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(CONFIDENTIAL FR) December 10, 1971 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 December 10, 1971 (FR) MONETARY AGGREGATES AND MONEY MARKET CONDITIONS Recent developments (1) The narrowly defined money stock grew a little in November, from the (upward) revised level for October. Thus, data now available show that M 1 , instead of continuing to edge lower in both October and November as expected, grew in both months at about a 0.5 per cent annual rate. M 2 was also revised upward. The October level of While M2 ran increasingly above path during November, its growth rate for the month, because of the higher October base, Recent Paths of Key Monetary Aggregates (Seasonally adjusted, billions of dollars) M1 M2 Nov. 16 Path Annual Rates of Growth, per cent September October November Levels, billions of $ September October November Week ending November 10 17 24 December 1 8p p - Preliminary Actual 1.0 2.1r 0.5r 0.5 Nov. 16 Path Actual 7.0 2.9r 7.1r 6.8 227.1 227.6r 227.7r 227.8 460.4 455.6r 458.3r 460.9 227.0 227.0 226.5 226.9 227.1 227.5 227.9 227.8 228.4 460.3 460.6 460.3 460.9 459.4 460.6 462.0 462.5 463.1 Adjusted Proxy Nov. 16 Path Actual 6.0 7.9 4.8 12.2 356.5 353.3 354.7 358.3 356.6 355.9 355.4 357.2 356.6 358.3 358.9 359.8 360.4 r - Money stock measures have been revised, beginning in September 1971, to reflect (1) the formation of new banking institutions doing primarily an international business, and (2) certain developments related to the widening of the CHIPS clearing system for international transactions to include agencies of foreign banks. These revisions raised the level of the money supply in Sept. and Oct., but had virtually no net effect after the first few days of November. -2was no faster than projected. In the case of the credit proxy--for which there was no revision in the October base--November growth accelerated to more than a 12 per cent annual rate, roughly double the rate anticipated. In the two most recent statement weeks, all three aggregates have widened the spread above their November 16 paths, although data for the week ending December 8 are, of course, still partly estimated. Immediately after the last Committee meeting, money market con- (2) ditions were generally near the upper end of the range specified as consistent with the policy directive adopted at the meeting. But as M1 continued to show virtually no growth, the Account Management gradually lowered its Federal funds rate target. In the first statement week following the meeting the funds rate averaged 4.86 per cent; by the most recent week the average was down to 4.59 per cent; and most recent trading has been around 4-3/8--4-1/2 per cent. A cut in the discount rate by 1/4 point to 4-1/2 per cent at four Federal Reserve Banks was announced after the close of the market today. (3) The funds rate fluctuated fairly widely around this declining trend partly because shortfalls in projections of other reserve factors sometimes resulted in a smaller availability of reserves than anticipated. This was particularly so in the statement week prior to Thanksgiving when a $400 million clerical error on vault cash compounded the effects of persistent shortfalls in other factors. Average member bank borrowing also varied rather widely over the period, running up to $700 million in the statement week ending December 1, when borrowing aggregating $2.4 billion was carried into the Thanksgiving holiday period, and dropping to only $60 million in the latest statement week. Net reserve positions of banks also showed rather sizable changes -3ranging from average net borrowed reserves of $344 million to net free reserves of $54 million in the latest week. (4) Short-term interest rates have changed little on balance or in some cases declined somewhat since the last Committee meeting. Treasury bill rates fluctuated widely during the period, rising as much as 30 basis points in the latter part of November. This back-up was concentrated in the Thanksgiving week when successive weekly, monthly, and tax bill auctions added substantially to bill market supplies at a time when money market conditions were temporarily tight. Since then--with foreign central bank buying strong--bill yields have dropped sharply, moving the rate on the 3-month maturity back to the 4.10 per cent level prevailing at the time of the last meeting. (5) Bond yields also advanced--from 10 to 30 basis points--in the latter part of November. This weakness was attributable essentially to the congested state of dealer inventories, following the large November Treasury refinancing and sizable continued capital market borrowing by corporations and particularly State and local governments. In the face of deepening market un- certainties regarding the likely consequence of the apparent stalemate in international monetary negotiations, dealers became restive about their large positions and pressed to reduce their exposure. In the Government market this process was facilitated by System purchases of about $850 million coupon issues. Thereafter, reports of progress in international negotiations, together with reduced dealer inventories, led to some rate declines. (6) As shown in the table on page'5,the supply of nonborrowed reserves dropped well below the expected path during the week of November 24. -4Even though required reserves were also below path to meet their needs banks reduced excess reserves and substantially increased borrowings from the Federal Reserve. On the other hand, in the two most recent statement weeks, nonborrowed reserves were above path. They were considerably above path in the week ending December 8, permitting banks to reduce borrowings substantially even though required reserves were also above path. (7) The text table on page 6 shows changes in major financial aggregates for selected recent periods. Reserve Aggregates: November 16 Paths vs. Actual (Seasonally unadjusted, in millions of dollars) Actual Nov. 16 Path Actual less November 16 Path November 24 Total Reserves Nonborrowed Reserves Required Reserves Excess Borrowing 30,759 30,220 30,564 195 539 30,935 (30,902) 30,635 (30,602) 30,685 (30,652) 250 300 -176 (-143) -415 (-382) -121 (- 88) - 55 +239 31,239 30,538 30,681 558 701 30,793 (30,776) 30,493 (30,476) 30,543 (30,526) 250 300 +446 (+463) + 45 (+ 62) +138 (+155) +308 +401 30,723 30,663 30,618 114 60 30,718 (30,612) 30,418 (30,312) 30,468 (30,362) 250 300 + 5 (+111) +245 (+351) +150 (+256) -136 -240 December 1 Total Reserves Nonborrowed Reserves Required Reserves Excess Borrowing December 8 Total Reserves Nonborrowed Reserves Required Reserves Excess Borrowing NOTE: Figures in parentheses reflect adjustrents of the path for unanticipated changes in U.S. Government deposits. Fourth and First Qtrs. combined (March over Sept.) Total Reserves Second Quarter (June over March ) Third Quarter (Sept. over June ) Latest 2 Months (Nov. over Sept.) 6.6 10.4 -4.1 10.3 5.3 10.8 -3.6 6.5 10.6 3.7 13.6 12.4 4.4 14.5 14.7 9.4 8.4 10.5 9.1 9.8 $ 6.8 $ 1.3 $ 2.3 $ 0.6 - -0.9 - 0.1 n. a. Nonborrowed Reserves Concepts of Money M1 (Currency plus demand deposits 1/) M2 (M1 plus time deposits at commercial banks other than large CD's) 7.0 M 3 (M2 plus deposits at thrift institutions) Bank Credit Total member bank deposits (Bank Credit proxy adj.) Loans and investments of Commercial banks 2/ 8.5 Short-term market paper (Actual $ change in billions) Large CD's Nonbank commercial paper 0.4 Other than interbank and U.S. Government. Based on month-end figures. Includes loans sold to affiliates and branches. N.S.A. N. A. NOTE: Not Seasonally Adjusted. Not available. All items are based on averages of daily figures, except for data on total loans and investments of commercial banks, commercial institutions--which are either end-of-month or paper, and thrift Wednesday of month figures. last Prospective developments (8) Current international financial negotiations make forecasts of interest rates and monetary aggregates, and their interrelationships, much more uncertain than usual. There is a potential for very large reflows of funds if participants come to believe that little further is to be gained from keeping funds abroad. However, the timing and nature of any international agreement, and the strength and speed of market reaction, are very conjectural. Estimates of the reaction range from a reflow of funds immediately following a settlement in the order of $10 billion (out of a potential of $15 billion or more) to a gradual reflow over a period of months. (9) Because of these major uncertainties as to the timing, magnitude, and effect of reflows of funds from abroad, we have not built a specific pattern of reflows related to an international settlement into our projected relationships of monetary aggregates and interest rates. When they occur, such reflows are likely to have mainly transitory effects raising both shortterm interest rates, particularly bill rates, and the money supply. Under current circumstances bill rates could rise as much as 50 basis points if there were a very sizable reflow within a relatively short period, but we would expect most of such a rate increase to be worked off over time as the repatriated funds percolate through financial markets either as loan repayments or as investments. Other short-term rates might decline some as a result of the reflows, and the spread of other rates over bill rates would be likely to narrow. With respect to money supply, the amount by which it may be augmented -8by the return flow is most difficult to foretell, depending as it does on the speed with which those who repatriate funds are willing or able to shift into domestic interest earning assets or to repay debt. very significant effect, even transitorily, We would not expect any on the domestic money supply unless the return flow were large and concentrated. (10) Apart from return flows related to an international settlement, there are questions with respect to the normal year-end pull-back of funds from abroad to comply with OFDI regulations. These regulations have been amended this year to give companies the choice of complying by either the end of We have assumed January or the end of February as well as the end of December. that this will lower the January average level of M 1 by the equivalent of about 2-1/2 percentage points in the annual growth rate--compensated for by an equivalent increase in the growth rate from January to February. (There may, of course, be a similar problem at the end of January and the end of February, but we will attempt to make allowance for it (11) Against this background, three alternative sets of (It might be noted that the growth rates specifications are summarized below. would after end-of-year experience.) be considered as mid-points of ranges--about 1-1/2 percentage points on either side for monthly changes.) Alt. A Fed. funds rate Member bank borrowings 4-1/2--5-1/8 Alt. B 4--4-5/8 150--400 Alt. C 3-1/2--4-1/8 75--200 25--100 Growth in (SAAR): M1 December January 4th Q. 1971 1st Q. 1972 M2 M1 M2 M1 M2 4-1/2 3 8-1/2 7 4-1/2 4 8-1/2 7-1/2 5 5 8-1/2 8-1/2 2 7-1/2 2 7-1/2 2 7-1/2 6 7 7 8 8 9 -9The more detailed monthly and quarterly paths for all the monetary aggregates are shown in the table on the next page (with weekly figures and more detail on aggregate reserves shown in the tables on pp.16 and 17). (12) With M 1 strengthening in recent weeks relative to earlier expectations, it now appears as if the December average level of the money supply will be about 4-1/2 per cent above November, given the money market conditions of either A or B. Money growth would be slightly less under A than B, but after rounding the difference in rates of growth and levels does not show up until January. Under alternative C the growth rate in December might be about 5 per cent. (13) The growth rate of M1 is expected to slow in January, except under alternative C. The assumption of a smaller than usual OFDI-related reflow at year-end temporarily depresses the level of M1 in January and its rate of growth relative to December. If the reflow turns out to be larger than assumed M 1 growth would, of course, be greater in January. Over the longer-run, as any temporary distortions of year-end seasonal patterns are worked out, we would expect M 1 for the first quarter of next year to grow at a 6 per cent annual rate under A, a 7 per cent rate under B, and an 8 per cent rate under C. It should be remembered that we have not worked into the monthly or weekly figures any allowance for reflows arising from an international settlement. (14) If the Committee were to retain a 6 per cent first quarter rate of growth in M 1 as one of its targets, it is the staff's best judgment at this point that associated money market conditions would be tighter than -10Alternative Monthly and Quarterly Paths of Key-Monetary Aggregates Alt. A Alt. B Alt. C Alt. A Alt. B Alt. 1971 December 228.7 228.7 228.8 464.2 464.2 464.3 1972 January February March 229.3 231.5 232.1 229.5 231.8 232.6 229.8 232.3 466.9 470.6 472.5 467. 1 471.2 473.5 467.6 472.2 474.9 233.4 C Per Cent Annual Rates of Growth December January February March 5.0 5.0 13.0 5.5 4.5 3.0 11.5 3.0 4.5 4.0 12.0 4.0 4th Q. 1971 1st Q. 1972 2.0 6.0 2.0 7.0 2.0 8.0 Year 1971 6.5 6.5 6.5 8. 5 7.0 9.5 5.0 8.5 7.5 10.5 6.0 8.5 8.5 12.0 7.0 7.5 7.0 7.5 8.0 7.5 9.0 11.0 Adjusted Credit Proxy 11.0 11.0 Total Reserves Alt. A Alt. 1971 December 360.9 360.9 360.9 32.0 32.0 32.0 1972 January February March 362.3 361.1 364.1 362.5 361.8 365.3 363.0 362.7 366.5 32.5 32.2 32.3 32.5 32.3 32.6 32.4 32.6 B Alt. C Alt. A Alt. 32.5 B Alt. Per Cent Annual Rates of Growth December January February March 8.5 4.5 - 4.0 10.0 8.5 5.5 11.5 9.0 7.0 - 1.0 12.5 6.0 18.5 -11.0 5.5 6.0 19.0 - 9.5 7.0 6.5 20.5 - 8.0 8.5 - 2.5 4th Q. 1971 1st Q. 1972 8.5 3.5 8.5 5.0 8.5 6.0 0.5 4.5 0.5 5.5 0.5 7.0 Year 1971 9.2 9.2 9.2 6.9 6.9 7.0 C -11those prevailing most recently, with the funds rate, for example, moving up in a 4-1/2--5-1/8 per cent range. The funds rate is now below the mid-point of the range the staff earlier thought consistent with a 6 per cent first quarter growth rate. Moreover, transactions demands in the period ahead now appear likely to be somewhat stronger than earlier assumed. With a 7 per cent first quarter growth rate, the funds rate may fluctuate in a 4--4-5/8 per cent range, while at an 8 per cent growth rate we would expect the funds rate to drop steadily to an average level somewhat below 4 per cent. (15) The Treasury bill market between now and the next meeting of the Committee might have to absorb as much as $2-1/2 billion of new bills issued for cash if the Treasury decides to cushion itself against the risk of liquidation of special issues by foreign central banks. At the same time foreign demands for bills, which recently have been very heavy, may be reduced somewhat. While these developments would tend to raise bill rates, the effect could be offset by the usual seasonal abatement of short-term market pressures after mid-December and any expectational effects from today's discount rate action. Thus, if day-to-day money market conditions are maintained around those most recently prevailing, the 3-month bill rate may be in a 3-7/8-4-1/4 per cent range. It would move down from that range under alternative C and up under alternative A. (16) In long-term credit markets, fundamental forces working to hold interest rates down appear strongest in the corporate and mortgage markets. The corporate calendar appears to be moderating, and in the mortgage market credit availability appears ample relative to demand. Even under alternative A, interest rates in these two markets might not show any significant rise. The -12rather large forward calendar of municipal issues and still sizable dealer holdings of U.S. Government coupon issues make these two markets particularly sensitive to any reversal of the easing trend in the money market. On the other hand, if this easing trend were to be extended further, all bond markets would certainly strengthen. (17) The recent sizable expansion in the bank credit proxy is not expected to continue into the early months of next year. The rate of growth in time deposits other than large CD's is expected to decelerate from its rapid recent pace, though remaining--under any of the three alternatives--above the relatively low third quarter pace. And, with business loan demands expected to be modest at best, banks are not likely to be very aggressive bidders for CD's. CD interest rates are likely to decline in line with any over-all reduction in the short-term rate structure, and it is possible that banks may also, under such circumstances, begin to reduce interest rates on consumertype time and savings deposits. Moreover, U.S. Government deposits available to banks to finance loans and investments are estimated to drop sharply on balance from December to February. -13Possible directive language (18) Alternative A. If the Committee wishes to formulate the directive in terms of money market conditions subject to a proviso clause, for purposes of the proviso clause it could employ the growth rates of either alternative A or B--e.g., 6 or in the first quarter. 7 per cent, respectively, for M 1 If the Committee favors the alternative A growth rates, it might adopt the following language. "To implement this policy, [DEL: promote to seeks Committee the somewhat over aggregates credit and monetary in growth greater the months ahead.] System open market operations until the next meeting of the Committee shall be conducted with a view to [DEL: achievingbank and] reserve MAINTAINING ABOUT THE money market conditions THAT HAVE PREVAILED ON AVERAGE SINCE THE PRECEDING MEETING; [DEL: objective] that with consistent SHALL BE MODIFIED IF PROVIDED THAT OPERATIONS IT APPEARS THAT THE MONETARY AND CREDIT AGGREGATES ARE DEVIATING SIGNIFICANTLY FROM THE GROWTH PATHS EXPECTED." The primary instruction calls for maintaining "about the money market conditions that have prevailed on average since the preceding meeting" because the mid-points of the ranges for money market conditions noted in paragraph (11) for the alternative A growth rates are closer to the average level of money market conditions since the November 16 meeting than they are to easier conditions recently prevailing. If the Committee would prefer to have the aggregates grow along the alternative B paths, it might modify -14- the above language to call for "maintaining money market conditions consis- tent with the recent reduction in Federal Reserve Bank discount rates". (19) Alternative B. The following language is proposed for possible use if the Committee decides to continue to formulate the primary instruction in terms of aggregates, and to seek the growth rates over the months ahead discussed earlier in connection with alternative B-including first-quarter rates of 7 and 8-1/2 per cent for M 1 and M2, respectively. s the same language This as that in the directive adopted at the November meeting except that the reference to "credit" aggregates is deleted. The deletion is proposed because the credit proxy is not expected to grow more rapidly on balance in the months ahead than in the fourth quarter. "To implement this policy, the Committee seeks to promote somewhat greater growth in monetary [DEL: and credit]aggregates over the months ahead. System open market operations until the next meeting of the Committee shall be conducted with a view to achieving bank reserve and money market conditions consistent with that objective." If the Committe favors an aggregate-oriented directive but would like to have the aggregates grow at the alternative A rates, it might modify the above language to indicate that it "seeks to promote moderate growth in monetary and credit aggregates over the months ahead." (20) tive B only in in Alternative C. This language differs from that of alterna- the omission of the word "somewhat" monetary aggregates." It is before "greater growth proposed for possible use if the Committee decides to pursue the more aggressive easing course contemplated by the specifications given earlier for alternative C. -15- "To implement this policy, the Committee seeks to promote somewhat] greater growth in monetary [DEL: [DEL: credit] and the months ahead. aggregates over System open market operations until the next meeting of the Committee shall be conducted with a view to achieving bank reserve and money market conditions consistent with that objective." -16- Alternative Weekly Paths of Key Monetary Aggregates (Seasonally adjusted, billions of dollars) Alt. December 15 22 29 January A Alt. B January 15 22 29 C Alt. A Alt. B Alt. 228.4 228.6 229.5 228.4 228.6 229.6 228.4 228.6 229.7 463.4 464.1 465.6 463.4 464.1 465.7 463.4 464.1 466.0 228.3 228.8 228.8 228.4 228.9 228.9 228.5 229. 1 229.2 465.4 466.2 466.5 465.6 466.4 466.7 465.8 466.7 467.2 Adjusted Credit December Alt. Proxy Total Reserves Alt. A Alt. 360.8 361.5 360.6 360.8 361.5 360.7 360.8 361.5 360.8 31.9 32.1 32.0 31.9 32.1 32.1 31.9 32.1 363.0 363.2 362.5 363.1 363.3 362.7 363.4 363.7 363.2 32.4 32.0 32.9 32.4 32.0 32.9 32.4 32.0 33.0 B Alt. C C Alt. A Alt. B Alt. 32.1 C -17Total and Nonborrowed Reserve Paths (Daily average in millions of dollars, seasonally adjusted) Total Reserves A Alt. B Alt. Alt. C Nonborrowed Reserves Alt. A Alt. B Alt. C 1971 December 31,991 32,003 32,016 31,746 31,824 31,888 1972 January 32,476 32,183 32,333 32,513 32,259 32,451 32,565 32,354 32,589 32,128 31,905 32,026 32,290 32,105 32,269 32,442 32,300 32,506 February March Per Cent Annual Rates of Growth December January February March 4th Q. 1971 1st Q. 1972 6.0 18.0 -11.0 5.5 6.0 19.0 6.5 20.5 - 9.5 - 8.0 7.0 8.5 - 1.0 - 1.0 4.5 5.5 11.5 14.5 - 8.5 - 0.5 7.0 Weekly Paths -- Alt. A Total Reserves Alt. B Alt. C 14.5 17.5 17.0 21.0 - 5.5 7.5 - 7.0 4.5 6.0 1.5 3.5 2.5 5.5 3.0 8.0 Seasonally Adjusted Nonborrowed Reserves Alt. A Alt. B Alt. C December 15 22 29 31,948 32,060 32,036 31,948 32,085 32,061 31,948 32,110 32,086 31,648 31,746 31,908 31,648 31,896 32,058 31,648 32,021 32,183 January 32,397 31,959 32,907 32,422 31,986 32,944 32,447 32,029 32,997 32,156 31,784 32,407 32,306 31,936 32,569 32,431 32,079 32,722 5 12 19 Weekly Paths -Alt. A Alt. B Alt. Not Seasonally Adjusted C Alt. A Alt. B Alt. C December 15 22 29 31,196 31,392 31,791 31,196 31,421 31,816 31,196 31,446 31,841 30,896 31,121 31,516 30,896 31,271 31,666 30,896 31,396 31,791 January 5 12 32,513 32,549 32,538 32,576 19 33,549 33,587 32,563 32,619 33,641 32,238 32,274 33,274 32,388 32,426 33,437 32,513 32,569 33,591 STRICTLY CONFIDENTIAL (FR) Table 1 PATHS OF KEY MONETARY AGGREGATES December 10, 1971 Monthly Pattern in Billions of Dollars 1971: June July Aug. Sept. Oct. Nov. Dec. 227.1 227.4 225.5 227.4 228.0 227.6 227.7 227.8 (228.7) 460.4 461.8 450.6 453.4 454.5 455.6 458.3 460.9 464.2) 356.5 356.4 346.7 349.8 351.0 353.3 354.7 358.3 (360.9) 31.8 31.6 31.3 31.3 31.7 32.1 31.6 31.9 (32.0) -6.0 11.0 6.6 10.4 (-1.0) 6.5 -8.5 0.2 0.3 14.7 15.8 -15.9 7.9 ( 6.0) Annual Percentage Rates of Change--Quarterly and Monthly 1971: 1971: 1st 2nd 3rd 4th Qtr. Qtr. Qtr. Qtr. -- 9.1 10.6 3.7 ( 2.0) -1.0 1.5 9.1 10.1 3.2 -2.1 0.5 0.5 ( 4.5) June July Aug. Sept. Oct. Nov. Dec. NOTES: 5.5 18.1 12.4 4.4 ( 7.5) 7.0 3.5 10.7 7.5 2.9 2.9 7.1 6.8 ( 8.5) 3.5 10.9 8.4 7.6 (8.5) 6.0 -0.5 7.7 10.7 4.1 7.9 4.8 12.2 ( 8.5) Annual rates of change other than those for the past are rounded to the nearest half per cent. Data 1/ shown in Currency parenthesis are current projections. plus private demand deposits. pe - Partially estimated. FR712-D Rev 2/16/71 STRICTLY CONFIDENTIAL (FR) Table 1-A PATHS OF KEY MONETARY AGGREGATES U.S. Gov't. Deposits Period 1 Path as of Nov. 16 2 Actuals & Current Proj. Time Deposits other than large CD's Total Time & Savings Deposits 3 Path as of Nov. 16 4 Actuals & 5 Path as of Current Proj. Nov. 16 6 Actuals & Current Proj. December 10, Large Negotiable CD's 7 Path as of Nov. 16 8 Actuals & Current Proj. 1971 Nondeposit Sources of Funds Path as of Nov. 16 10 Actuals & Current Proj. Monthly Pattern in Billions of Dollars 1971: June July Aug. Sept. Oct. Nov. Dec. 5.3 4.3 4.3 5.1 5.8 6.6 4.7 5.4 (5.4) 265. 5 267. 4 254.4 256.4 257.3 259.6 263.3 265.4 (268.4) 233.3 234.4 225.0 225.9 226.5 228.0 230.6 233.2 (235.5) 32.2 33.0 29.4 30.4 30.8 31.6 32.7 32.2 (32.9) 4.5 4.3 3.9 4.1 4.8 5.4 (4.7) Annual Percentage Rates of Change--Quarterly and Monthly 1971: 1st Qtr. 12.0 28.8 14.7 8.2 (13.5) 10.5 8.5 14.8 9.4 4.2 10.7 17.1 9.6 (13.5) 2nd Qtr. 3rd Qtr. 4th Qtr. 1971: June July Aug. Sept. Oct. Nov. Dec. 11.0 27.5 14.0 5.3 (13.0) 14.5 5.5 11.8 4.8 3.2 7.9 13.7 13.5 (12.0) Weekly Pattern in Billions of Dollars 1971: Oct. 20 27 4.3 4.8 263.6 263.9 230.7 231.2 32.9 32.7 5.2 5.0 Nov. 3 10 17 24 5.6 5.0 6.1 5.7 5.5 5.0 265.5 266.0 263.6 264.1 265.2 266.4 233.3 233.6 231.5 232.2 233.1 234.1 32.1 31.8 32.1 32,3 5.0 5.1 5.4 5.7 4.4 5.8 4.8 5.1 5.4 (5.5) 266.4 266.8 267.2 267.3 267.5 (267.9) 233.8 234.0 234.2 234.7 234.7 (235.0) 32.6 32.8 (32.9) 5.4 4.7 (4.7) Dec. 1 8 pe 15 NOTES: estimated. pe - Partially Annual rates of change other than those for the past are rounded to the nearest half percent. Data shown in parenthesis are current projections. FR 712-K Rev 2/16/71 Table 2 CONFIDENTIAL (FR) AGGREGATE RESERVES AND MONETARY VARIABLES December 10, 1971 RETROSPECTIVE CHANGES, SEASONALLY ADJUSTED (Annual rates in percent) 1 Period Annually 1968 1969 1970 Reserve Aggregates 2 3 Total Member Nonborrowed Total Total Nonborrowed Member Reserves Reserves Bank Deposits + 6.4 + 9.5 + 8.9 - 4.0 +11.8 - + 7.8 - 1.6 + 6.0 - 3.0 Monetary Variables Money Supply 4 Adjusted Adjusted Credit Proxy 7 6 Total 8 Currency Private Demand Deposits 9 Time Deposits Adjusted + 9.7 + 0.4 + 8.3 + 7.8 + 3.2 + 5.4 + 7.4 + 6.0 + 6.5 + 7.9 + 2.4 + 5.1 +11.3 Addenda 10 Nonbank Thrift Instit. Commercial Deposits Paper +17.9 + 6.3 + 3.4 + 7.8 + 7.3 - 4.9 n.a. n.a. Semi-annually 1st Half 1970 2nd Half 1970 +13.0 + 1.9 +17.1 + 4.7 +18.4 + 4.8 +11.4 + 5.6 + 5.2 + 7.4 + 5.5 + 5.1 + 5.1 + 8.4 +26.3 + 4.7 +10.6 +12.8 + 1.7 1st Half 1971 + 8.9 + 8.2 +14.6 + 9.7 +10.0 + 8.6 +10.5 +22.3 +20.9 -18.2 Quarterly 3rd Qtr. 1970 4th Qtr. 1970 +19.1 + 6.6 +24.4 + 9.4 +21.5 +14.6 +14.7 + 7.8 + 6.5 + 3.8 + 5.0 + 5.8 + 6.9 + 3.2 +30.4 +20.6 + 9.3 +11.6 -16.2 +20.4 1st Qtr. 1971 2nd Qtr. 1971 +11.0 + 6.6 +11.0 + 5.3 +16.9 +11.8 +10.9 + 8.4 + 9.1 +10.6 + 8.2 + 8.8 + 9.4 +11.3 +28.8 +14.7 +23.3 +17.4 -24.7 -12.5 3rd Qtr. 1971 +10.4 +10.8 + 8.1 + 7.6 + 3.7 + 6.3 + 2.8 + 8.2 +12. 8 - 0.2 1.0 Nov. Dec. + 3.6 +18.4 + 4.4 +22.8 +10.9 +12.4 +19.9 + 1.8 + 6.3 +15.1 + 1.7 + 2.8 + 6.7 + 5.0 + 4.9 + 7.4 + 0.7 + 2.2 + 6.5 +20.9 +14.6 +25.2 +10.6 + 9.4 +14.5 +32.4 -28.7 +58.1 1971--Jan. +12.2 +11.4 + 8.8 +15.1 + 8.8 +16.2 +17.8 +16.1 +10.2 +11.9 +10.3 + 2.8 +13.4 +11.0 + 7.3 + 9.7 + 7.2 + 1.4 +14.5 +12.1 +28.8 +29.7 +26.0 +25.1 - +18.5 +24.9 -10.9 -55.2 + 2.7 +17.0 + 0.2 + 9.7 +12.4 - 6.2 +15.9 +12.5 + 6.7 + 8.5 + 8.8 + 7.7 + 8.2 +14.1 + 9.1 +12.0 + 7.1 + 7.1 + 7.1 +16.2 +10.4 +13.2 +15.5 +14.8 +21.8 +14.2 +15.4 + 4.4 -15 .8 -26.3 + 0.3 +14.7 +15.8 -13.1 +16.1 +29.6 +11.2 + 5.6 + 7.3 +10.7 + 4.1 + 7.9 +10.1 + 3.2 - 2.1 +11.7 + 2.3 + 4.6 + 8.9 + 3.4 - 4.1 + 9.4 + 4.2 +10.7 +15.9 + 8.5 +13.8 -32.1 -15.9 + 7.9 -13.0 + 5.8 + 2.1 +10.6 + 4.8 +12.2 + 0.5 + 0.5 + 6.9 - 1.4 + 0.7 +17. 1 + 9.6 +11.8 +10.0 1970--Oct. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. p NOTE: - + 1.9 9.2 - 9.0 1.7 +31.6 +30.1 n.a. p - Preliminary. n.a. - Not available. FR 712 - E but reserve requirements Aggregate reserve series have been adjusted to eliminate changes in percentage reserve requirements against deposits, beginning October 1, 1970. on Eurodollar borrowings are included beginning October 16, 1969, and requirements on bank-related commercial paper are included CONFIDENTIAL (FR) Table 3 AGGREGATE RESERVES AND MONETARY VARIABLES December 10, 1971 SEASONALLY ADJUSTED (In millions of dollars) 1970: 1971: July Aug. Sept. 28,041 28,585 29,240 26.694 27,780 28,708 27,896 28,408 29,024 298.4 203.7 307.8 210.3 211.6 212.8 48.0 48.1 48.3 162.4 163.5 164.5 208.4 213.2 217.7 191.4 193.9 196.4 318.2 322.5 324.3 Oct. Nov. Dec. 29,385 29,474 29,925 28,928 29,033 29,584 28,134 29,233 29,703 310.6 313.8 319.0 213.1 213.6 214.8 48.5 48.7 49.0 164.6 164.9 165.8 221.5 224.2 228.9 198.9 200.6 203.4 324.8 326.5 330.6 Jan. Feb. 30,229 30,515 30,748 29,801 30,176 30,398 30,029 30,255 30,534 323.3 328.1 332.5 215.3 217.7 219.7 49.3 49.7 50.0 166.0 168.0 169.7 234.4 240.2 245.4 207.8 212.7 217.4 333.4 336.7 339.6 30.816 31,253 31,257 30,644 30,961 30,801 30,611 221.2 248.1 220.3 342.0 223.8 225.5 50.5 50.8 51.1 170.7 31,046 336.9 340.4 342.3 173.0 174.5 251.3 254.4 222.8 225.0 344.5 346.7 Sept. 31,266 31,650 32,067 30,465 30,873 31,634 31,094 31,473 31,906 345.5 347.1 349.2 227.4 228.0 227.6 51.6 51.7 51.9 175.8 176.3 175.6 256.4 257.3 259.6 225.9 226.5 228.0 349.8 351.0 353.3 Oct. Nov. p 31,643 31,850 31,291 31,443 31,460 31,596 349.8 352.9 227.7 227.8 52.2 52.2 175.5 175.6 263.3 265.4 230.6 233.2 354.7 358.3 6 13 20 27 31,816 31,653 31,671 31,428 31,567 31,243 31,405 30,875 31,667 31,529 31,561 31,207 349.2 349.1 350.1 350.2 227.3 227.7 227.5 228.5 175.3 175.6 175.4 176.1 262.3 262.7 263.6 263.9 32.7 32.9 32.9 32.7 229.6 229.8 230.7 231.2 353.5 353.8 355.3 355.2 28.5 28.6 29.9 29.4 Nov. 3 10 17 24 31,693 31,381 32,091 31,889 31,489 31,246 31,808 31,200 31,297 31,440 31,878 31,556 352.0 351.6 352.9 353.1 227.8 227.1 227.5 227.9 175.7 174.9 175.3 175.7 263.6 264.1 265.2 266.4 32.1 31.8 32.1 32.3 231.5 232.2 233.1 234.1 357.0 356.6 358.3 358.9 29.6 30.1 30.1 29.6 Dec. 1 32,150 31,509 31,644 354.4 227.8 175.7 267.3 32.6 234.7 359.8 29.4 Mar. Apr. May June July Aug. Week ending: Oct. 1971: NOTES: (In billions of dollars) 30,998 Aggregate reserve series have been adjusted to eliminate changes in percentage reserve requirements against deposits, but 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 Eurodollar 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. FR 712-F p - Preliminary. n.a. - Not available. Table 4 MARGINAL RESERVE MEASURES (Dollar amounts in millions, based on period averages of daily figures) Member Free reserves Period Excess reserves Total Banks Borr owin C i t R e s e r v e Major banks Outside N.Y. 8 N.Y. s Country Monthly (reserves weeks ending in): 1970--January February March April May June July August September October November December - 759 - 916 - 751 -. 687 - 765 - 736 -1,134 706 - 374 - 274 - 199 84 169 210 129 178 159 171 183 175 235 193 210 264 928 1,126 880 865 924 907 1,317 881 609 467 409 348 148 106 90 227 165 140 218 143 101 12 42 36 287 317 225 331 241 289 460 278 115 40 17 16 232 289 287 119 228 217 348 273 274 313 294 265 261 414 278 188 290 261 291 187 119 102 57 30 1971--January February March April May June July Aug. Sept. Oct. Nov. p - - 140 71 120 2 6 303 672 633 324 245 94 238 264 192 154 218 211 158 194 212 131 197 378 335 312 152 212 514 830 827 536 376 291 45 29 41 15 78 103 77 153 37 72 54 36 30 17 9 36 85 223 130 104 55 65 262 248 238 119 60 159 270 318 249 132 84 35 29 16 9 38 167 260 226 146 117 88 - 80 58 3 128 277 208 81 48 197 150 84 176 184 127 79 86 13 6 4 14 5 12 19 26 - 191 131 204 93 365 230 102 174 174 99 306 267 46 39 134 91 40 20 47 36 61 22 74 84 27 18 51 56 June 2 9 16 23 30 - 361 80 149 409 518 285 73 254 210 232 646 153 403 619 750 171 46 86 103 107 100 27 4 161 132 217 25 152 202 203 158 55 161 153 308 July 7 14 21 28 - 384 986 839 478 277 5 282 67 661 991 1,121 545 -252 47 9 149 309 344 88 257 189 397 236 255 241 333 212 Aug. 4 11 18 25 - 330 566 955 680 434 27 224 91 764 593 1,179 771 43 -338 229 122 47 254 97 307 328 326 313 292 218 261 132 Sept. 1 8 15 22 29 - 382 560 210 390 81 324 205 247 - 61 343 706 765 457 329 424 99 --86 -- 52 286 97 49 37 370 306 231 106 230 185 173 130 88 157 6 13 20 27 - 95 122 362 214 49 210 51 309 449 332 413 29 100 31 128 5 56 81 77 113 185 121 111 162 108 99 97 3 10 17 2 4 p - 180 112 99 344 396 10 188 195 216 122 287 539 -21 64 131 --122 138 106 47 52 131 110 54 49 139 143 54 558 114 701 60 217 -- 154 -- 179 15 151 45 1971--Apr. May Oct. Nov. 7 14 21 28 Dec. p - Preliminary. 1 p 8 p - - - 600 -17 -42 --1 34 Table 5 SOURCE OF FEDERAL RESERVE CREDIT Retrospective Changes (Dollar amounts in millions of dollars, based Total Federal Reserve credit (Excl. float) Period Year: 1969 (12/25/68-12/31/69) 1970 (12/31/69-12/30/70) U S Government Government Total holdings +5,192 +4,276 +4,279 ( 7 14 21 28 + + + 155 255 348 54 + + - 145 86 423 43 + + + + 5 12 19 26 + + + + 771 201 503 115 + + + + 712 272 304 144 2 9 16 23 30 + 305 974 + 202 160 + +1,156 - 57 418 2/ July 7 14 21 28 + + + - 362 364 743 957 + + + - 373 74 562 359 + + + + Aug. 4 11 18 25 + + - 335 204 483 116 + + + 141 1 73 296 + + 1 8 15 22 29 + + + 381 470 387 575 837 + + + 399 309 54 320 595 + 6 13 20 27 + - 576 217 36 423 + + - 655 299 27 432 + 3 10 17 24 p + + 140 162 704 842 + + + 48 116 445 546 + 1 p + - 732 712 + - 487 73 1971--Apr. May June Sept. Oct. Nov. Dec. 8 p 47 106 +1,059 +3,220 2/ r a Other -- (- ) 143) 82) 12) 70) ) + + + + -- ) -- ) -- ) -- ) + -- ) -- ) + + Fe l -- + +1, Federal securities Bills 1/ +5,539 +3,351 on weekly averages of daily figures) + 707 +1,180 + - d a Outright 206 124 + + + 23 54 2 12 71 56 + + + 11 10 4 16 + - 9 36 1 27 25 + + - 31 20 4 1 - 11 + 9 12 6 + + + 20 34 5 52 36 + + - 5 26 19 28 + + + + 1 15 18 18 - 42 124 + 84 + 113 + 27 57) 87) 144) + 35 ) -- ) 70) 70) + 109 -) 145) 145) + 91 + 15 -- ) + 25 + 52 -- ) + 153 -- ) + + 39 5 + + 35 48 + + 69 92 -- ) -- ) 91) 91) -- + + -- + + ) 54) 54) + 71 ) + 403 89) 89) + + 245 80 67 63 Bankers' acceptances 35 28 ) -- Repurchase agreements + - 39) 39) -- Agency Securities + - + + + Repurchase agreements Member banks borrowings + 245 - 884 Figures in parenthesis reflect reserve effect of match sale-purchase agreement. Includes effect of changes in special certificates of $ +94 million of the week of June 9, $ +416 million of the week of June 16, and $ -510 million of the week of June 23. Preliminary Table 6 MAJOR SOURCES AND USES OF RESERVES Retrospective and Prospective Changes (Dollar amounts in millions, based on weekly averages of daily figures) v e s 1 of r e s e s u a f f e c t i n F a c t o r s Period Currency outside banks Cold stok stock (Sign Year: 1969 (12/25/68-12/31/69) 1970 (12/31/69-13/30/70) 45,539 +3,351 supply affecting Factors Federal Reserve credit (excl. 1/ float) i Treasury d icat 54 1 ----- + 257 483 414 580 + - + 235 + 241 + 301 10 + + + 14 14 21 1 - 99 - 69 - 127 - 33 -- + + 129 351 465 69 + 307 - 248 + 83 + 218 + - 497 211 421 177 + - 14 13 5 25 + 317 - 135 - 128 + 72 ---- + 80 240 378 125 362 + + + - 169 522 398 648 776 + + - 327 291 122 291 334 + + 36 1 ----- + 616 483 358 895 - 54 244 + 176 + 204 + 376 + 217 + 11 - 453 -86 114 -- + 51 168 384 55 + 266 17 + 125 - 113 2 9 16 23 30 + 305 974 + 202 + 160 +1,156 7 14 21 28 + + + - 362 364 743 957 4 11 18 25 + + - 335 204 483 116 Sept. 1 8 15 22 29 + + + 381 470 387 575 837 ------ + + 392 191 190 238 892 - 45 - 76 - 36 - 374 Oct. 6 13 20 27 + - -- - 576 217 36 423 --- + 235 344 566 296 Nov. 3 10 17 24 + + 140 162 704 842 ----- + - Dec. 1 8 + - 732 712 --- + - 1/ 171 229 ---. - Excess reserves + + 771 201 503 115 Aug. Required reserves reserves + 241 + 667 813 + + + + July = Bank use of reserves - 5 12 19 26 June Change in total + 773 279 275 348 54 - ef Other nonmember deposits and F.R. accounts serves) -3,122 2 + + + May s reserves Foreign deposits and gold loans ct on -2,676 -- +1,150 - 7 14 21 28 1971--Apr. Float operations of -- For retrospective details, see Table 5. 2/ Includes $400 million in special drawing account. p - Preliminary. 243 249 131 384 - 898 -1,655 +1,448 +1,163 +1,340 +1,257 + 108 94 - 11 + 111 - 212 + 181 - 44 + 22 + + 4 8 4 29 + 45 - 272 + 277 - 215 - 153 - 65 + 178 + 16 + 37 5 8 + + - 450 490 197 133 + + + - 280 163 326 683 742 + + + 10 29 26 11 4 + + + 233 119 42 308 404 - 139 + 52 1 51 - - 142 + 83 + 785 - 497 + - 37 49 11 - 11 + - 129 165 161 159 167 261 302 655 + 357 + 202 + 46 - 341 + 173 - 158 + 162 - 19 + + - 22 15 4 + 345 - 386 + 178 + 7 19 9 + 53 + 151 - 233 + 64 + 46 36 + 363 - 444 - - 242 - - 5 7
@FedFRASER