if current money market rates are to be maintained in the face of peak seasonal pressures. If the Committee wished to encourage somewhat easier market conditions, however, this would appear to require net reserves over the next four weeks consistently ranging around zero. Such a net reserve position might be consistent with a 3-month bill rate moving close to, and possibly below, 5 per cent and with a Federal funds rate also moving down toward 5 per cent. Such a rate structure might not fully emerge until early next year when normal seasonal pressures abate. Even if bill and other money market rates are thus reduced by System action in the period ahead, this is not likely to generate any prompt and substantial bank credit expansion because banks are likely to be inclined to reduce their short-term borrowings further. A modest rate of bank credit expansion, however, might be expected as time passes since banks may be able to terminate net CD run-offs and subsequently begin to add to outstandings. An easing of bank liquidity positions would increase their willingness to add to security portfolios and to accommodate loan demands. This, in turn, would contribute to a better market for municipal and Federal CONFIDENTIAL (FR) -7- December 9, 1966. Government security issues (including participation certificates) and probably to some renewed expansion of the money stock. On the other hand, if loan demands do not hold up and business activity is weaker than expected, banks might begin to lower CD rates in line with reductions in bill rates, and transaction demand for money may fall off. In such a situation, the rate levels specified above would not be low enough to stimulate much of a bank credit and money expansion. Chart la MEMBER BANK RESERVES SEASONALLY ADJUSTED MONTHLY AVERAGES OF DAILY FIGURES BILLIONS OF DOLLARS 23.5 23.0 22.5 REQUIRED 22.0 ____ AGAINST TOTAL PRIVATE DEPOSITS 21.5 21.0 20.5 20.0 17.0 lo-0 16.5 * ---- --- REQUIRED AGAINST PRIVATE DEMAND DEPOSITS 16.0 15.5 J 1965 S D M J 1966 S Chart lb MEMBER BANK RESERVES MONTHLY AVERAGES OF DAILY FIGURES BILLIONS OF DOLLARS, SEASONALLY ADJUSTED 23.5 -REQUIRED RESERVES 23.0 __- ___.1. NET BORROWED 22.5 RESERVES -- RESERVES -NONBORROWED 22.0 21.5 21.0 20.5 BILLIONS OF DOLLARS 1.0 MEMBER BANK BORROWINGS .5 EXCESS RESERVES 0 II I 1965 I I II I 1966 I Chart 2 MONEY SUPPLY AND BANK DEPOSITS SEASONALLY ADJUSTED WEEKLY AVERAGES OF DAILY FIGURES I BILLIONS OF DOLLARS I BILLIONS OF DOLLARS TOTAL MEMBER BANK (Credit Proxy) DEPOSITS -- 245 240 S235 230 MONEY SUPPLY 170 225 165 220 160 155 TIME DEPOSITS (All ADJUSTED Commercial Banks) 150 145 140 135 130 NEGOTIABLE CD'S (Unadjusted) - --- I I I I I I I I I I t t I | I J 1965 t I S g I D 1966 *CHANGE IN SERIES Chart 3 DEMAND DEPOSITS AND CURRENCY SEASONALLY ADJUSTED WEEKLY AVERAGES OF DAILY FIGURES BILLION IS OF DOLLARS 45 MONEY SUPPLY COMPONENTS: 40 CURRENCY OUTSIDE BANKS -~----cI 35 30 ~~*1- 140 *DEMAND 135 DEPOSITS 130 125 120 15 U.S. GOVT. DEMAND DEPOSITS (Member Banks) 10 5 0 J J 1965 1966 Table A-1 MARGINAL RESERVE MEASURES (Dollar amounts in millions, based on period averages of daily figures) Member banks Excess reserves borrowings to date As r evised Period I Free reserves ___________________________________________ Monthly (reserves weeks ending in): 1965--November December 341 430 418 452 - 77 - 22 1966--January February March April May June July August September October November p 380 357 335 361 315 370 380 366 375 341 362 431 474 545 638 653 722 739 740 765 766 605 - 51 -117 -210 -277 -339 -352 -359 -374 -390 -425 -243 As first published each week As expected at conclusion of each week's open market opeations ____________________________________________ I Weekly: 1966--Aug. 3 353 461 277 374 364 778 782 730 719 691 -425 -321 -453 -345 -327 -427 -383 -466 -442 -422 -427 -417 -487 -482 -447 Sept. 7 14 21 28 337 504 592 67 749 888 771 650 -412 -384 -179 -583 -419 -410 -198 -568 -440 -439 -206 -542 Oct. 5 12 19 26 314 413 489 147 828 928 790 518 -514 -515 -301 -371 -439 -511 -297 -366 -439 -489 -308 -376 Nov. 2 9 16 23 30 279 378 549 167 438 594 646 711 439 636 -315 -268 -162 -272 -198 -301 -249 -227 -261 -207 -302 -224 -244 -236 -221 Dec. 7 204 449 -245 -245 -194 p - Preliminary TABLE A-2 AGGREGATE RESERVES AND RELATED MEASURES Retrospective Changes, Seasonally Adjusted (In per cent, annual rates based on monthly averages of daily figures) Res e r v e Ag r e gates oMonetar v Required reserves Total Reserves Against Nd e o Total Reserves Demand Deposits Total Member a e Variables Time Deposit(comm. (credit) 1/ Money Supply Private Deposits banks) Total Demand _Deposits Annually: 1964 1965 + 4.2 + 5.3 + 4.6 + 4.3 + 4.9 + 5.3 + 3.1 + 2.3 + 7.5 + 9.1 +12.8 +16.0 + 4.3 + 4.7 + 4.0 + 4.4 Monthly: 1965--July August September October November December + 3.7 + 0.4 - 1.2 + 3.7 + 0.6 +13.8 + + + + + 4.1 1.5 3.9 7.3 5.0 9.8 + 4.8 - 1.8 - 2.2 + 9.7 - 2.0 +13.7- + + 2.0 4.0 6.8 5.1 3.9 8.2 + 7.4 + 6.8 + 3.6 +12.5 + 5.1 + 9.7 +15.0 +18.3 +13.7 +17.8 +15.0 +11.5 + 5.2 + 4.4 + 8.1 + 8.0 + 2.9 +11.6 + 4.7 + 2.8 + 9.4 + 7.5 + 1.9 +13.0 1966--January February March April May June 2/ July 2/ August September2/ October 2/ November 2 /p + 6.7 + 4.0 + 2.9 +13.2 + 0.3 + 0.2 +11.4 -20.2 + 6.6 -10.0 - 2.2 + 9.5 + 3.1 - 4.6 +10.9 + 0.1 - 0.8 + 7.1 -15.8 - 0.3 - 7.1 + 5.4 + 6.9 + 2.9 + 2.7 +11.9 + 2.1 + 1.6 + 8.4 -14.8 - 0.2 - 1.1 - 7.7 +11.3 + 3.8 + 4.0 +11.7 - 4.8 + 1.3 + 2.5 -16.9 - 3.0 - 2.1 - 8.3 + 8.1 + 3.5 + 5.5 +15.5 + 4.9 + 4.4 +10.3 - 3.4 -- 3.4 - 5.4 + 7.4 + 5.7 + 8.1 +15.3 +12.7 +11.8 +14.8 +10.7 + 3.0 - 2.3 + 0.8 + 5.7 + 1.4 + 7.8 +11.3 - 4.9 + 6.3 -10.5 -+ 6.4 - 6.3 - 2.8 + 4.6 -+ 8.2 +12.7 - 7.2 + 7.2 -16.2 - 0.9 + 7.3 - 8.1 - 4.6 1/ 2/ Includes all deposits subject to reserve requirements. Movements in this aggregate correspond closely with movements in total member bank credit. Changes in reserves, total deposits, and time deposits have been adjusted for redefinition of time deposits effective June 9. Changes in reserves have been adjusted for increases in reserve requirements in July and September. p - Preliminary. laoie b-i MAJOR SOURCES AND USES OF RESERVES Retrospective and Prospective (Dollar amounts in millions, based on weekly averages of daily figures) Period Period Factors affecting supply of reserves Federal Reserve Gold Currency Technical Gold credit (excl. tk outside factors stock float) 1/ banks net 2/ Change in total reserves = Bank use of reserves Required Excess Excess reserves reserves reserves 3/ ACTUAL fear: 1964 (1/1/64 - 12/30/64) 1965 (12/30/64 - 12/29/65) +3,127 +4,035 -125 -1,602 -2,281 -2,143 -185 +798 +534 +1,089 +766 +1,188 -232 - 99 Year-to-date: (12/30/64 - 12/8/65) +4,129 -1,579 -2,017 -190 +344 +451 -107 (12/29/65 - 12/7/66) +2,843 -628 -1,791 -299 +123 +382 -259 Weekly: 1966--Nov. 2 + 304 + 1 + 14 -204 +113 - 19 +132 9 16 p 23 p 30 p + + + 509 5 699 775 + 1 + 1 - 2 - 27 - 677 87 75 17 +141 + 82 +339 -439 - 25 - 2 -435 +291 -124 -173 - 53 + 20 + 99 +171 -382 +271 7 p + 97 - 72 - 283 +252 - 6 +228 -234 + 665 420 520 ---- - 110 50 160 +825 +955 -370 + 50 +485 - 10 + 50 +485 - 10 Dec. PROJECTED 4/ Dec. 14 21 28 4 - 20 -- + 555 -225 +310 +310 11 18 25 + - 30 715 165 ---- + + 40 420 245 -290 + 50 -225 -300 -245 -145 -300 -245 -145 1 8 + + 175 315 ---- + - 200 315 -400 -100 - 25 -100 - 25 -100 15 - 230 + retrospective details, see Table B-4. factors included, see Table B-3. required reserves by type of deposits, see Table B-2. reserve side for explanation of projections. 95 - 40 Jan. Feb. For For For See -175 -175 p - Preilminary. -- -- Table B-2 CHANGES IN REQUIRED RESERVE COMPONENTS Retrospective and Prospective Seasonal and Nonseasonal Changes (Dollar amounts in millions, based on weekly averages of daily figures) Total required Period Supporting U. S. Gov't. demand demand Supporting private deposits Total Total Other than seasonal han Seasonal changes reserves deposits +766 +1,188 + 13 - 89 +753 +1,277 -222 +115 +444 +382 -249 -369 +693 +751 2 9 16 P 23 p 30 p - 19 -124 -173 - 53 + 20 -119 - 20 -196 + 9 + 51 7 p +228 seasonal changes Time _Demand Demand Time - 12 - 4 +511 +499 +476 +667 -301 -444 + +347 + 51 +652 +1,139 1/ +100 -104 + 23 - 62 - 31 + 84 - 46 + 57 -105 - 19 -15 -4 - 11 - 15 + 5 + + - 22 42 17 57 9 + 9 - 12 - 6 + 1 - 8 - 50 +278 +132 + 2 +131 + 13 5 ACTUAL Year: 1964 (1/1/64 - 12/30/64) 1965 (12/30/64 - 12/29/65) Year-to-date: (12/30/64 - 12/8/65) (12/29/65 - 12/7/66) Weekly: 1966--Nov. Dec. 5 5 PROJECTED Dec. Jan. Feb. 14 + 50 -150 +200 21 28 +295 - +485 - 10 90 + 85 +240 -- +400 -250 +310 -175 - 15 + 5 +115 - 80 - 10 -- 4 11 18 25 +310 -300 -245 -145 - 75 -190 -145 +100 +385 -110 -100 -245 +335 -140 -115 -230 + + + + 25 15 15 10 + 25 + 10 - 5 - 30 + + + 1 8 15 - 25 -100 -175 + 25 + 95 - 40 - 50 -195 -135 - 80 -190 -160 + 10 + 10 + 5 + 15 - 15 + 20 1/ Reflects reserve requirement changes in July and September. p - Preliminary. - + -5 5 5 5 -- Table B-3 TECHNICAL FACTORS AFFECTING RESERVES Retrospective and Prospective Changes (Dollar amounts in millions, based on weekly averages of daily figures) Priod Technical facts d fcto ACTUAL Foreign deposits and gold loans (Sign indicates effect on reserves) Treasury operations Other nonmember deposits and F. R. accounts Year: 1964 (1/1/64 - 12/30/64) 1965 (12/30/64 - 12/29/65) -185 +798 -476 +294 +132 -171 - 37 + 77 +196 +598 Year-to-date: (12/30/64 - 12/8/65) (12/29/65 - 12/7/66) -190 -299 +275 +531 -1,024 -699 + 71 - 36 +488 - 95 2 9 16 23 30 -204 +141 + 82 +339 -439 +112 + 78 + 48 + 13 +154 -273 +120 + 61 +499 -548 + - 28 7 32 17 16 - 15 - 50 - 59 -156 - 29 7 +252 +115 +112 - 1 + 26 Dec. 14 +825 +405 +200 - 5 +225 21 +955 + 40 +855 + 25 + 35 28 -370 -500 +130 -- 4 11 -225 -290 --- -265 -385 --- 18 25 + 50 -225 --- + 50 -225 1 8 15 -400 -100 - 40 ---- -400 -100 - 60 Weekly: 1966--Nov. Dec. PROJECTED Jan. Feb. -+ 40 + 95 -- -- - -+ 20 Table B-4 SOURCE OF FEDERAL RESERVE CREDIT Retrospective Changes (Dollar amounts in millions of dollars, based on weekly averages of daily figures) Period Total Federal Reserve credit Total (Excl. float) holdings Bills U. S. Government securities Repurchase IOther areements Year: ,964 (1/1/64 - 12/30/64) 1965 (12/30/64 - 12/29/65) +3,127 +4,035 +3,281 +3,916 +1,985 +3,145 +1,022 + 916 +274 -145 Year-to-date: (12/30/64 - 12/8/65) (12/29/65 - 12/7/66) +4,129 +2,843 +4,078 +2,931 +3,425 +2,242 916 439 -263 +250 Weekly: 1966--Sept. Oct. Nov. Dec. Federal Agency borrowings acceptances Securities + Member banks Bankers' -100 + 77 - 54 + 42 + 77 - 9 26 97 7 14 21 28 438 96 526 155 + 380 + 380 - 41 411 32 - 82 370 32 + 41 - 41 +139 -117 -121 5 12 19 26 692 110 630 20 + 506 + 496 - 30 448 - 20 448 + 10 - -I 10 + 273 + 194 + 79 +178 +100 -138 -272 2 9 16 23 30 304 509 5 699 775 + + 225 455 + + 243 323 - 18 + 76 +132 + 52 - 59 438 - 16 306 - 43 + 550 + 212 -132 +338 + 65 -272 +197 7 97 4 256 + 141 +115 *1 I + 58 .1. 1 ___________ + 9 -187 - - Chart Reference Table C-1 TOTAL, NONBORROWED AND REQUIRED RESERVES Seasonally Adjusted (Dollar amounts in millions, based on monthly averages of daily figures) 15,295 15,321 15,344 15,364 15,371 15,409 15,495 21,585 19,679 19,748 19,796 19,855 19,910 19,993 20,118 20,247 20,387 20,486 20,547 20,634 21,960 22,157 22,279 22,449 22,436 22,612 22,682 22,689 22,667 22,737 22,748 23,010 21,625 21,771 21,814 21,953 21,994 22,082 22,158 22,186 22,114 22,248 22,341 22,523 21,563 21,713 21,868 22,036 22,109 22,243 22,332 22,299 22,259 22,439 22,402 22,657 20,702 20,765 20,881 20,985 20,962 21,138 .21,247 15,730 15,717 15,789 15,831 15,750 15,877 23,139 23,217 23,274 23,530 23,536 23,539 23,763 23,363 23,492 23,297 22,701 22,759 22,671 22,877 22,878 22,788 22,844 22,896 23,123 22,075 22,997 22,695 22,700 22,566 23,255 22,667 20,964 20,996 21,179 21,209 21,105 21,385 21,436 21,551 21,776 21,739 21,872 21,843 1965--January February March April May June July August September October November December 1966--January February March April May June 1/ July 1/ August 1/ September 1/ October 1/ November p 1/ 20,673 20,711 20,875 20,931 20,911 21,135 21,150 20,542 20,601 20,754 20,783 20,765 20,972 21,015 21,172 21,333 21,346 21,499 21,526 1964--January February March April May June July August September October November December 21,256 21,422 21,409 21,487 22,862 23,163 23,193 23,355 23,067 23,064 23,042 22,895 21,331 21,553 21,720 21,803 21,970 22,084 22,269 22,477 22,453 22,582 22,511 22,517 22,598 22,430 22,385 15,575 15,665 15,709 15,713 15,746 15,912 15,916 16,071 16,151 16,168 16,285 16,364 16,356 16,510 16,625 16,534 16,626 16,468 16,428 16,498 16,353 16,321 p - Preliminary. 1/ Reserves have been adjusted for redefinition of time deposits effective June 9. Table C-2 DEPOSITS SUPPORTED BY REQUIRED RESERVES AT ALL MEMBER BANKS Seasonally Adjusted (Dollar amounts in billions, based on monthly averages of daily figures) Monthly Total member bank deposits (credit) 1964--January February March April May June July August / e deposits Private demand U.S. Gov't. demand deposits 2/ deposits 202.8 203.8 205.1 206.0 206.6 208.7 209.3 211.3 93.5 94.4 94.9 95.8 96.8 97.7 98.6 99.6 104.4 104.6 104.7 104.9 104.9 105.2 105.8 106.3 4.9 4.8 5.4 5.3 4.9 5.8 5.0 5.4 September 213.1 100.8 106.9 5.5 October November December 214.1 216.1 216.7 101.9 103.1 104.2 107.2 107.3 107.5 5.0 5.7 5.0 1965--January February 218.4 220.4 106.0 107.6 107.4 107.3 5.0 5.5 March April 222.5 224.6 108.6 109.9 107.8 108.1 6.1 6.7 May June July August September October November December 225.8 227.7 229.1 230.4 231.1 233.5 234.5 236.4 111.1 112.2 113.8 115.5 116.9 118.7 120.2 121.2 107.5 108.4 108.6 108.6 109.7 110.2 110.4 111.2 7.2 7.1 6.7 6.3 4.6 4.5 4.0 4.0 1966--January 238.0 121.8 111.7 4.5 February March April 238.7 239.8 242.9 122.1 122.8 124.8 111.6 112.7 113.5 5.0 4.3 4.7 May June 3/ July ./ August 3/ Sept. 3/ Oct. 3/ 243.9 244.8 246.9 246.2 246.2 245.5 126.2 127.0 128.8 129.8 130.1 129.6 112.9 113.5 112.4 112.1 112.6 111.6 4.8 4.3 5.6 4.2 3.5 4.3 Nov. 3/ p 244.4 129.3 111.4 3.7 I/ Includes all deposits subject to reserve requirements--.e., the total of time, private demand, and U.S. Government demand deposits. Movements in this aggregate correspond closely with movements in total member bank credit. 2/ Private demand deposits include demand deposits of individuals, partnerships and corporations and net interbank balances. 3/ Deposits have been adjusted for redefinition of time deposits effective June 9, 1966. p - Preliminary. TABLE C-2a DEPOSITS SUPPORTED BY REQUIRED RESERVES AT ALL MEMBER BANKS Seasonally adjusted (Dollar amounts in millions, based on weekly averages of daily figures) Total member bank deposits Week ending: Time deposits (credit) / Private demand U. S. Gov't. demand deposits 2/ deposits 6* 13* 20* 27* 247.3 247.1 247.0 247.1 127.9 128.7 129.0 129.2 113.0 112.2 112.6 112.1 6.3 6.2 3* 10* 17* 24* 31* 246.1 246.3 246.5 245.0 246.8 129.2 129.4 129.9 130.1 130.3 112.1 111.1 112.3 112.1 112.2 4.8 5.7 Sept. 7* 14* 21* 28* 247.0 246.5 245.7 245.7 130.2 130.2 129.8 130.0 112.5 112.1 113.7 112.8 4.3 4.2 2.2 2.9 5* 12* 19* 26* 246.2 245.2 244.3 246.1 129.8 129.8 129.8 129.3 112.8 112.1 111.5 111.0 3.5 3.3 3.0 5.9 2* 246.1 245.8 244.5 243.0 243.3 129.5 129.3 129.3 129.3 129.3 111.2 111.1 111.2 111.5 111.3 5.4 5.3 4.0 2.2 2.7 244.6 129.4 112.2 2.9 1966--July Aug. Oct. Nov. 9* 16p* 23p* 30p* Dec. 7 p* 5.4 5.8 4.3 2.8 4.4 p - Preliminary. 1/ Includes all deposits subject to reserve requirements--i.e., the total of time, private demand, and U.S. Government demand deposits. Movements in this aggregate correspond closely with movements in total member bank credit. / Private demand deposits include demand deposits on individuals, partnerships and corporations and net interbank balances. * - Deposits have been adjusted for redefinition of time deposits effective June 9, 1966. TABLE C-3 MONEY SUPPLY AND TIME DEPOSITS AT ALL COMMERCIAL BANKS Seasonally adjusted (Dollar amounts in billions, based on monthly averages of daily figures) Monthly Money Supply Currency S1 / Private Demand Deposits 2/ Time Deposits Adjusted 1964--October November December 158.8 159.0 159.7 34.0 34.1 34.2 124.8 124.8 125.4 123.5 125.1 126.6 1965--January February March April May June July August September October November December 159.7 159.8 160.3 161.0 160.7 161.7 162.4 163.0 164.1 165.2 165.6 167.2 34.5 34.6 34.7 34.8 34.9 35.0 35.3 35.5 37.7 36.0 36.1 36.3 125.3 125.2 125.6 126.2 125.8 126.7 127.2 127.5 128.5 129.3 129.5 130.9 128.7 130.7 132.0 133.3 134.6 136.2 137.9 140.0 141.6 143.7 145.5 146.9 1966--January February March April May June 3/ July 3/ August 3/ September3/ October 3/ November 7/p 168.0 168.2 169.3 170.9 170.2 171.1 169.6 169.6 170.5 169.6 169.2 36.6 36.8 36.9 37.2 37.3 37.4 37.7 37.8 37.9 37.9 38.0 131.4 131.4 132.3 133.7 132.9 133.7 131.9 131.8 132.6 131.7 131.2 147.8 148.5 149.5 151.4 153.0 154.5 156.4 157.8 158.2 157.9 158.0 1/ 2/ 3/ Includes currency outside the Treasury, the Federal Reserve, and the vaults of all commercial banks. Includes (1) demand deposits at all commercial banks, other than those due to domestic commercial banks and the U.S. Government, less cash items in process of collection and Federal Reserve float; and (2) foreign demand balances at Federal Reserve Banks. Deposits have been adjusted for redefinition of time deposits effective June 9, 1966. p - Preliminary. TABLE C-3a MONEY SUPPLY A. TIME DEPOSITS AT ALL COMMERCIAL fANKS Seasonally Adjusted (Dollar amounts in billions, based on monthly averages of daily figures) Week Ending Money Supply Currency 1/ I Time Deposits adjusted adjusted 6 13 20 27 170.9 169.6 169.8 168.9 37.6 37.7 37.7 37.7 133.3 132.0 132.1 131.2 155.5* 156.1* 156.6* 157.1* 3 10 17 24 31 169.2 168.7 169.7 169.8 170.0 37.7 37.8 37.8 37.8 37.7 131.6 130.9 131.9 132.0 132.2 157.0* 157.4* 157.9* 158.0* 158.2* Sept. 7 37.8 38.0 38.0 28 170.5 170.1 171.7 170.0 37.9 132.6 132.1 133.7 132.1 158.2* 158.2* 158.1* 158.4* Oct. 5 12 19 26 170.7 170.2 169.6 168.9 37.9 38.0 37.9 37.9 132.8 132.2 131.7 131.0 158.2* 158.0* 158.1* 157.7* Nov. 2 9 16 23 30 168.9 168.8 168.9 169.4 169.4 37.8 38.0 38.1 38.1 38.1 131.1 130.8 130.9 131.4 131.3 157.8* 157.9* 158.0* 158.1* 158.1* Dec. 7 170.1 38.1 132.0 158.3* 1966--July Aug. 14 21 1/ Private Demand Deposits 2/ Includes currency outside the Treasury, the Federal Reserve, and the vaults of all commercial banks. 2/ Includes (1) demand deposits at all commercial banks, other than those due to domestic commercial banks and the U.S. Government, less cash items in process of collection and Federal Reserve float; and (2) foreign demand balances of Federal Reserve Banks. * - Deposits have been adjusted for redefinition of time deposits effective June 9, 1966. p - Preliminary. December 13, 1966. CONFIDENTIAL (FR) TO: Federal Open Market Committee FROM: The Staff SUBJECT: Supplement to Blue Book. Since the current issue of the blue book, "Money Market and Reserve Relationships" was prepared on Friday afternoon, aggressive professional and investor buying interest in the Government securities market has carried both bond and bill yields appreciably lower. As a result, the first paragraph of the blue book text, which is given as a reference for purposes of interpreting the staff's suggested Alternative A of the current directive, is out of date. To be fully current, the second sentence of that paragraph should describe the 3-month bill rate as moving down into a 5.00-5.15 per cent range rather than a 5.105.20 per cent range; and the 6-month bill should be described as being in a 5.10-5.20 per cent range rather than around 5.25 per cent. Such bill rates, being thus at least temporarily lower relative to other money market rates, probably also serve to raise slightly the rate of bank credit expansion that can be expected to ensue from a maintenance of "current money market conditions"; but their influence is not believed to be strong enough to produce a December bank credit expansion much above the range already specified in the blue book. Committee members may wish to have these market changes in mind in making any references to the blue book in this morning's discussion.
@FedFRASER