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(CONFIDENTIAL

FR)

January 12, 1973

MONETARY AGGREGATES
AND
MONEY MARKET CONDITIONS
Prepared for the Federal Open Market Committee

By the Staff
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

January 12, 1973

CONFIDENTIAL (FR)

MONETARY AGGREGATES AND
MONEY MARKET CONDITIONS

Recent developments
RPD and the money supply aggregates all appear to be

(1)

expanding at rates well above the upper limits of the Committee's
December-January ranges of tolerance, as shown in the following table.
For December alone, growth of M 1 and M 2 accelerated to annual rates of
15.8 and 14.6 per cent, respectively (before annual seasonal and benchmark
revisions).1/

Growth of M 1 in the fourth quarter was at an 8.6 per

cent annual rate, and growth for all of 1972 at an 8.2 per cent rate.
Although levels of M 1 and M 2 both receded somewhat in early January, they
remained high relative to earlier projections.
Growth of Monetary Aggregates and RPD
In December-January Period
(SAAR in Percentage Points)
Ranges of
Tolerance

Current
Estimates

RPD

4 - 11

15-1/2

M1

3 -

11-1/2

M2

4-

9
10

13

MEMO:
Federal Funds

5-1/8--5-7/8

5.66 (week ending

Jan. 10)
(2)

Contra-seasonal December increases in State and local

Government holdings of both demand and time deposits suggest that--as
1/
The revised series is described and compared with the old series in
Appendix A.

expected--revenue sharing payments did contribute importantly to recent
growth of the money supply aggregates.

In the case of M1, this contri-

bution apparently accounted for about 3 percentage points of the
December growth.

No other special contributing factors have been docu-

mented, however;

for example, a System telephone survey of banks parti-

cularly affected by Regulation J and the establishment of new RCC's
turned up little evidence of bank requests for increased compensatory
balances from corporations or others.

The most plausible explanation of

recent rapid monetary growth thus appears to be the stimulus to transactions demands generated by strong economic expansion.
(3)

Shortly after the last Committee meeting, incoming deposit

data indicated that the reserve and monetary aggregates were tending to
run above the upper limits of the Committee's ranges of tolerance, and the
extent of these overshoots widened as the inter-meeting period progressed.
Because the terms of the Treasury's new bond financing were announced at
about the time firm evidence of overshoots became available, the Desk was
somewhat inhibited in moving to resist these excesses.

Within this "even-

keel" constraint, however, the Desk did hold back on the provision of
nonborrowed reserves, and the average Federal funds rate advanced nearly
30 basis points over the inter-meeting period.

In the latest statement

week, the funds rate averaged around 5.65 per cent.

Recently, trading

has been 5.75 per cent, with Desk strategy on the provision of reserves
expected to result in a funds rate ranging between 5-3/4 and 5-7/8 per cent.
(4)

Fluctuations in the rates at which Federal funds actually

traded were considerably wider than usual, ranging generally from as low

as 4-1/2 per cent to as high as 7 per cent.

Large and erratic

day-to-day fluctuations in float contributed importantly
to this increased rate volatility by making it more difficult for both
banks and the Desk to manage reserve positions.

In these circumstances

member bank borrowing was unusually heavy, particularly over the two long
holiday weekends.

Average borrowings, however, dropped from $1.8 billion

in the New Year's holiday week to about $690 million in the latest week.
(5)

The general firming of money market conditions over the

inter-meeting period was accompanied by relatively modest advances in
other interest rates.

In short-term markets these advances ranged from

5 to 20 basis points, but in long-term markets rates were generally unchanged to only about 10 basis points higher.

Sizable demand for securities

--arising partly from the reinvestment of revenue-sharing payments--tended
to limit rate advances on the most liquid types of short-term instruments,
particularly short-maturity Treasury bills.

The yield on 3-month bills,

for example, showed a net decline mid-way in the inter-meeting period.
But recently it has risen to about 5.25 per cent, with announcement of
the Phase III

wage-price program exerting a modest bearish impact on credit

markets.
(6)

In the Treasury auction of its new 20-year bond demands from

reporting Government security dealers and other market professionals proved
to be stronger than anticipated, with their awards amounting to more than half
the total offering.

Secondary market demand for the issue from final investors

was unenthusiastic at the unexpectedly low 6.79 per cent stop-out yield, and

-4-

the yield on the issue rose to 6.85 per cent as professionals
Positions of reporting dealers have

pressed to reduce their positions.

declined substantially in the past few days, and most recently were
about $70 million
(7)

The table on the following page compares recent changes

in money and credit aggregates (seasonally adjusted annual rates) with
those for selected earlier periods.
of money are in

terms of the new,

Comparison for the various concepts

revised series.

Average

for 1970
and 1971
Dec. '71
over
Dec. '69

Year
1972
Dec. '72
over
Dec. '71

Past 6
Months
Dec. '72
over
June '72

Past 3
Months
Dec. '72
over
Sept.'72

Past
Month
Dec. ' 2
7
over
Nov. '72

Total Reserves

6.9

10.6

9.0

14.3

15.7

Nonborrowed Reserves

9.0

7.5

2.7

7.4

-1.7

Reserves available to
support private nonbank deposits

8.3

10.1

10.7

10.9

16.1

M 1 (currency plus
demand deposits) 1/ 6.6

8.2

8.6

8.8

13.3

11.0

11.1

10.4

12.7

11.2

13.0

12.4

11.3

12.1

9.3

11.7

11.4

11.8

14.4

Loans and investments
of commercial
10.2
banks 2/

14.0

14.2

14.4

10.7

10.2

6.6

3.3

Concepts of Money

M2 (M1 plus time
deposits at
commercial banks

other than large
10.3
CD's)
M3 (M plus deposits
2
at thrift
institutions)
Bank Credit
Total member bank
deposits (bank credit
proxy adj.)

Short-term market paper
(Actual $ change in
billions)
Large CD's

22.4

2.3

Nonbank commercial
-0.4 3/
0.3 3/
-1. 5 3 /
1.3 3/
0.3
paper
L/ Other than interbank and U. S. Government.
2/ Based on month-end figures. Includes loans sold to affiliates and branches.
3/ Latest data November 1972.
NOTE: All items are based on averages of daily figures, except for data on total
loans and investment of commercial banks, commercial paper, and thrift institutions--which are either end-of-month or last Wednesday of month figures.

Prospective developments
(8)

As in the previous Blue Book, three alternative sets of

relationships among monetary aggregates and money market conditions are
shown in summary form below for FOMC consideration (with figures for
aggregates representing seasonally adjusted annual rates of growth).
More detailed monthly and quarterly figures are shown in the table on
page 6a.

Figures for money supply as variously defined represent the

new, revised series.

Revision of the bank credit proxy and reserve series

has not yet been fully completed, and the figures for RPD represent our
best judgmental estimate of numbers consistent with the new money supply
series, pending completion of the overall revision in the next two weeks.
Alt. A

Alt. B

Alt. C

Longer-run targets for
aggregates (represented by
average growth rates for
first
half of 1973)
Ml

6--7

5--6

4--5

M2

7--8

6--7

5--6

Credit proxy

5--6

4--5

3--4

RPD

7--8

6--7

5--6

12--14

10--12

10--12

9--11

Associated ranges for January
-February '73
Nonborrowed RPD
RPD
M1

17-1/2--19-1/2
11--13
7--9

6-1/2-8-1/2

6--8

M2

8-1/2--10-1/2

8--10

7-1/2--9-1/2

Federal funds rate

5-3/8--5-7/8

5-5/8--6-1/4

5-3/4--k-1/2

-6aAlternative Longer-Run Targets
for Key Monetary Aggregates
Adjusted Credit Proxy
Alt. A

Alt. B

Alt. C

Alt. A

Alt. B

Alt. C

Alt. A

Alt. B

Alt. C

1972 Dec.

256.0

256.0

256.0

525.8

525.8

525.8

406.4

406.4

406.4

1973 Jan.
Feb.
Mar.

257.5
259.4
260.8

257.4
259.2

257.3
259.0

260.5

260.2

530.5
534.3
537.3

530.3
533.9
536.4

530.2
533.3
535.4

410.8
410.7
411.7

410.7
410.4
411.2

410.5
410.1
410.9

June

264.7

263.4

262.2

546.7

543.8

540.4

418.4

416.5

414.2

Quarters: 1973

1st. Q
2nd. Q

7.5
6.0

Jan,
Feb.

7.0
9.0

Rates of Growth
8.5
8.0

6.5
3.0
6.0
8.0

7.0

5.5

7.5
3.5

10.0
8.0

10.0
7.0

4.5

3.0

12.5
-1.0

13.0
-0.5

4.5

5.0

12.6
-1.0

5.0
6.5

Months
10.5
8.5

Alt. A

Total Reserves
Alt. A Alt, B Alt. C

RFD
Alt, B

Alt. C

31,354

31,354

31,354

28,933

28,933

28,933

Jan.
Feb.
Mar.

31,886
22,068
31,775

31,868
32,013
31,709

31,851
31,956
31,645

29,280
29,510
29,528

29,263
29,456
29,463

29,245
29,400
29,401

June

31,988

31,830

31,592

30,068

29,910

29,722

1972 Dec.

Rates of Growth
Quarters: 1973

4.5
1.5

1st Q.
2nd Q.

3.5

8.0

7.5

-0.5

7.5

6.0

6.5
4.5

14.5
9.5

13.5
8.0

13.0
6.5

Months
Jan.

Feb.

20.5
7.0

19.5
5.5

19.0
4.0

(9)

Ranges of tolerance in RPD and the monetary aggregates

for January-February have been reduced to two percentage points so as
to provide a more precise indication of FOMC target paths from which
deviations can be measured.

Strict adherence to a relatively narrow

RPD path may tend to lead to wider fluctuations in the Federal funds
rate.

However, clear and significant shifts in the multiplier between

RPD and deposits could provide a basis for adjustment of the RPD path
in the inter-meeting period, depending on Committee preferences.
(10)

Alternative B shown in paragraph (8) encompasses longer-

run paths for the aggregates that include a 5--6 per cent annual rate of
growth for M 1 , the longer-run target specified by the Committee at its
last meeting.

Alternative A provides for somewhat more rapid growth in

the aggregates and alternative C for somewhat less.
(11)

The short-run ranges of tolerance for the monetary

aggregates remain on the high side of longer-run targets.

For example,

in alternative B, the January-February M 1 growth is indicated at
per cent, as compared with the 5--6 per cent longer-run target.

It is

expected that revenue sharing payments in January and the beginning of
tax refunds next month will exert some temporary stimulus to growth in
holdings of cash and time and savings deposits.
(12)

All of the alternatives shown indicate a slowing in

the second quarter growth rate in M1 and M2 relative to the first quarter.

This reflects mainly (a) disappearance of the transitory upward effect on
M1 from sizable Treasury refunds of taxes and smaller final payments by

-8individuals, (b) the lagged effect on money demand of past interest rate
increases, and (c) in alternatives B and C, particularly, reduced public

interest in time and savings deposits other than large CD's as short-term
rates rise further above ceiling rates.
(13)

To achieve the aggregates of alternative B, the staff

expects that money market conditions will tighten from around prevailing levels, given the continuing strong transaction demands for money
implicit in the rapid growth in nominal GNP projected for the first and
second quarters.

The potential for money market tightening implied by

the alternative B monetary target paths is indicated by the 5-5/8--6-1/4
per cent Federal funds rate range shown for that alternative.

Even with

RPD over the forthcoming January-February period rising in a 10--12 per
cent annual rate range, we would expect the funds rate to move up to
6 per cent or somewhat above by the time of the next meeting.

But it

should be noted that even-keel considerations--discussed in paragraphs
(16) and (17)--would suggest that the most propitious time for a rise
in the funds rate, should one be required, is before the end of January.

A

rise in the funds rate of the dimensions contemplated in alternative B
would likely be accompanied by a further rise in short-term rates generally,
with the 3-month Treasury bill rate in particular moving upward in a
5-3/8--5-3/4 per cent range.
(14)

At such market rates, demand for member bank borrowings

would be relatively strong, even with the discount rate at the recently
announced 5 per cent level, and the level of borrowings might be around $1
billion on average.

However, as borrowings continue large,many banks will wear

-9out their welcome at the window and this will add further to pressure on
open market rates and on banks to restrict acquisitions of loans and
investments.
(15)

Efforts to achieve the reserve and monetary aggregates

of alternative C are likely to entail an even greater firming of money
market conditions, with the Federal funds rate probably moving well
above 6 per cent by the time of the next meeting.

The 3-month bill

rate would likely rise into the 5-3/4--6 per cent area, if not by the
time of the next meeting then by early March when additional cash borrowing
through tax bill offerings may be anticipated.

If short-term rates attain

these levels, there may be a rather marked dampening in flows of consumertype time and savings deposits, which could eventually call into question
the viability of current Regulation Q ceilings on such deposits.
(16)

If the Committee were to opt to restrain growth in

reserves and monetary aggregates with the result that money market
conditions firmed, even-keel considerations would again be a constraint
on the timing of policy actions.

Sufficient time has been given for

distribution of the recent long-term bond offering so that it no longer
appears to require special consideration.

However, on January 31 the

Treasury will announce terms for refunding $4.8 billion of publicly-held
obligations that mature in mid-February.

It is too early to have an

idea as to the nature of the refunding, although it does seem unlikely
at this point that new cash will need to be raised or that the Treasury
will wish to offer another long bond so close to the recent offering.
Thus, a relatively conventional exchange with short- and intermediate-term
options seems most likely.

-10-

(17)

However that may be, a significant tightening of the

money market between late January and mid-February seems precluded if the
Committee wishes to adhere to previous even-keel standards.

Some slight

upward drift in money market rates would not necessarily be ruled out,
depending on the psychological atmosphere around the refunding, but the
great bulk of any tightening, should it be required, would have to be
accomplished within the next two weeks.
(18)

Alternative A indicates more expansive paths for the

reserve and monetary aggregates which are not likely to entail any
significant change in money market conditions from those recently prevailing; this alternative, therefore, has the greatest probability of
minimizing conflicts between even-keel considerations and monetary
objectives.

The funds rate under such conditions is likely to be most

frequently in the 5-3/8--5-7/8 per cent area.

If the funds rate were to

remain near the upper end of that band, the 3-month bill rate probably
would be within a 5-1/4--5-1/2 per cent range over the next several weeks.
Upward bill rate pressures could be moderated in the near-term, however,
by demands for bills from State and local governments who have just
received their January revenue-sharing distribution.

In addition, apart

from additions to the weekly and monthly bill auctions, the next sizable
bill offering is not expected until early March, as noted earlier.

-11-

(19)

Long-term interest rates may not rise very much under

alternative A, but would probably show greater upward adjustments, at
least in the short-run, under alternatives B and C.

Demands on bond

markets can be expected to be generally moderate this month and next.
The near-term forward calendar of new corporate and municipal issues
is relatively modest in size, although there are indications that the
volume could build up in the spring.

Mortgage market demands, though

remaining large in volume, appear to have crested.

Pressures on long-

term rates are thus most likely to come from the supply side, as.banks
and other institutional investors find that their inflows of funds are
dropping off or becoming significantly more expensive--conditions most
likely to develop under alternatives B and C.

Bank interest in secur-

ities and mortgages is likely to be lessened in any event as business
loan demands continue strong, partly to help businesses finance the
anticipated acceleration in the rate of inventory accumulation.
(20)

In addition to prospective credit flows, market psychol-

ogy will have a particularly important bearing in interest rate developments in the period ahead.

The forthcoming budget message, the progress

of peace negotiations, and continuing evaluation of the new wage-price
program are major factors that will affect investor attitudes.

Also,

market assessment of the likely course of monetary policy in the wake
of the recent discount rate action will be an important influence.

-12
Proposed directives
(21)

Presented below are three alternative formulations for the

operational paragraph of the directive, which might be taken to correspond
to the similarly lettered policy alternatives discussed in the preceding
section.

In all three alternatives it is proposed to retain a reference

to Treasury financing because of the regular February refinancing to be
announced on January 31.

Retention of the reference to credit market

developments is suggested should the Committee wish to take account of
the possibility of excessive market reaction to further increases in the
funds rate, particularly in connection with alternatives B and C.

The

credit market reference could also encompass adverse reactions to the
discount rate increase should they occur.
Alternative A
To implement this policy, while taking account of THE
operations] and possible credit
FORTHCOMING Treasury financing [DEL:
market developments, the Committee seeks to achieve bank reserve
slower] SOME MODERATION
and money market conditions that will support [DEL:
appears
than
OF growth in monetary aggregates over the months ahead[DEL:
for]
indicated

this]
FROM THE PACE IN the second half of [DEL: LAST year.

Alternative B
To implement this policy, while taking account of THE
FORTHCOMING Treasury financing [DEL:
operations] and possible credit
market developments, the Committee seeks to achieve bank reserve
and money market conditions that will support slower growth in
monetary aggregates over the months ahead than[DEL:
indicated
appears
for] OCCURRED IN the second half of [DEL: LAST year.
this]

-13Alternative C
To implement this policy,

while taking account of THE

operations] and possible credit
FORTHCOMING Treasury financing [DEL:
market developments,

the Committee seeks to achieve bank reserve

and money market conditions that will support CONSIDERABLY slower
appears
growth in monetary aggregates over the months ahead than[DEL:
for]
indicated

this]
OCCURRED IN the second half of [DEL:LAST year.

CHART 1

STRICTLY CONFIDENTIAL(FR)

1/12/73

RESERVES AVAILABLE TO SUPPORT
PRIVATE NONBANK DEPOSITS
BILLIONS OF DOLLARS

-133

--

29
1972

--127

S
1971

D

M

J
1972

S

D

M

J

1973

* Break in Series Actual Level of RPD After Reduction in Reserve Requirements Effective November 9, 1972
** RPD Adjustea to Remove Discontinuity Introduced by Reduction in Reserve Requirements

J
1973

CHART 2

STRCTLY CONFIDENTIAL FR)

1/12/73

MONETARY AGGREGATES
NARROW MONEY SUPPLY M1

BILLIONS OF DOLLARS

-1270

9% growth for Dec -Jan

II

I

j

BROADER MONEY SUPPLY M2

10% growth for Dec -Jan

SI

A

J

SO

N
1972

1971

1972

1973

I

;<
J
1973

CHART 3

S fRICTLY CONFIDENTIAL (FR)

1/12/73

MONETARY AGGREGATES
ADJUSTED CREDIT PROXY

BILLIONS OF DOLLARS

-420

400

-380

-360

1971
*reak

1972

in series Actual Level of Total Reserv-e

1973
After Reductior in Reserve

A
equreements

S

Eftective

O
N
1972

0

November 9 1972

J
'73

CHART 4

MONEY MARKET CONDITIONS AND INTEREST RATES
MONEY MARKET CONDITIONS

INTEREST RATES Short-term
PER CENT

INTEREST RATES Long-term
r

WFEKLY AVERAGES

1

-7

RESERVES
RESERVES

BILLIONS OF DOLLARS

-12
BORROWED

-

!

"

lr\
II

j

UV

NF T BORROWED
I

I I I I

1971

Ii I I I I I I I I I

1972

1

1973

1

.,

1971

1972

1973

1971

1972

1973

Table 1

STRICTLY CONFIDENTIAL

Bank Reserves

Period

1972--July
Aug.
Sept.
Oct.
Nov.
Dec.
1973--Jan.

30,365
30,555
30,903
30,975
29,311
28,917
(29,282)

Annual Rates of Change
1971--4th Qtr.
1972--lst
2nd
3rd
4th
1973--1st

Reserves Available for Private Nonbank Deposits
Seasonally Adjusted
Not Seasonally Adjusted
Actual
Actual
and
and
Projected
Projected
(1)
(M)

Qtr.
Qtr.
Qtr.
Qtr.
Qtr.

1972--Aug.
Sept.
Oct.
Nov.
Dec.
1973--Jan.
Dec.-Jan. 1/

30,166
30,253
30,615
30,844
29,370
29,207
(30,233)

January 12, 1973

Aggregate Reserves

Total
Reserves

(3)
33,138
33,382
33,360
33,788
31,839
31,354
(31,884)

4.8

2.2

10.8
7.1
10.0
11.2
(9.0)

10.1
12.8
3.6
14.3
(6.0)

8.8
-0.8

7.5
13.7
2.8
13.6
16.9
(15.0)
(15.5)

(FR)

Required Reserves
Seasonally Adjusted
Time
Nonborrowed
Private
and
Reserves
Demand
Nondeposits
(4)
(6)
(5)
32,924
33,016
32,802
33,205
31,188
30,212
(30,871)

U.S. Gov't.
and
Interbank
(7)

21,052
21,131
21,306
21,248
19,396
18,949
(19,166)

9,722

2,774
2,826
2,457
2,813
2,529
2,437

(9,893)

(2,602)

9,136
9,249
9,408
9,491
9,572

0.5

16.4

11.0
13.0
-2.0
7.4
(10.5)

6.8
4.0
8.3
8.8
(6.5)

18.0
14.2
15.4
13.4
(15.0)

3.4

4.5
9.9
-3.3
9.2
21.5
(13.5)
(17.0)

14.8
20.6
10.6
10.2
18.8
(21.0)
(20.0)

2,770
2,934
2,917

6.8

15.4
11.4
15.7

-7.8
14.7
9.1
-1.7

(20.5)
(17.0)

(26.0)
(11.0)

33,340
33,368
33,481
33,090
33,544

33,014
33,124
33,125
32,750
33,043

21,149
21,118
21,066
21,048

21,264

9,176
9,217
9,244
9,253
9,293

32,938
32, 617
32,586
32,815

21,285
21,277
21,414
21,249

9,331
9,412
9,417
9,445

2,378
2,308
2,345
2,604

weekly:
2
9
16
23
30

30,570
30,434
30,563
30,278
30,822

30,373
30,075
30,421

6
13
20
27

31,397
30,457
31,025
30,791S

30,869

30,104
30,763
30,644

33,775
32,765
33,370
33,398

4
11
18
25

30,925
31,099
30,772
31,076

30,890
30,661
30,891
30,771

33,806
33,828
33,802
33,764

33,379
33,276
33,388
32,837

21,293
21,230
21,241
21,258

9,443
9,461
9,505
9,492

2,882

1
8
15
22
29

30,984
30,991
29,203
28,118
28,749

31,056

33,741
33,788
31,966
30,630
30,790

33,141
32,742
31,474
30,147

21,236
21,320
18,998
18,247
18,826

9,539
9,555

2,757

30,870
29,512
28,136
28,806

9,554
9,576
9,598

2,763
2,512

6
13
20
2-7

28,904
28,684
29,038
28,855

28,774
28,788
29,205
29,426

31,225
31,197
31/4 22
31,414

30,594

9,656
9,674

2,320

29,979
30,345

18,913
18,792
19,046
18,922

3
10

29,238
29,037

30,214
29,795

31,601
31,307

29,565
30,442

19,156
19,143

9,846
9,894

1972--Aug.

Sept.

Oct.

Nov.

Dec.

1973--Jan.

_______________

_____________

30,027

30,368

1_______________

30,185
30,290

i__________________I__________________________

NGTE: Data shoum in parentheses are current projections.
At the FOMC eeting December 19, 1972 the Comitttee agreed on an RPD range of 4 to UL per cent.
I/

9,710

9,769

2,812

2,722

2,728
3,029
2,688
2,796

2,041
2,512

2,384
2,559
2,363
2.271
2,271

Table 2

STRICTLY CONFIDENTIAL (FR)

Monetary Aggregates
(Actual and current projections, seasonally adjusted)

Period

Narrow
Money
Supply (M )
1
Money

Broad
Money
Supply (M2)
Honey~~'^

Adjusted
Credit
Proxy
Crdt
(3)

(1)

January 12, 1973

U.S.
Govt.
Deposits
Gv.

Total
Time and
Savings
n
Tm

(4)

(5)

(6)

(7)

293.7
297.1
300.5
303.4
305.9
311.2
(315.3)

255.6
257.7
260.2
262.7
264.6
267.5
(270.9)

38.1
39.3
40.3
40.7
41.3
43.7
(44.4)

Time deposits
other
than CD's
te

Negotiable
CD's
eoibe

Nondeposit
Sources of
Funds
Sucso

Monthly Pattern ii n Billions o ' Dollars
1972--July
Aug.
Sept.
Oct.
Nov.
Dec.
1973--Jan.

239.4
240.5
241.6
242.3
243.6
246.8
(248.2)

495.0
498.3
501.8
505.0
508.2
514.4
(519.1)

386.3
389.3
392.6
395.5
399.4
404.2
(408.2)

Annual Percentage Rates of Ch inge--Quarter

and Monthly

1.1

1972--Aug.
Sept.
Oct.
Nov.
Dec.
1973--an.
Dec.-Jan.

9.7

15.9

14.7

13.3
8.6
9.3
10.0
(8.5)

11.3
11.1
10.7
11.8
(5.5)

14.8
15.7
13.2
14.2
(12.0)

17.1
11.8
10.1
11.2
(10.0)

5.5
5.5
3.5
6.4
15.8
(7.0)

Qtr.
Qtr.
Qtr.
Qtr.
Qtr.

8.0

9.3
5.3
8.5
8.6
(7.5)

1971--4th Qtr.
1972--lst
2nd
3rd
4th
1973--1st

5.3
4.6
5.3
6.1
7.8
6.5
(6.6)

8.0
8.4
7.7
7.6
14.6
(11.0)
(13.0)

9.3
10.2
8.9
11.8
74.4
(12.0)
(13.0)

13.9
13.7
11.6
9.9
20.8
(16.0)
....
........ (18.5)

9.9
11.6
11.5
8.7
13.2
(15.5)
(14.5)

(11.5)

...........
. ...........

...........

.........

Weekly Pattern in Billions of Dollars
1972--Aug. 2
9
16
23
30

239.7
240.1
240.9
240.5
241.2

496.2
497.1
498.6
498.3
499.8

387.5
388.2
389.8
388.7
390.1

295.1
295.6
296.5
297.6
298.9

254.5
257.0
257.7
257.8
258.5

Sept.6
13
20
27

242.6
241.5
241.6
241.1

502.2
501.2
501.6
501.5

390.9
391.9
393.2
392.4

299.4
300.1
300.3
301.2

259.6
259.8
259.9
260.4

Oct. 4
11
18
25

241.8
242.7
242.2
242.3

504.0
504.8
504.9
505.4

395.1
394.0
394.6
396.3

302.6
302.6
303.8
304.1

262.2
262.1
262.7
263.0

Nov.

1
8
15
22
29

242.1
242.7
244.3
244.3
242.8

505.4
506.0
508.5
509.4
508.3

397.5
397.7
396.6
400.4
401.0

303. 9
304.4
305.1
306.7
307.3

263.4
263.3
264.3
265.1
265.5

Dec.

6
13
20
27 p

246.1
245.6
246.0
248.5

512.2
512.0
513.6
517.2

402.8
403.3
403.0
404.5

308.5
309.8
311.9
313.4

266.1
266.4
267.6
268.7

246.8
245.3

516.9
515.0

408.3
407.0

313.3
313.7

270.1
269.7

1973--Jan. 3 p
10 pe

NOTES:

J

Ne

1

--

Data shown in parentheses are current projections.
Annual rates of change other than those for the past are rounded to nearest half per cent.

pe -

rartlally eslimaceo.

3.9
4.2
4.1
4.3
4.3
4.4

(4.4)

STRICTLY CONFIDENTIAL (FR)
JANUARY 12,

1973

Table 3
RESERVE EFFECTS OF
OPEN MARKET OPERATIONS AND OTHER RESERVE FACTORS
(Millions of dollars, not seasonally adjusted)

.

ftalthly
1972 - July
Aug.

____

Bills
& Accept.
(1)

-543
-906

Open Market Operations 1/
Coupon
Agency
RPs 3 /
Issues
Issues
Net (2)
(3)
(4)

Totl
(5)

Daily Average Reserve Effect 2/
Open Market
AMember
Other 4/
Factors
Operations
Bank Borrowing
(6)
(7)
(8)

-116

-26
- 3

-816

-570
22

463
-238

108
237

Sept.

-158

--

-35

-816

-1,009

111
-548
450

116
-51
-135

-22
157
134

--147

205
442
596

1,124

Dec.

-

-

Target
available5/
reserves (11)

2 26
p
32

p

89
135

145
- 60

337
194

76

-1,617

Oct.
Nov.

-

Ain resere. categpries
req. res. against available res. 5/
U.S.G. and interb. (6)+(7)+(8)-(9)
(9)
(10)

360
100

1,370

-403

232

405

59
32p
44
4p

- 378
-1,7 6 6 p
- 93 9 p

485
-478p
-198p

320
-1,483p
- 329p

1973 - Jan.

335
-1,520
- 300
815

Feb.
Weekly
Nov.

1
8
15
22
29

- 75
- 3
- 26
-415
-105

---51
---

- 9
--166
--

-1,028
1,084
-3,311
2,259
- 694

-1,111
1,081
-3,389
2,010
- 799

117
600
-599
-307
-219

-210
404
-465
- 75
153

242
-1,014
- 498
-1,211
255

-136
176
-204
-217
-481

285
-186
-1,358
-1,376
670

Dec.

6
13
20
27

229
288
- 42
-294

---135
--

--14
-149

193
1,939
-1,325
-1,772

422
2,213
-1,502
-1,918

671
-428
507p
-790p

17
216
41 6 p
-101p

-

407
271
- 583p
1,020p

313
45
- 7 7p
- 94p

-

Jan.

3
10
17
24
31

514
152

--

--

--

--

3,680
-2,375

4,194
-2,223

1,145p
-150p

631p
-1,060p

-770p
-1,106p

396p
141p

32
14
4
17p
223p
610
-245p

Representa change in Syste's portfollo from end-of-period to end-of-peri6d; includes redemption in regular bill auctions
I
2/ Represents change in daily average level from preceding period.
31 Includes matched sale-purchase transactions as well as RP's.
1/ Suf of changes in vault cash, currency in circulation, Treasury operations, F.R. float, gold and foreign accounts, and other FR accounts.
5/ Reserves to support private nObank deposits. Target change for December and January reflects the mid-point of the target range adopted at the
Target change for previous months reflects the bluebook patterns that are consistent with the mid-points of target
December 19, 1972 FOMC meeting.
ranges that were adopted during the month.

STRICTLY CONFIDENTIAL (FR)
JANUARY 12,

1973

Table 4
SECURITY DEALER POSITIONS AND BANK RESERVES
Millions of Dollars
U.S.

Govt. Security

Dealer Positions
Bills "
Coupon Issues

Period

Other Security
Dealer Positions
Corporate
Municipal
Bonds
Bonds
(3)
(4)

Excess
Reserves
(5)

Member Bank Reserve Positions
Borrowings
Net Free
Basic Reserve Deficit
at FRB
Reserves
w YoiC
38 Other
(6)
(7)
(8)
(9)

(1)

(2)

1971 -- High
Low

4,733
1,350

2,834
343

337
0

556
30

590
- 61

1,180
84

202
-988

-4,714
-1,545

-5,499
-2,569

1972 -- High
Low

4,291
1,916

1,585
- 93

235
0

383
40

796
-133

1,223
12

380
-1,070

-5,635
-1,638

-5,720
-1,910

1971 -- Dec.

2,544

1,761

170

251

165

107

50

-2,791

-4,375

1972 -- Jan.
Feb.
Mar.

3,004
2,408
3,489

1,416
1,176
604

135
149
101

206
136
185

173
124
249

20
33
99

153
91
150

-2,667
-3,203
-3,208

-4,192
-3,072
-3,522

Apr.
May
June

2,612
2,792
2,694

274
675
205

46
123
87

99
134
260

136
104
204

109
119
94

27
- 15
110

-3,026
-2,625
-2,828

-3,299
-2,652
-2,864

July
Aug.
Sept.

2,262
2,643
4,099

97
692
170

142
114
53

166
176
174

147
255
162

202
438
514

- 55
-183
-352

-2,945
-3,913
-3,835

-2,603
-2,801
-4,024

2,887
3,096
*3,510

207
1,039
* 953

105
84
58

132
191
291

247
314
200p

6 06

p
1,050p

-292
-850p

-3,637
-4,561
-4,977

-4,044
-3,622
-4,958

Oct.
Nov.
Dec.
1972 --

574

Notes:

1
8
15
22
29

3,114
2,520
2,531
3,116
4,158

328
1,095
1,117
1,079
1,001

0
31
36
121
174

173
254
126
136
249

205
124
786
189
340

555
959
494
419
572

-350
-835
292
-230
-232

-3,272
-4,475
-4,902
-4,727
-4,329

-3,225
-3,676
-3,707
-3,281
-3,709

Dec.

1973 --

Nov.

6
13
29
27

3,899
3,564
*3,114
*3,520

938
975
* 849
*1,107

85
108
19
19

322
383
260
197

336
244
206
2
57p

589
805
1,221
1,120p

-253
-561
-1,015
- 86 3 p

-4,233
-5,602
-4,899
-4,781

-4,415
-4,647
-5,476
-5,445

Jan.

3
10
17
24
31

*3,718
*3,212

*
*

19
115p

142r
1OOp

486p
6
0p

1,751p
6
91p

-1,26 5p
- 6 31p

-5,001p
-5,31 6 p

-4,338p
-5,899p

871
843

Government Security aealer trading positions are on a commitment oasis.
tracing positions, wnicn exclude Treasury bills financed by repurchase
agreements maturing in 16 days or more, are indicators of dealer holdings available for sale over the near-term. Other security dealer positions
are debt issues still
in syndicate, excluding trading positions. The basic reserve deficit is excess reserves less borrowing at Federal Reserve
less net Federal funds purchases. Weekly data are daily averages for statement weeks, except for corporate and municipal issues in syndicate
which.are Friday figures.
*STRICTLY

CONFIDENTIAL

CONFIDENTIAL (FR)
JANUARY 12, 1973

Table 5
SELECTED INTEREST RATES
Per cent

Periods

Federal Funds

Tasur bls
90-day
1-year

Long-term________

_

Short-term

90

9da
Pper

90-CDsdy
Prime-NYC

New Issue
Aaa Utility*

(10-Yr. onstant
Maturty

Municipal
Bond Buyer

ti
Yelds

(5)

(3)

1971 -- High
Low

5.73
3.29

5.47
3.32

5.94
3.53

5.88
4.00

5.75
3.63

8.26
7.02

6.23
4.97

6.89
5.42

8.07
7.32

1972 -- High
Low

5.38
3.18

5.13
3.03

5.52
3.60

5.50
3.75

5.50
3.50

7.60
6.99

5.54
4.96

6.58
5.87

7.72
7.54

1971 --

Dec.

4.14

4.01

4.40

4.66

4.58

7.28

5.21

5.93

7.62

1972 -- Jan.
Feb.
Mar.

3.50
3.29
3.83

3.38
3.20
3.73

3.82
4.06
4.43

4.03
3.81
4.10

3.81
3.53
3.98

7.21
7.34
7.24

5.12
5.29
5.31

5.95
6.08
6.07

7.61
7.61
7.55

Apr.
May
June

4.17
4.27
4.46

3.71
3.69
3.91

4.65
4.46
4.71

4.55
4.45
4.60

4.47
4.33
4.50

7.45
7.38
7.32

5.43
5.31
5.34

6.19
6.13
6.11

7.58
7.63
7.62

July
Aug.

4.55
4.80
4.87

3.98
4.02
4.66

4.90
4.90
5.44

4.83
4.75
5.07

4.75
4.78
5.00

7.38
7.37
7.40

5.41
5.30
5.36

6.11
6.21
6.55

7.62
7.63
7.64

5.04
5.06
5.33

4.74
4.78
5.07

5.39
5.20
5.28

5.21
5.18
5.40

5.19
5.13
5.38

7.38

-- Nov. 1
8
15
22
29

5.06
5.25
4.89
4.97
5.03

4.74
4.71
4.74
4.79
4.87

5.34
5.17
5.18
5.17
5.26

5.15
5.13
5.13
5.23
5.25

5.13
5.13
5.13
5.13
5.13

7.27

5.19
5.02
5.05
5.04
5.10
5.01
4.96
4.99

6.48
6.28
6.36
6.37
6.29
6.25
6.26
6.29

7.71
7.70
7.67
7.72

Dec. 6
13
20
27

5.17
5.29
5.38
5.34

4.94
5.05
5.12
5.13

5.25
5.27
5.21
5.31

5.28
5.28
5.45
5.50

5.25
5.25
5.38
5.50

7.15
7.21

4.96
5.03
5.10
5.11

6.31
6.35
6.40
6.40

1973 -- Jan. 3

5.61
5.66

5.16
5.15

5.45
5.42

5.63
5.63

5.50
5.63

Sept.
Oct.
Nov.

Dec.
1972

10

7.09
7.15

7.12
6.99
7.05

7.25

6.42
6.42p

:089

7.71
7.69
7.67
7.67
7.68

"

Notes:

Weekly data for columns 1 to 4 are statement week averages of daily data. Column 5 is a one-day Wednesday quote. For columns 6 and 8 the
weekly data is the mid-point of the calendar week over which data are averaged. Column 7 is a one-day quote for the Thursday following the
end of the statement week. Column 9 gives FNMA auction data for the Monday preceding the end of the statement week. The FNMA auction yield is
the implicit yield in weekly or bi-weekly auction for short-term f6rward com itments for Government underwritten mwortgages.
*New series--Corporate New Issues Aaa series discontinued.

Appendix Table I

CONFIDENTIAL (FR)

RESERVES AND MONETARY VARIABLES

Res erves
Period

Total
(1)

Wonborrowed
(2)

.. ,..
Available to
Support Pt.

__

Pepasits

1

(1) O)

Annually1
1968
1969
1970
1971
1972
Stsi-Annually7
l t Ralf 1970
2nd Half 1970

+7.6
-1.2
-6.0
+7 3
-10 .6

-5.6
-2.7
+9.2
+80
+7 5

.

Mne

January 12, 1973

I

Stockt Measures

Bank Credit Measures
Adjusted
Total
Credit
Loans and
1
2
3
rr
Investments
(8)
(A)
(5)
1 (6)
(7)
(Per Cent Annual Rates of Growth)

+8.6
-2.17
+8.1
+7 8
+10.1

+7.8
+3.2
+5.6
46 2
+8.2

+9.3
+2.3
+8.1
+1 1
+10.7

+8 3
+7.8
+7.8
+13.3
+12.8

*9.7
+0.6
+8.3
+9 5
+11.7

+11.0
+3.9
+8.1
+11.3
414.0
+5.2
+10.8
+11.5
+10.6

TItal
Tmea
(9)

Other
Thrift
Institution
Oeposit

Time
Other than
C's

(1

U..

hdpeosit

eav't.

C's

(1
)
(Dolla

I

(13)
-

( 4)

bsil
nge in U Illiton)

+13.2

+6.4
+3.4
+7.7
+17 5
+16.4

+2.4
-12.6
+14.5
+7.9
+10.2

+2.6
+13 ?
-8.4
-7.6
+0.4

-0.1
+0.3
+1.1
-0.3
+0 3

+22.3
+12 2
;

+15.6
+21.2
+10.1

+4.7
+10.6
+20.1
411.5

+2.6
+11.9
+3.9
+4.1

+0.7
-9.1
-7.1
-0 4

+0.4
+0.7
-2.1
+1 8

+11.3
-4.9
+17.9
S+417.9
+1%.3

+11.o

+3.0
+15.2
+9.3
+6.5

+5.2
+10.6
+10.9
44.6

+5.6
45.2
+10.0
+42.4

+5.8
+10.1
+15.5
46.3

+5.0
+10 3

lat Half 1971
2nd Half 1971

+0 4
+11.6
+9.6
44.T

+8.8

-+4.8
+11 4
+9 7
48 8

lat Half 1972
1972
lf

+11.6
+9.0

+12.1
+2.7

+9.0
+10.7

+7.4
+8.6

+11.1
+9.8

+13.4
+11 5

+11.3
+11 4

+15 .

+15.6
+14 0

+14.7
+10.8

+17.9
+14 0

+3.7
+6.6

-0.3
+0.6

-0.8
+1.1

+8.9
+10.0
+7.2
+2.2
*+F I
+12.8
+3.6
414.3

+9.5
+9.0
+6.0
+6.8
+11.0
+13.0
-2.0
+7 4

+10.8
+10.6
+4.3
+4.8
+10.8
+7.1
+10.0
+11 2

+9.1
+10.6
+3.7
+1.1
+9.3
+5.3
+8.5
+8 6

+18.1
+12.4
4.4
+8.0
+13 3
+8.6
+9.3
410 0

+18.9
+14.4
+7.8
+9.6
+15 5
+10.8
+11. 6
4110

+10.9
+8.4
+7.6
+9.7
+11.3
+11.1
10.7
+11 8

+12.3
+10.3
+9.7
+11.1
+15.7
+9.5
+13.6
414 4

+28.8
+14.7
+8.2
+15.9
+14.8
+15.7
+13.2
+14 2

+27.5
+14.0
+5.3
+14.7
+17.1
+*11.B
+10.1
+11.2

421.9
+17.3
+13.7
+12.8
+20.5
+14.5
+15.7
+11.9

+2.8
+1.3
+2.3
+1.8
-0.1
+3.7
+3.2
+3.3

-4.6
-2.6
-0.4

-2.4
+0.3
+2.3
-0.4

-0.3

-0.1

July
Aug.
Sept.
Oct.
nov.
Dec

+4.4
+4.1
+12 9
-7 4
+3.4
+10.7

-7.6
+2.8
+22.9
-2.8
+42.0
+21.4

44.8
+6.9
-0.8
+3.6
+5.9

+10.1
+3.2
-2.1
+0.5

+7.5
+2.9
+2.9
+7.1
+6.5
+10.2

+10.5
46.6
46.2
+9.1
+8.7
+11.0

+10.7
+44
+7.9
+4.8
+11.2
+13 1

+6.2
+11.9
+10.9
+11.9
+6.2
+14.9

+9.4
+4.2
+10.7
+17.1
+9.1
+20.8

+4.8
+3.2
47.9
+13.7
+13.0
+17.0

+16.7
+10.3
+13.8
+13.0
+11.4
+13.7

+1.1
+0.4
+0.8
+1.1
-0.5
+1.2

-0.2
-0.4
+0.1
40,8
+0.5
-1.3

+0.8
+0.6
+0.9
-1.9
+0.7
+0.8

Jan.
Feb.
Mar
Apr.
May
June
July
Aug.
Sept.
lOct.

+20.2
-5.9
+15.8
+22.9
+6.9
+8.6
+2.9
+8.8
-0.8
+15.4
+11.4
+1 55

+23.1
-3.6
+13.3
+22.2
+73
48.8
-1.6
+3.4
-7.8
+14.7
+ 9.1
-1.7

+9 2
+7.4
+15.6
+7.0
+6.2
47 9
+8.6
+7.5
+13.7
+2.8
+13.6
+16.9

+13.4
+14.3
+11.6
+7.2
+7.7
10.6 1
+11.3 I
+8.0
+8.4
+7.7
+7.6
+14 6

+15.6
+16.7
+13.8
410.9
+9.7
+11 5
+13.5
+10.7
+10.6
+10.4
+9.1
+13 3

+9.9
+5.9
+17.7
+13.5
+14.7
+4 7
+12.2
+9 3
+10 2
+8.9
+11.8
+14 4

+14.2
+12.4
+19.9
+5.4
+70.0
+2.3
+10.2
+18.3
+11 9
+11.4
+20.6
+10.7

+20.0
+16.2
+7.8
+12.4
+17.8
+16.3
+11.6
+13.9
+13 7

+24.4
+15.4
+10.8
+7.8
+17.6
+14.8
+8.5
+9 9
+1l 6
+11.5
+8.7
+13.2

+23.9
+17.6
+19.0
+15.&
+10.6
+16.6
+18.3
+12.3
+15.8
+13.5
+11.0
+10.9

-0.2
+0.6
-0.4
+1.3
+1.6
+0.8
+1.0
+1.2
+1.0
+9.4
+0.6
+2 3

-0.1
-0.3
+0.1
-0.2
+0.2

+6.1

tlt
2r
3rd
46t
1st
2nd
3rd
4th
1971:

1972:

Otr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
t.

1971
1971
1971
1971
1972
1972
1972
1972

Nov.

Dec

p

--

44.8

+2.6
+3.2
+12.6
+11.9
+7.7
+7.6
+5.6
+14.2
+5.5
+5.5
+3.5
+6.4
+15.0

+17.0

--

_________-

WOMReserve

requirements af Erredollar borrowving
Oetober 1- 1970.

are included Beginning

betober

16,

+8.4
+26.3

+11.8

+9.9
+20.8

---

'

I

~

-0.8
--

+0.3
+0 3

+1 1

-2.6
+2.4
+1.3
-2.1

+0.1
+0.3
-0 1
+0.2

-0.7
+0.7
+0.7
+1.8
-1 4

+0.1

'-

1969, and requirements on benk-related conmerctal paper are included beginning

Appendix Table II

CONFIDENTIAL(FR)

RESERVES AND MONETARY VARIABLES
(SeAsonally adjusted, billions of dollars)
_I

Period

Reserves

Total
(1)

Money Stock

I

Availahle to
NonSupport Pot
horrowed
peposits
(3)
(2)

1
total
(E)

P

Pvt..De

(5)

esaares

I

Credit
Proxy
(8)

3

(6)
I

Other

Bank Credit Measurca

(7)

N2

January 12, 1973

Total
Time
Loans and Total Other than
Cn's
I1
Inves atn
tTT'~~
4
1~~0 (10) 1
(11)
(9)

Thrift
Institution
n nnat,
I
(12)

(13)

(14)

-- '
Cu B

Non
Deposit
,u
je...
JF ndlu .1

Anially
Ser 1965
ecr 1969
Dec 1970

27 249 26 471
27 977 26.829
29 132 28.764

24.963
25.245
26.747

1917.4
203.7
214.8

154.0
157.7
165.8

378.0
368.8
418.2

572.6
588.3
634.0

304.6
105.4
330.6

390.6
406.0
438.9

204.2
194.1
228.9

180.6
183.2
203.4

194.6
201.5
215.8

23.6
11.0
25.5

29 390
29.600
29.779

28 958
29.240
29.445

26 930
27.132
27.470

215.3
217.7
219.7

166 0
168.0
169.7

423.1
430.4
437.1

642.2
653.4
663.9

333 4
336.7
339.6

443.6
449.0
452.4

234.4
240.2
245.4

207.8
212.7
217.4

219.2
223.0
226.8

26.6
27.5
28.1

29.991
10.327
30 527

29.859
30.106
30 106

27.735
27.935
28.199

221.2
223.8
225 5

170.7
173.0
174.5

441.5
446.6
450.6

672.5
681.0
687.8

342.0
344.5
346.7

455.2
458.9
464.1

248.1
251.3
254.4

220.3
222.8
225.0

231.0
234.4
237.2

27.8
28.5
29.4

5.1
4.1
4.5

Julv
Sept

30 639 29.915
30.763 29.985
31 073 30.556

28.358
28 521
28.503

227 4
228.0
227.6

175.8
176.3
175.5

453.4
454.5
455.6

693.8
697.6
701.2

349.8
351 0
353.3

466.5
471 1
475.4

256.4
257.3
259.6

225.9
226.5
228.0

240.4
243.1
245.6

30.4
30.8
31.6

4.3
3.9
4.1

Oct
Nov
Dec

30 882
30.970
31.246

30.485
10.535
31.079

28.588
28.728
28 841

227.7
227.7
228.2

175.5
175.5
175.7

458.3
460.8
464 7

706.5
711.6
718.1

354.7
358.0
361.9

480.1
482.6
488.6

263.3
265.3
269.9

230.6
233.1
236.4

248.3
250.8
253.4

32.7
32.2
33.4

4.8
5.4
4.0

an
Feb
Mar

31 772 31.678
31.616 31.582
32.032 31.931

29.064
29.244
29 625

228.8
231.2
233.5

176.0
178.0
179.9

469.9
475 5
480.1

727.3
737.4
745.9

364.9
366.7
372.1

494.4
499.5
507.8

274.4
278. 1
279.9

241.2
244.3
246 5

257.4
261,8
265.8

33.2
33.8
33.4

4.0
3.6
3.7

Apr
Hay
Taun

32.643
32 830
33.059

32 525
32 728
32 967

29.798
29.951
10 148

235.0
235.5
236 6

180.9
181.1
181 9

483.0
486.1
490 4

752.7
758.8
766.1

376.3
380.9
382.4

510.1
518.6
519 8

282.8
287.0
290.9

248.1
250.7
253.8

269.7
272.6
275.7

34.7
36.3
37.1

3.5
3.7
3.8

Tolv
Aug
Sept

33 138
33.382
33.360

32 924
33 016
32.802

30.365
30.555
30,903

239.4
240.5
241.6

184.5
185.5
186.1

495 0
498.3
501.8

774.7
781.6
788 4

386.3
389.3
392. 6

524.2
532.2
537.5

293.7
297.1
300.5

255.6
257.7
260.2

279.7
283.3
286.6

38.1
39.3
40.3

39
4.2
4.1

30.975
29.311
28.917

242.3
243.6
246 8

186.5
187.3
190.0

505.0
508 2
514.4

795.2
801.2
810.1

395.5
399.4
404.2

542.6
551.9
556.8

303.6
305.9
311.2

262.7
264.1
267.5

290. 1
293.1
295.8

40.7
41.3
43.7

4 3
4.3
4.4

502.2
501 2
501 6
501.5

390.9
391.9
393.2
392 4

299.4
300.1
300.3
301.2

259.6
259 8
259.9
260.4

39 7
40.4
40.3
40.8

(15)

10.1
8.6
7.0

Apr
Mav
Tunr

ueumao

7.0
20.0
11.6

Monthly
1971--Tan
Feh
Mar

U S
Gov't
_ ....

4.0
4.1
4.1
4.2

Aule

1972--

Oct
p

33.788 33 205
11 839 31.1 P
31.354 30.212

6
13
20
27

33.775
32 765
33 370
33 398

32.938
32.617
32.586
32.815

31.397
30.457
31.025
30.794

242.6
241.5
241.6
241 1

187
186
186
185

4

11
15
25

33 806
33 828
33 802
33.764

33.379
33 276
33.388
32.837

30 925
31 099
30 772
31.076

241.8
242 7
242,2
242,3

186 3
186 8
186.3
186.3

504.0
504.8
504.9
505.4

395.1
394.0
394.6
396.3

302.6
302.6
303.8
304.1

262.2
262.1
262.7
263.0

40.4
40.5
41.0
41.0

4.2
4.1
4.2
4.5

Nov

1
8
15
22
29

33.741
33 788
31.966
10 630
30.790

33 141
32.742
31.474
30.147
30.185

30 984
30.991
29. 203
28. 118
28 749

242.1
242.7
244 3
244 3
242.8

186,2
186.5
188. 0
187.8
186 4

505.4
506.0
508.5
509.4
508.3

397.5
397.7
396.6
400.4
401 0

303.9
304.4
305.1
306.7
307.3

40.6
41.1
40.8
41.6
41.8

4.6
4.0
4.3
4.4
4.4

poc

6
13
20
27 (

31
11
31
11

30
30
29
30

28 901
2B 6P4
29.038
28 855

246.1
245 6
246 0
248 5

189 7
188 8
189 0
191 5

512
512
513
517

402.8
403 3
403 0
404 5

308.5
309 8
311 9
313 4

263.4
263.3
264.3
265.1
265.5
266.1
266 4
267.6
268 7

42.4
43 5
44 3
44 7

4.4
4 2
4 4
4 6

Tin

3 p

29.138

246.8

190.3

516.9

408.3

313.3

270.1

43.2

4.4

vov
Dec

1972--Sept

Otr

225
197
422
414

31.601

594
290
979
345

29.565

3
0
1
5

2
0
6
2

'-"

Reserve requirements on Euro-dollar borrowing9 are Included helinnlng October 16, 1969, and requirements on bank-related commercial paper are included beginlftng
shbject to reserve requirefents, bank-related conmemrciapaper, and Euro-dbllar
Adjusted credit proxy includes mainly total member hank depoost
Oetbher 1 1970
Weekly data are daily averages for statement weekt Monthly data are daily averages except for nonbank confercial paper figures which
borrowings of U S banks
are for lest day of month
Weekly data are not available for 3 , total loans and investments and thrift institution deposits
p - Preliminary
1WnF

_

Appendix A
REVISIONS IN THE M1 SERIES

The narrow money stock series--M has been revised to reflect:
1

(1)
(2)
(3)
(4)

benchmark adjustments for domestic nonmember banks;
benchmark adjustments to incorporate additional
international banking institutions;
the impact of the revised regulation J; and
new seasonal factors.

These revisions will be described below. It should be noted,
however, that the revised M 1 series, as well as revisions in the other
aggregates, will not be released to the public until early February
because final revisions to credit proxy and reserve series are as yet
incomplete. Beginning January 19, data supplied for internal System
purposes only will include the new M1 and M2 series, as well as other
revised series as they are completed. Thus, for approximately two weeks
the Committee will be receiving revised data while public releases will
show the series on the present basis. The revised series will be supplied
to the public in a press release, with detailed technical explanations
provided in the Federal Reserve Bulletin for February.

SEASONAL FACTORS
The seasonal factor revisions, incorporating the effect of 1972
developments, are minor. No changes were made in seasonal factors for
January, March, or any month in the second quarter for the demand deposit
component seasonal factors. The seasonal factors for each month in the
third quarter were raised slightly, reducing the level of the seasonally
adjusted series, and the factors for February and each month in the fourth
quarter were reduced somewhat. Minor changes also occurred in the seasonal
factors for currency. In general, these were raised for the second and
third quarter months and lowered for the first and fourth quarter months.
For 1972 data, the seasonal adjustment revision alone reduces the third
quarter seasonally adjusted annual rate of growt of M1 by 0.2 percentage
points and increases the fourth quarter growth rate by 0.8 percentage
points. In no month are annual rates of growth changed by more than 2.0
percentage points (annual rate) by the new seasonal factors taken alone.

LEVEL ADJUSTMENTS

Other adjustments significantly increase the level of the M1
series back to 1959. The amount of the level adjustment is $300 million
in 1959 and increases to $9.5 billion at the end of 1972. Appendix Chart 1
compares the level of the old and new seasonally adjusted series weekly
for 1971-72. Appendix Table A-1 displays the components of the level
adjustment for three recent dates.
Benchmark revisions for domestic banks. M1 estimates are based
initially on member bank data with estimates made for nonmember banks
based on historical relationships between country member banks and nonmember banks. These nonmember estimates are then revised when call report
data become available. Based on December 1971 and June 1972 call report
information, the past relationship between nonmember and country bank data
(deposits and vault cash) did not hold in the first half of 1972, leading
to an underestimation of M1 growth at nonmember banks over the year ending
in June 1972, and probably in the second half of 1972 as well. As
shown in Appendix Table 1, the level of M 1 has been increased by about
$1 billion at the end of 1971 and by $1.9 billion at the end of 1972.
Foreign Banking Institutions. In December 1970, the M 1 series
was revised to incorporate the impact of foreign banking institutions
operating in the U.S. This adjustment eliminated the overstatement of
associated with the clearings of these
cash items (understatement of M1)
type balances to the money supply series.
banks and also added their M 1
At that time, data for a few New York City institutions were not available.
The new series now incorporates the impact of these institutions on the
M1 series. As shown in Appendix Table A-l, this revision increases the
narrow money stock by about $3 billion in 1972, and by lesser amounts
back to 1959.
Regulation J revisions. Prior to the November 9 revision of
Regulation J, the M1 series had been biased downward by the timing of
bank payment for Federal Reserve cash letters. This downward bias was
eliminated by the revision in Regulation J which reduced cash items and
float, two items deducted from gross demand deposits in the calculation
of M1. Since Regulation J went into effect, the staff has been adjusting
M1 data to remove the effect of the regulatory-induced changes in cash
items and float. The new series uses actual data after November 9 but
reduces cash items and float prior to November 9 to remote a one time
break in M1 associated with the change in Regulation J. This adjustment
has been carried back to 1959.

PRELIMINARY
Appendix Table A-1

Components of Revision in M1
Not Seasonally Adjusted
(Millions of dollars)

Dec.
1971

June
1972

Dec.
1972

985

1,633

1,695

2,795

2,887

3,024

4,

4,396

4.487

8,248

8,916

9,206

Benchmark
Domestic nonmember banksl/
Foreign institutions/
Regulation J/
Total

1/ Includes benchmark adjustment for nonmember bank demand deposits
liabilities and holdings of vault cash, based on December, 1971 and
June, 1972 Call Reports of condition.
2/ Adjustment for overstatement of cash items associated with
clearance of checks for a few New York City foreign banking operations
and the addition of M1-type liabilities for these institutions.
3/ Adjustment for cash items and float reduction resulting from
amended Regulation J.
Actual data after November 9, 1972 and
estimated from reserve bank data prior to November 9, 1972.

The Regulation J increase in the level of M1 is estimated to
be about $500 million in December 1959, growing to about $4.5 billion in
1972, as shown in Appendix Table A-1. This adjustment adds an average
about .1 percentage point per year to the growth in M 1 since 1959.

ANNUAL RATES OF CHANGE
While the level of M is raised $8 - $9 billion in 1972,
and less for previous years, the combined effect of the level adjustments
and new seasonal factors on annual rates of change are small. Comparison
of rates of change in the old and new series for recent periods is shown
in Appendix Table A-2.
For annual data, the biggest recent changes occur in 1970 and
1971, which are raised by 0.6 and 0.7 percentage points, respectively.
Semi-annual growth rates for 1972 are changed little, but the second half
of 1971 is raised by 1.0 percentage point. In 1972, quarterly growth
rates are lowered slightly in the first and third quarters and raised in
the second and fourth quarters. The fourth quarter of 1971 is raised
significantly.
Changes in the 1972 monthly pattern are shown in the right panel
of Appendix Table A-2. Three months--February, September, and October-are increased by more than 2 percentage points at an annual rate. Reduction
exceeding 2 percentage points occurred in January, July, August, and December.

Finally, for the December-January period the staff's projected
M 1 growth is
11-1/2 per cent (annual rate) on the old basis and 10 per
cent (annual rate) in the new series.

PRELIMINARY
Appendix Table A-2
Comparison of Seasonally Adjusted Annual Rates of Growth of M
1
Old and Revised Series

Old

Revised

Difference

Annual :
1968
1969
1970
1971
1972

7.8
3.2
5.4
6.2
8.2

7.8
3.6
6.0
6.9
8.2

0
0.4
0.6
0.7
0.0

Semi-annual:
1970-1
II

5.6
5.2

6.1
5.7

1971-1
II

10.0
2.4

10.1
3.4

0. 1
1.0

7.4
8.6

7.6
8.6

0. 2
0.0

9.1
10.6
3.7
1. 1

8.9
11. 1
4.1
2.7

-0.2
0.5
0.4
1.6

9.3

9.1
6.0
8.1
8.8

-0.2
0.7
-0.4
0.2

1972-I
II
Quarterly:
1971-1
II
III
IV
1972-I
II
III
IV

Dif-

Old
Monthly:
1971-Oct.
Nov.
Dec.

Revised

0.5
0
2.6

ference

4.1
1.5
2.5

3.6
1.5
-0.1

3.2
12.6

1.0
15.2

-2.2
2.6

Mar.

5.3
8.5
8.6

1972-Jan.
Feb.

11.9

11.0

-0.9

Apr.
May
June

7.7
2.6
5.6

6.9
4.4
6.4

-0.8
1.8
0.8

July
Aug.
Sept.

14.2
5.5
5.5

12.2
3.4
8.7

-2.0
-2.1
3.2

Oct.
Nov.
Dec.

3.5
6.4
15.8

7.2
5.7
13.3

3.7
-0.7
-2.5

1973-Jan. pe
(Memo:

Dec.,

7.0
1972-Jan.,
11.5

0.0

7.0
19 73

10.0

)Pe
-1.5

APPENDIX CHART 1

STRICTLY CONFIDENTIAL (FR)

1/12/73

TOTAL MONEY STOCK
SEASONALLY ADJUSTED

BILLIONS OF DOLLARS

REVISED SERIES

OLD SERIES

1971

1972

1973


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102