The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
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 this document may contain occasional gaps in the text. These gaps are the result of a redaction process that removed information obtained on a confidential basis. 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 optimal 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. Strictly Confidential (FR) Class I FOMC Strictly Confidential (FR) Class I FOMC MONETARY POLICY ALTERNATIVES Prepared for the Federal Open Market Committee By the staff Board of Governors of the Federal Reserve System Strictly Confidential (FR) Class I - FOMC December 18, 1992 MONETARY POLICY ALTERNATIVES Recent Developments (1) Reserve conditions have remained unchanged since the last Committee meeting. Because of settlement day pressures, the federal funds rate averaged a little above its expected level of 3 percent and adjustment plus seasonal borrowing a little above its allowance. Rates on Treasury securities registered relatively small mixed changes over the intermeeting period, with bill rates essentially unchanged and bond yields falling. 2 Economic activity was stronger than expected, but the more robust economy along with the tenor of the new Administration's appointments and statements were seen as lowering the odds on outsized fiscal stimulus. The flattening of the Treasury yield curve may have been partly a response to actual and potential shifting of relative supplies: bill auction sizes increased over recent weeks, and there was talk in the incoming Administration of shortening the maturity structure of Treasury debt issues. Long-term forward rates embedded in the Treasury yield curve fell to their lowest levels in nearly three years, and investors also may have been encouraged by discussions of long-term deficit reduction and by prospects for sustained low inflation. Rates rose sharply on one-month private paper as that maturity came to span the year-end. However, expected rates over the year-end holiday weekend have fallen recently, contributing to a drop of 20 to 45 basis points in private short-term rates beyond the one-month maturity. The declines are greatest for bank obligations, 1. The borrowing allowance was reduced by $25 million to $50 million late in the intermeeting period because of the usual decline in seasonal borrowing. 2. Interest and exchange rates in this bluebook have been updated through noon, December 18. perhaps reflecting reduced concerns about possible banking problems, partly as bank earnings exceeded expectations. Bank stock prices outperformed broad stock market indexes, which were themselves boosted to record highs by the prospects for a stronger economy and decreases in bond yields. Private long-term rates also dropped 10 to 20 basis points late in the period, except for rates for weaker credits which remained unchanged. (2) The dollar's weighted-average exchange value has declined slightly on balance since the November FOMC meeting. Foreign short- term interest rates rose while long-term rates declined a few basis points on average over the period. Although new economic data indi- cated that both the West German and the Japanese economies are in recession, markets seem to have postponed or reduced expectations of near-term monetary easing, owing in part to statements by the central banks of those countries. Small dollar depreciations against the mark, the yen, and several other currencies were about offset by a 15 percent appreciation against the Swedish krona, which was cut loose from its ECU peg after a second round of extremely heavy selling pressures. The pressures then spread episodically to other European currencies, culminating in the floating of the Norwegian krone; tensions within the ERM persisted through the end of the intermeeting period, but at a somewhat reduced intensity. The Desk did not intervene in currency markets over the intermeeting period. (3) Growth rates of M2 and M3 appear likely to come in a little below below their respective 3-1/2 and 1 percent paths specified for September to December at the last FOMC meeting. In November, M2 decelerated to a 3-1/2 percent annual growth rate, and weekly data for the first half of December indicate significant further slowing this month. A deceleration had been expected, owing primarily to the waning effects of special factors. 3 Abstracting from those effects, the underlying growth in M2 was apparently quite weak, and less than expected, despite an upward revision to estimated nominal income growth. M1 growth has slowed especially sharply in recent weeks, accounted for in part by weakness in demand deposits.4 Some of this deceleration may reflect smaller contributions to growth from mortgage refinancing, and it may be that demand deposits, and NOW accounts as well, were reacting to the runup in short-term interest rates over October and November. The nontransactions component of M2 continued to decline. Small time deposits again fell substantially, with a portion of the funds apparently captured by savings deposits, which expanded rapidly. M3 accelerated to a 1-3/4 percent growth rate in November, as the runoff of large time deposits and institutional money funds slowed substantially. Branches and agencies of foreign banks increased CD issuance, perhaps anticipating year-end needs, but appear likely to rely more heavily on borrowing from overseas offices as the year end approaches. Early December data indicate a likely decline in M3 for this month. 3. The effects of the boost to NOW accounts from a reclassificaended in November. Morttion of large time deposits gage refinancings and associated effects on deposits were expected to add nearly 1 percentage point less to growth in November and December than in October. It now appears that the contribution of mortgage refinancing to growth has dropped off faster than we had projected, but from a much higher level in October. 4. Reflecting the deceleration of transaction deposits, growth of required and total reserves slowed to the still rapid rates of about 22 and 21 percent, respectively, in November. Primarily because of a lower rate of currency growth, the monetary base grew at an 8-3/4 percent rate for the month. (4) M2 and M3 should finish the year about 1/4 and 1/2 percentage point, respectively, below the lower bounds of their target ranges. The velocity of M2 is projected to rise 3-1/4 percent this year, including a 5-1/4 percent (annual rate) increase in the third quarter--despite further declines in market rates and the influence of special factors, such as mortgage refinancing, that boosted money and held down velocity. Banks and thrifts, rebuilding capital positions, promptly reduced deposit rates as short-term market rates fell, and a steepening yield curve as well as the stickiness of bank loan rates induced shifts out of M2 deposits. The experimental staff M2 model, which employs a variety of rates affecting household portfolio choices and shows a rise in overall opportunity costs this year, predicts a 3 percent increase in velocity. M3 velocity has been boosted in part by greatly increased reliance by banks and thrifts on capital and other nondeposit sources of funds not included in M3. (5) Domestic nonfinancial debt posted a paltry 2-3/4 percent growth rate in October owing to a temporary dropoff in federal borrowing, before picking up in November. Although borrowing by nonfederal sectors appears to be strengthening a little, some of the recent pickup may have been the result of efforts to fund year-end needs in advance. At banks, business loans expanded at a more robust 5-1/4 percent pace in November. While part of this increase reflected a shift from the commercial paper market by one large firm that was downgraded, commercial paper still posted a strong gain in November. Corporations not only obtained early funding of year-end positions but reduced their reliance on long-term debt markets after the backup in bond yields in October and November. Overall, business borrowing seems to be increas- ing slightly, after decreasing in the second and third quarters. While equity issuance also has declined, the recent stock market rally has led to a buildup of the new issue calendar. Bank loans to consumers remained weak in November, even after adjusting for securitizations, and although revolving credit posted a third monthly gain in October, total consumer credit, including noninstallment loans, turned down after being flat or rising slightly the previous several months. estate loans at banks grew modestly again in November. Real Residential mortgage growth had not kept pace with indicators of housing activity through the third quarter, but some boost may be expected in the fourth quarter with the record level of refinancings and rising home sales with concomitant opportunities for increasing mortgage sizes. Since October, however, a steep decline is evident in indexes of new mortgage applications for home purchases and especially for refinancing. Over- all, the debt aggregate appears likely to finish the year at about the 4-1/2 percent lower bound of its monitoring range, with federal debt up 10-3/4 percent and nonfederal 2-1/2 percent. Debt-to-income ratios have fallen slightly for both households and business; debt-service burdens have declined much more substantially as obligations are rolled over at prevailing lower interest rates. MONEY, CREDIT, AND RESERVE AGGREGATES (Seasonally adjusted annual rates of growth) QIV'91 to Sept. Oct'. Nov. Nov. Money and credit aggregates M1 19.1 22.7 13.9 14.5 M2 3.7 5.2 3.5 2.3 M3 1.8 0.4 1.8 0.6 Domestic nonfinancial debt 3.3 2.7 6.2 4.6 5.0 2.7 -1.3 4.1 10.5 4.6 10.5 2.7 6.7 4.8 4.8 4.0 Nonborrowed reserves 2 23.7 45.6 22.0 20.8 Total reserves 24.4 42.0 21.0 20.6 Monetary base 16.7 14.3 8.8 10.4 Adjustment plus seasonal borrowing 287 143 104 Excess reserves 994 1074 1051 Federal Nonfederal Bank credit Reserve measures Memo: 1. 2. (Millions of dollars) Data for November debt measures are partly projected. Includes "other extended credit" from the Federal Reserve. NOTE: Monthly reserve measures, including excess reserves and borrowing, are calculated by prorating averages for two-week reserve maintenance periods that overlap months. Reserve data incorporate adjustments for discontinuities associated with changes in reserve requirements. Policy Alternatives (6) Three alternatives are presented below for consideration by the Committee. Under alternative B, federal funds would continue to trade around 3 percent, in association with the allowance for adjustment and seasonal borrowing remaining at $50 million. (Seasonal borrowing ordinarily would be expected to edge down in January, but with such borrowing already at a very low level of about $20 million, little change is likely over the intermeeting period.) Alternative A incor- porates a 1/2 percentage point reduction in the federal funds rate. Such a reduction could be accomplished through open market operations-by lowering the borrowing allowance by $25 million--pushing the federal funds rate below the discount rate. The lower funds rate also could be achieved by reducing the discount rate by 1/2 percentage point and leaving the borrowing allowance unchanged. The latter approach would be in line with the Committee's usual procedure, as it would not involve moving the intended federal funds rate below the discount rate. The 1/2 percentage point increase in the federal funds rate of alternative C could be implemented by raising the borrowing allowance by $25 million. (7) In view of the stronger tone of economic data in recent weeks, market participants seem to be anticipating a firming in the stance of monetary policy some time next year, but likely not between now and the early February FOMC meeting. With an unchanged federal funds rate under alternative B, other private short-term rates will decline over the intermeeting period as remaining year-end pressures unwind. Apart from year-end effects, rates along the maturity spectrum might tend to drift lower should developments unfold as in the staff forecast; in these circumstances, expectations of substantial policy tightening in 1993 are likely to fade, albeit slowly, as inflation remains subdued and the pace of expansion stays moderate. Intermediate- and longer-term rates may be importantly influenced by new proposals on fiscal policy. Markets apparently are anticipating some modest fiscal stimulus, but there is considerable uncertainty about the size of any short-term package and the scope and credibility of proposals for longer-term deficit reduction. Interest rates could also be affected by discussions of other policy measures apparently being considered by the new Administration, which also have not been assumed in the staff forecast. For example, efforts to increase bank lending by relaxing regula- tions, intended to ease the cost and availability of credit to borrowers dependent on banks, might boost some market interest rates if such a relaxation were seen as having a significant impact on spending and as shifting bank portfolios toward loans and away from government securities. Proposals to put greater emphasis on shorter maturities in Treasury debt management, while motivated primarily by possible saving in federal interest expense, may flatten the yield curve a little. (8) The 1/2 percentage point decline in the federal funds rate under alternative A would be passed through fully to other short-term interest rates. The three-month Treasury bill rate would drop into the 2-3/4 percent area, or a bit below, and the prime rate would be reduced to 5-1/2 percent. Market expectations about the trajectory of interest rates over the next few months would be marked down, but anticipations that the easing move might need to be reversed before much time had passed--especially in the context of possible fiscal stimulus--would limit declines in longer-term rates. The foreign exchange value of the dollar could drop noticeably, although in present circumstances, foreign central banks might ease their own policies somewhat sooner than they are likely to otherwise, muting the dollar's decline. (9) Although many market participants have come to the view that monetary policy easing has run its course for the current economic cycle, none appears to expect a tightening to be implemented in the near term, as in alternative C. Consequently, short-term Treasury rates would jump by the full 50 basis point increase in the federal funds rate. Private rates could increase a bit more, as market participants built in higher risk premiums in response to the greater odds that the economic expansion could slow. The increase in long-term yields, however, would be held down by the enhanced credibility of the Federal Reserve's price stability objective, and the yield curve should flatten somewhat. The foreign exchange value of the dollar would likely rise considerably. (10) Projected growth of the monetary aggregates under the three alternatives for the interval from November to March is shown in the table below. (Additional data appear in the detailed table and charts on the following pages.) Growth of M2 and M3 in coming months is expected to remain damped relative to that of nominal income under all of the alternatives. The forces that have been restraining money demand over the past two years should abate only a little in the near term. With the yield curve steep and the cost of consumer credit high relative to deposit rates, households are likely to steer funds into capital market instruments, such as bond and stock mutual funds, and to use deposit balances to reduce debt burdens further. Credit flows will continue to be diverted from the depository sector. Nonfinancial busi- nesses, while showing a renewed interest in shorter-term credit as inventory financing needs rise, are expected to continue to rely heavily -10- on the capital markets in view of the attractive levels of bond rates and stock prices. Restraints on banks' supply of credit are expected to ease, but only gradually, in response to improvements in the financial condition of banks and as the outlook for the economy brightens. With their balance sheets highly liquid, banks are likely to remain unaggresOverall sive in bidding for retail deposits and managed liabilities. demands for credit by nonfederal sectors are expected to remain damped relative to income. Federal borrowing, however, should remain brisk. Under any of the alternatives, overall nonfinancial debt is expected to expand at about a 5-1/2 percent rate from the fourth quarter through March, in the lower half of its provisional 4-1/2 to 8-1/2 percent monitoring range, and below the pace of nominal GDP. Alt. A Alt. B Alt. C Growth from November to March M2 2 1-1/2 1 M3 M1 1/4 7-1/2 0 5-3/4 4 2-1/2 1/2 8-1/4 1-3/4 1/4 6-3/4 1-1/4 0 5 -1/4 Implied growth from 1992:Q4 to March M2 M3 M1 (11) The 1-1/2 percent M2 growth projected for the November- to-March period under the unchanged money market conditions of alternative B represents a considerable slowing from the pace of recent months. This projected deceleration largely reflects the reversal of the net Alternative Levels and Growth Rates for Key Monetary Aggregates M1 Alt. A Alt. B Alt. C Alt. A Alt. 3497.1 3507.2 3507.7 3497.1 3507.2 3507.1 3497.1 3507.2 3506.5 4183.8 4190.1 4181.2 3514.5 3522.3 3531.5 3512.1 3517.9 3524.7 3509.7 3513.5 3517.9 5.2 3.5 0.2 5.2 3.5 0.0 2.3 2.7 3.1 Quarterly Ave. Growth Rates 1992 Q1 Q2 Q3 Q4 1993 Q1 Sep 92 to Dec 92 Dec 92 to Mar 93 Nov 92 to Mar 93 Levels in billions 1992 October November December 1993 January February March Monthly Growth Rates 1992 October November December 1993 January February March 91 91 91 92 92 92 to to to to to to Q4 92 Nov 92 Dec 92 Jan 93 Feb 93 Mar 93 Tentative 1993 Target Ranges: C Alt. A Alt. B Alt. C 4183.8 4190.1 4180.9 4183.8 4190.1 4180.6 1007.3 1019.0 1021.8 1007.3 1019.0 1021.0 1007.3 1019.0 1020.2 4184.1 4188.2 4193.0 4183.0 4185.7 4189.5 4181.9 4183.2 4186.0 1029.3 1036.7 1044.2 1027.0 1032.7 1038.3 1024.7 1028.7 1032.4 5.2 3.5 -0.2 0.4 1.8 -2.5 0.4 1.8 -2.6 0.4 1.8 -2.7 22.7 13.9 3.3 22.7 13.9 2.4 22.7 13.9 1.5 1.7 2.0 2.3 1.1 1.3 1.5 0.8 1.2 1.4 0.6 0.8 1.1 0.4 0.4 0.8 8.9 8.6 8.7 7.1 6.7 6.5 4.2 0.4 0.2 3.7 2.1 4.2 0.4 0.2 3.7 1.6 4.2 0.4 0.2 3.7 1.2 2.2 -1.3 -0.1 1.1 0.3 2.2 -1.3 -0.1 1.1 0.1 2.2 -1.3 -0.1 1.1 -0.1 16.4 9.8 10.3 17.2 8.2 16.4 9.8 10.3 17.1 6.7 16.4 9.8 10.3 17.0 5.2 3.0 2.7 2.1 2.9 2.0 1.5 2.8 1.3 0.9 -0.1 1.1 0.2 -0.1 0.8 0.0 -0.2 0.5 -0.3 13.4 8.8 7.4 13.1 6.8 5.7 12.8 4.8 3.9 2.2 2.3 2.1 1.4 1.6 1.8 2.2 2.3 2.1 1.0 1.1 1.2 0.5 0.6 0.3 -0.1 0.3 0.6 0.5 0.6 0.3 -0.3 0.1 0.3 0.5 0.6 0.3 -0.4 -0.2 0.1 14.1 14.5 13.6 7.9 8.1 8.3 14.1 14.5 13.6 6.7 6.7 6.7 14.1 14.5 13.5 5.5 5.2 5.0 2.5 to 6.5 B 1.0 to 5.0 Alt. Chart 1 ACTUAL AND TARGETED M2 Billions of Dollars . -3750 * Actual Level Short-Run Alternatives 3700 The range for 1993 is the provisional range adopted at the July meeting. 6.5% 3650 3600 2.5%, 3550 '4 * A B SC 3500 3450 3400 ONDJ F M A M J J 1992 A S O N D J F M A M J J 1993 A S O N D 3350 Chart 2 ACTUAL AND TARGETED M3 Billions of Dollars * S4425 Actual Level Short-Run Alternatives 4375 The range for 1993 is the provisional range adopted at the July meeting. 4325 4275 4225 A B C 4175 4125 ONDJ F M A M J J 1992 A S O N D J F M A M J J 1993 A S O N D 4075 Chart 3 M1 Billions of Dollars 15% Actual Level - * 1190 ' 1170 Short-Run Alternatives .. * 10o% S.." .. - 1150 1130 .. 1110 S..1090 5 - % .. -- 1070 1050 .. . 15% .. . '1030 .............................. * * * . .. * .:.'.... ........... ..... 1010 10% - 990 970 -....-- 930 910 ...... O ND ... ................................. ........ S1 11 1 1 1 J F M A M J J 1992 A S O 0. % N 890 D J F M A M J J 1993 A S ND 870 Chart 4 DEBT Billions of Dollars * Actual Level (November level partly projected.) Projected Level 12900 8.5% - 12700 The range for 1993 is the provisional range adopted at the July meeting. -12500 12300 8.5% 12100 -11900 -11700 4.5% -11500 -11300 S11100 l l l l l l l l l l l l l l Illllll ONDJ F M A M J J 1992 A S O N D J F M A M J J 1993 I I I I I A S O N D 10900 -12impact of certain special factors that have boosted M2 recently, including heavy mortgage refinancing activity. The slowing in growth also is due to the additional reductions in rates on liquid deposits, catching up to previous declines in market interest rates. 5 On a quarterly average basis, M2 would grow at only about a 1-1/2 percent rate in the first quarter, well below the staff projection for nominal income growth, and velocity would extend its recent increases--at a projected 4-1/4 percent annual rate. By March, M2 would have expanded at a 1-3/4 percent pace from its fourth-quarter base, leaving the aggregate below its tentative 2-1/2 to 6-1/2 percent range. (12) M3 is expected to be unchanged on balance over the November-to-March period under the reserve market conditions of alternative B, as a decline that appears to be in train in December offsets sluggish growth over the following three months. Restraint on balance- sheet growth by depository institutions and slack demands for loans at banks and thrifts will continue to stunt the growth of this aggregate. Around year-end, certain bank liabilities, including large time deposits, could decline noticeably, as banks seek to minimize deposit insurance charges and capital requirements, but such maneuvers in themselves should have little effect on growth over the November-to-March period. M3 growth would be about 3/4 percentage point below its tenta- tive 1 to 5 percent target range in March. (13) The lower interest rates of alternative A would boost M2 growth well into 1993, putting this aggregate near the lower end of the current provisional range by March. This alternative would also improve 5. M1 is projected to grow at a 5-3/4 percent pace from November to March under alternative B. With currency growing at a 7-1/4 percent rate, and total reserves at a 7 percent pace, the monetary base is projected to grow at a 7 percent rate over the period. -13the odds that growth of the aggregates in 1993 would be within the provisional target ranges later in the year as the lower interest and exchange rates boosted income relative to the staff forecast. Much of the higher money growth over coming months relative to alternative B would reflect stronger expansion of M1. Compensating balances would increase further, and NOW accounts would rise more quickly. However, deposi- tories are likely again to be fairly prompt in adjusting liquid deposit rates, limiting the impact of the policy easing on the monetary aggregates. Bank credit is unlikely to respond very strongly to lower rates, and additional needs for funds would be met from core deposits. With issuance of managed liabilities weak, growth in M3 would be boosted only slightly as compared with alternative B, and that aggregate would remain below its provisional target range in March. (14) M2 is projected to expand at only a 1 percent rate from November-to-March under alternative C and M3 would decline at a 1/4 percent rate. M1 growth would be limited to 4 percent over November-to- March by the higher opportunity costs of demand deposits and NOW accounts under this alternative. Losses on capital market instruments as long-term rates rise could limit flows into bond and stock mutual funds, cushioning the restraining effect on M2 and M3. Still, M2 would be just 1-1/4 percent above its fourth-quarter base by March. -14Directive Language (15) Draft language for the operational paragraph, including the usual options and updating, is presented below. No Committee mem- bers expressed a desire to discuss the language relating to the factors to be taken into account when considering intermeeting adjustments. OPERATIONAL PARAGRAPH In the implementation of policy for the immediate future, the Committee seeks to DECREASE SOMEWHAT/maintain/INCREASE SOMEWHAT the existing degree of pressure on reserve positions. In the context of the Committee's long-run objectives for price stability and sustainable economic growth, and giving careful consideration to economic, financial, and monetary developments, slightly (SOMEWHAT) greater reserve restraint might (WOULD) or slightly (SOMEWHAT) lesser reserve restraint (MIGHT) would be acceptable in the intermeeting period. The contem- plated reserve conditions are expected to be consistent with growth of M2 and M3 over the period from [DEL:September] NOVEMBER through [DEL: December] MARCH at annual rates of about ____ AND [DEL:3-1/2 and 1] percent, respectively. ____ December 18, 1992 SELECTED INTEREST RATES (percent) Short-Term federal funds 6-month 2 3 comm. paper bank prime 3-month 1-month fund loan 3-year 30-year offered Buyer 5 6 7 8 9 10 I 11 12 13 14 15 16 1-year 4 Treasury bills secondary market 3-month 1_1 Long-Term money market mutual CDs secondary market 1 U.S. government constant maturity yields 10-year corporate conventional home mortgages A-utility municipal secondary primary recently Bond market I market fixed-rate Ifixed-rate ARM - High -- Low 7.46 4.22 6.46 3.84 6.50 3.93 6.43 4.01 7.75 4.25 8.49 4.88 7.37 4.53 9.93 7.07 7.47 5.24 8.35 6.96 8.52 7.58 9.96 8.49 7.40 6.76 9.97 8.38 9.75 8.35 7.78 6.02 92 -- High - Low 4.20 2.91 4.05 2.69 4.22 2.82 4.51 2.91 4.32 3.07 5.02 3.17 4.51 2.74 6.50 6.00 6.32 4.24 7.65 6.30 8.07 7.29 8.99 8.06 6.87 6.12 9.22 7.86 9.03 7.84 6.22 4.97 Monthly Dec 91 4.43 4.07 4.10 4.17 4.47 4.98 4.61 7.21 5.39 7.09 7.70 8.68 6.87 8.56 8.50 6.19 Jan Feb Mar 92 92 92 Apr May 92 92 Jun Jul Aug Sep Oct Nov Weekly Sep Sep Sep Sep Sep 92 92 92 92 92 92 4.03 4.06 3.98 3.73 3.82 3.76 3.25 3.30 3.22 3.10 3.09 3.80 3.84 4.04 3.75 3.63 3.66 3.21 3.13 2.91 2.86 3.13 3.87 3.93 4.18 3.87 3.75 3.77 3.28 3.21 2.96 3.04 3.34 3.95 4.08 4.40 4.09 3.99 3.98 3.45 3.33 3.06 3.17 3.52 4.05 4.07 4.25 4.00 3.82 3.86 3.37 3.31 3.13 3.26 3.58 4.11 4.11 4.28 4.02 3.87 3.91 3.43 3.38 3.25 3.22 3.25 4.18 3.84 3.73 3.66 3.52 3.45 3.25 3.07 2.91 2.79 2.83 6.50 6.50 6.50 6.50 6.50 6.50 6.02 6.00 6.00 6.00 6.00 5.40 5.72 6.18 5.93 5.81 5.60 4.91 4.72 4.42 4.64 5.14 7.03 7.34 7.54 7.48 7.39 7.26 6.84 6.59 6.42 6.59 6.87 7.58 7.85 7.97 7.96 7.89 7.84 7.60 7.39 7.34 7.53 7.61 8.57 8.79 8.91 8.82 8.70 8.62 8.38 8.16 8.11 8.40 8.51 6.67 6.83 6.86 6.80 6.72 6.66 6.32 6.31 6.40 6.59 6.56 8.65 8.92 9.17 8.98 8.85 8.66 8.25 8.04 7.98 8.25 8.48 8.43 8.76 8.94 8.85 8.67 8.51 8.13 7.98 7.92 8.09 8.31 5.89 5.88 6.11 6.15 6.00 5.87 5.51 5.27 5.11 5.06 5.26 2 9 16 23 30 92 92 92 92 92 3.33 3.09 3.28 3.07 3.41 3.15 2.97 2.91 2.90 2.78 3.23 3.01 2.93 2.94 2.86 3.32 3.10 3.04 3.05 2.96 3.33 3.14 3.07 3.12 3.13 3.40 3.24 3.17 3.23 3.30 3.01 2.96 2.90 2.88 2.87 6.00 6.00 6.00 6.00 6.00 4.68 4.41 4.38 4.45 4.34 6.60 6.39 6.36 6.45 6.40 7.40 7.29 7.30 7.39 7.37 8.08 8.06 8.10 8.17 8.16 6.38 6.31 6.43 6.49 6.45 7.90 7.95 8.02 8.06 7.99 7.94 7.84 7.89 8.02 7.93 5.24 5.15 5.03 5.02 5.01 Oct Oct Oct Oct 7 14 21 28 92 92 92 92 3.20 3.20 3.05 2.96 2.69 2.85 2.95 2.93 2.82 2.96 3.11 3.18 2.91 3.06 3.27 3.35 3.07 3.19 3.34 3.39 3.17 3.19 3.26 3.26 2.83 2.77 2.79 2.74 6.00 6.00 6.00 6.00 4.24 4.48 4.76 4.93 6.30 6.49 6.70 6.79 7.37 7.50 7.58 7.64 8.37 8.42 8.55 8.52 6.49 6.51 6.71 6.81 8.18 8.22 8.41 8.47 8.01 8.06 8.23 8.21 4.97 5.05 5.13 5.12 Nov Nov Nov Nov 4 11 18 25 92 92 92 92 3.07 2.91 2.97 3.10 2.99 3.06 3.12 3.21 3.21 3.26 3.34 3.41 3.40 3.44 3.51 3.58 3.40 3.47 3.63 3.66 3.25 3.26 3.28 3.22 2.75 2.74 2.74 2.74 6.00 6.00 6.00 6.00 4.99 5.07 5.12 5.19 6.83 6.94 6.83 6.83 7.65 7.72 7.55 7.54 8.65 8.49 8.40 8.48 6.70 6.57 6.48 6.47 8.53 8.44 8.48 8.47 8.29 8.32 8.32 8.29 5.17 5.20 5.32 5.34 Dec Dec Dec 2 92 9 92 16 92 3.37 2.94 2.93 3.30 3.26 3.23 3.47 3.37 3.39 3.66 3.55 3.63 3.75 3.60 3.50 3.46 3.88 3.78 2.77 2.79 2.80 6.00 6.00 6.00 5.38 5.22 5.26 6.94 6.80 6.80 7.58 7.48 7.44 8.35 8.27 6.48 6.42 8.41 8.35 8.34 8.23 5.52 5.47 Daily Dec Dec Dec 11 92 16 92 17 92 2.76 3.02 3.00 3.25 3.21 3.20 3.40 3.36 3.37 3.67 3.58 3.58 3.52 3.43 3.39 3.76 3.77 3.69 6.00 6.00 6.00 5.29 5.21 5.21 6.80 6.77 6.77 7.44 7.44 7.43 - - 91 NOTE: Weekly data for columns 1 through 11 are statement week averages. Data in column 7 are taken from Donoghue's Money Fund Report. Columns 12, 13 and 14 are 1-day quotes for Friday, Thursday or Friday, respectively, following the end of the statement week. Column 13 is the Bond Buyer revenue index. Column 14 is the FNMA purchase yield, plus loan servicing fee, on 30-day mandatory delivery commitments. Column 15 is the average contract rate on new commitments for fixed-rate mortgages (FRMs) with 80 percent loan-to-value ratios at major institutional lenders. Column 16 is the average initial contract rate on new commitments for 1-year, adjustablerate mortgages (ARMs) at major institutional lenders offering both FRMs and ARMs with the same number of discount points. Strictly Confidential (FR). II Class FOMC Money and Credit Aggregate Measures Seasonally adjusted DEC. nonlransactions Mi Period in M2 2 3 0.6 4.2 8.0 4.8 4.0 2.8 QUARTERLY AVERAGE 1991-4th QTR. 1992-1st QTR. 1992-2nd QTR. 1992-3rd QTR. 11.0 16.5 9.8 10.3 MONTHLY 1991-NOV. DEC. and U.S. government' other' total' a 9 10 investments 6 7 3.6 1.7 1.2 4.8 1.8 0.5 7.5 5.5 3.5 7.2 10.3 11.0 8.4 5.9 2.3 8.1 6.9 4.3 -5.4 -7.4 -9.3 -1.8 1.0 2.2 -1.3 -0.1 0.2 1.5 0.5 1.2 6.1 4.5 3.3 2.6 11.5 10.0 14.4 10.8 1.5 2.5 2.5 1.9 3.9 4.3 5.4 4.2 -9.6 -6.5 2.3 1.2 3.2 -0.3 7.4 6.5 12.6 9.8 1.8 0.6 4.4 2.9 -8.4 -3.0 -13.4 -14.1 -3.6 -5.3 -2.2 6.2 -7.5 -23.6 -6.6 0.8 7.2 -2.0 -3.5 -0.2 -3.4 -1.1 3.8 1.8 0.4 1.8 -1.8 6.9 2.6 -1.7 -2.4 2.7 -1.8 4.5 4.4 1.9 4.7 1.2 3.5 6.3 0.2 2.5 0.2 5.5 6.7 4.8 4.8 7.7 8.3 17.1 15.0 13.0 14.6 10.0 9.7 5.0 -1.4 2.6 4.5 2.4 2.4 2.0 1.7 1.7 1.9 2.7 4.1 3.9 5.4 6.0 5.5 4.8 4.9 3.9 3.9 3.3 2.7 5 6.2 3.9 1.1 -0.9 -7.2 -5.7 2.4 4.2 0.4 0.2 -0.6 -0.1 -3.0 -3.6 14.3 9.0 4.8 2.9 1.6 0.7 16.4 27.2 10.3 4.9 14.6 -3.3 11.1 15.7 19.1 22.7 13.9 2.7 9.3 0.4 -1.5 0.5 -3.1 -0.9 3.3 3.7 5.2 3.5 -2.2 3.0 -3.2 -3.8 -4.7 -3.0 -5.4 -1.4 -2.3 -1.7 -0.8 960.5 973.1 988.6 1007.3 1019.0 3461.6 3471.2 3481.9 3497.1 3507.2 2501.1 2498.1 2493.3 2489.8 2488.2 701.3 704.9 700.5 686.7 682.9 4162.9 4176.1 4182.4 4183.8 4190.1 2 9 16 23 30 p 1017.0 1019.0 1023.2 1014.5 1020.1 3508.1 3514.4 3513.3 3497.8 3503.2 2491.1 2495.3 2490.1 2483.2 2483.1 683.0 679.1 679.0 689.6 683.9 4191.1 4193.4 4192.3 4187.4 4187.1 7 p 1022.5 3509.5 2487.0 677.5 4187.0 LEVELS ($BILLIONSI : MONTHLY 1992-JULY AUG. SEP. OCT. NOV. p 1. 2. L in M3 only 4 1992-JAN. FEB. MAR. APR. MAY JUNE JULY AUG. SEP. OCT. NOV. p DEC. M3 components M2 1 ANN. GROWTH RATES (%) ANNUALLY (Q4 TO Q4) 1989 1990 1991 NEEKLY 1992-NOV. total loans 1992 Domestic nonfinancial debt' Bank credit Money stock measures and liquid assets 21, : 5006.0 5024.6 5043.1 5051.0 2883.9 2897.0 2913.2 2924.9 2936.6 2968.4 2992.4 3004.8 3001.4 8558.9 8572.3 8591.7 8621.0 11527.2 11564.7 11596.5 11622.4 Adjusted for breaks caused by reclassifications. Debt data are on a monthly average basis, derived by averaging end-of-month levels of adjacent months, and have been adjusted to remove discontinuities. p-preliminary pe-preliminary estimate Strictly Confidential (FR). Components of Money Stock and Related Measures II Class FOMC seasonally adjusted unless otherwise noted Small Currency Demand deposits Other checkable deposits Overnight RPs and Eurodollars NSA' 1 2 3 4 221.2 245.5 266.0 279.2 277.5 287.0 282.8 292.7 329.1 76.2 78.8 73.3 884.7 919.9 1028.8 MONTHLY 1991-NOV. DEC. 266.0 267.3 287.6 289.5 329.7 333.2 73.7 76.2 1992-JAN. FEB. MAR. 269.4 271.6 271.8 293.9 305.1 309.6 339.0 346.3 349.5 APR. MAY JUNE 273.6 274.7 276.2 311.2 315.1 311.0 JULY AUG. SEP. 278.9 282.3 286.4 OCT. NOV. p 288.4 290.0 Period LEVELS ($BILLIONS) : ANNUALLY (4TH QTR.) 1989 1990 1991 1. 2. 3. 4. 5. Savings deposits' 5 denomination time deposits' DEC. Money market mutual funds general Institupurpose tions and broker/ only dealer* 21, 1992 Large denomination time deposits' Term RPs NSA' 10 Savings bonds Short* term Treasury securities Commercial paper' Bankers acceplances 12 Term Eurodollars NSA' 13 14 15 7 8 9 1145.3 1167.7 1079.1 311.2 346.2 359.8 106.8 130.1 173.6 561.3 501.9 443.1 106.8 93.6 73.0 78.8 68.0 60.5 116.8 125.2 137.0 319.3 329.8 319.6 349.1 357.4 337.9 40.3 33.6 24.4 1028.7 1042.6 1079.2 1063.0 359.5 360.5 173.6 179.1 442.3 437.1 73.3 70.5 61.5 57.2 137.1 137.9 322.9 316.1 337.9 339.7 24.5 23.3 77.6 77.6 74.6 1061.2 1083.9 1098.0 1042.9 1019.8 1002.8 358.6 361.7 358.3 182.4 188.2 185.3 427.9 420.7 413.0 70.5 71.7 73.3 55.3 55.9 57.9 138.9 140.1 141.2 310.0 319.9 327.7 334.8 327.5 337.0 23.2 22.9 22.2 350.0 356.4 356.7 72.6 69.2 72.0 1111.2 1122.4 1127.0 985.3 968.7 956.2 355.9 356.7 355.3 189.2 194.8 199.7 405.7 400.9 395.3 72.5 73.4 73.6 55.0 52.8 51.8 142.4 143.5 144.6 327.6 328.9 333.3 341.7 329.4 347.1 21.6 22.0 22.0 315.6 320.6 327.8 358.2 362.2 366.1 72.4 75.8 74.2 1134.4 1145.6 1159.6 942.4 928.0 915.2 351.7 349.7 344.7 207.7 217.2 217.2 388.5 384.6 380.0 72.5 73.3 75.1 50.8 50.6 47.9 145.9 147.5 149.5 325.2 327.8 326.4 350.3 352.4 364.4 21.7 20.9 20.4 336.2 339.2 374.0 381.2 75.0 74.6 1171.6 1181.6 898.8 884.5 347.6 348.7 205.6 203.5 373.2 369.5 77.3 79.4 47.4 47.8 152.0 322.9 370.8 21.6 6 Net of money market mutual fund holdings of these items. Includes money market deposit accounts. Includes retail repurchase agreements. All IRA and Keogh accounts at commercial banks and thrift institutions Excludes IRA and Keogh accounts. institutions. Net of large denomination time deposits held by money market mutual funds and thrift p-preliminary 1i are subtracted from small time deposits. NET CHANGES IN SYSTEM HOLDINGS OF SECURITES Millions of dollars, not seasonally adjusted December 18, 1992 Period I 2 Net purchases I Treasury bills Redemptions Net within change (-) Treasurycoupons r Net purchases 3 1 ear 1-5 1,468 17,448 20,038 --Q1 --- 2 0 ---03 1991 December 1992 January February March April May June -11,263 13,048 19,038 327 425 3,043 946 50 6,583 2,160 4,356 7,664 5,858 1992 12,730 4,400 1,000 1,000 1,160 4,356 7,664 5,858 800 900 1,165 178 -1,000 4,415 867 1,600 Net (-) Change 2,950 550 650 2,433 837 -1,628 123 505 -2,600 4,415 867 S 550 -_ 284 --- 300 -3,228 123 505 Net change outright holdings ) total 4 1,315 375 11,282 -10.390 13,240 27,726 -1,683 11,128 -1,614 4,150 1,450 1,815 3,867 5,310 5,698 9,419 7,299 -16,864 992 152 14,106 ----- 2,452 3730 5,927 -233 7,896 6,617 -14,636 1,137 14,195 300 1,092 16,035 -3,313 1,150 1,930 -49 4,149 3.796 -85 812 5,890 4,272 7,820 -12,874 -2,010 248 345 -1,203 1.996 -914 5,371 9,739 -19,267 2,425 4,095 655 776 350 -2,613 -868 8,323 2,312 -16,298 10,614 -10,873 987 1,522 2,440 -4,792 -343 -2,101 -1,531 1,281 500 ----- 375 ------- -.- 1,027 1,425 --- --- 1,027 --- 1,425 --- 3,530 -- 4,110 306 4,110 306 200 2,278 271 595 4,072 1,064 271 595 4,072 1,064 400 3,325 200 4,122 300 155 126 300 155 126 1,825 500 650 350 200 July August September October November Weekly September 9 16 23 30 October 7 14 21 28 November 4 11 18 25 December 2 9 16 Memo: LEVEL (bil. $) 6 December 16 153 3,918 153 3,918 277 250 825 246 3,136 277 250 825 246 3,136 150.2 1. Change from end-of-period to end-of-period. 2. Outright transactions in market and with foreign accounts. 3. Outright transactions in market and with foreign accounts, and short-term notes acquired in exchange for maturing bills. Excludes maturity shifts and rollovers of maturing issues. 595 ------- 5,332 200 6,756 -- 3,832 500 --- 650 350 --- 200 200 250 600 3,272 353 3,918 250 877 6,156 825 546 3,051 250 600 ----- 200 5,906 300 .-.- 36.6 70.0 Net RPs --- -100 1.280 2,452 2,478 3,725 837 1,600 --- 258 Federal agencies redemptions Redemptions over 10 5-10 STRICTLY CONFIDENTIAL (FR) CLASS II-FOMC 1 18.9 27.8 153.3 308.9 -5.4 4. Reflects net change in redemptions (-) of Treeisury and agency securities. 5. Includes change in RPs (+), matched sale-pu rchase transactions (-), and matched purchase sale transactions (+) 6. The levels of agency issues were as follows: within 1 year December 16 2.0 1-5 5-10 2.6 0.7 over 10 0.1 total 5.4
@FedFRASER