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Authorized for public release by the FOMC Secretariat on 2/25/2020 Confidential (F. R.) January 23, 1959 TO: Open Market Committee FROM: Division of Research and Statistics Board of Governors SUBJECT: The Outlook for Member Bank Reserve Positions Member bank reserve projections indicate that, in the ubsence of further System action, reserve positions will tighten considerably in the current week ending January 28 and will continue relatively tight through the middle of February. Net borrowed reserves would average about $200 million during the three weeks ending February 11. In the second half of February, however, reserve positions are expected to ease and net free reserves may reappear. Without System operations free reserves would then be maintained through April, fluctuating somewhat around an average level of about $150 million. After April generally tighter reserve positi.ons are indicated, with net borrowed reserves averaging over $400 million at the end of June. In the week of January 28, a large increase in tax and loan accounts, associated with the Treasury financing, should more than offset declines in other deposits and cause a sharp increase in required reserves. This tightening influence and the end-of-month decline in float will be only partially offset by a continued inflow of currency, and in the absence of further System action, net borrowed reserves would average a little above $100 million for the week. Early :!.n February required reserves should again decline, reflecting continued seasonal reduct ion in private deposits, as well as a decline in tax and loan accounts. However, drains of reserves associated with other factors are expected to offset this easing influence, raising net borrowed reserves to around $250 million through the week of February 11. In the second half of February, further reduction in required reserves, a return flow of currency, and an increase in float should combine to ease reserve positions substantially, establishing net free reserves of about $240 million in the week of February 25, During March and April free reserves should average about $150 million, reaching peaks of around $300 million in the weeks of March 18 and April 22, associated with the midmonth rise in float. After the week of April 22, member bank reserve pos it ions should tighten considerably as all factors except required reserves produce net drains over the remainder of the period through June. Net borrowed reserves are expected to average about $100 million in May and $200 million in June. Authorized for public release by the FOMC Secretariat on 2/25/2020 - 2 - Projections of changes in member bank reserve positions are shown through June 1959, weekly in Table 1 and monthly in Ta ble 2. Estimated levels of free reserves (last column in Table 1) are net results of other factors, which are derived on the following basis: 1. Customary seasonal changes in currency in circulation. 2. Gold outflow at the rate of $25 million a week through the end of June 1959. 3. Treasury balance at Federal Reserve Banks maintained at $500 million following the week ending February 4. 4. Required reserves estimated as follows: 5. a) Usual seasonal changes in demand deposits adjusted, time deposits, and interbank deposits, with no allowance f,Jr growth. Weekly projections of demand deposits adjusted indicate a decline of $5 billion from the end of December to early April, with moderate fluctuations in the second quarter. b) Treasury tax and loan accounts projected on basis of cash receipts and expenditures and of attrition on maturing issues as estimated by Board's staff. Estimates assume cash financing of $600 million in March; $3.5 billion on April 6; and $1.1 billion on May 15. Tax and loan account balances, which averaged $1.1 billion in the week of January 21, and are estimated at about $3.9 billion this week, are expected to decline to a low level of about $1.1 billion in mid-March and to vary between that level and $3. 7 billion during the rest of the period. Open market operations data include changes in System holdings through January 22. Authorized for public release by the FOMC Secretariat on 2/25/2020 Confidential (F. R.) Table 1 ESTIMATED CHANGES IN BANK RESERVES, WITH RELEVANT FACTORS (Weekly averages; in millions of dollars) Member EaPJc Reserves Period Required Excess 1959: Jan. 21* - Jan. 28 Feb. 4 160 1.35 150 150 180 + 20 - 135 + 75 -+ 105 - 240 - 60 + 255 11 18 25 Mar. 4 11 18 Apr. 25 1 8 15 22 May 29 6 13 20 June 27 3 10 17 24 July 1 * Actual. 74 + - so - 60 - 60 -- 15 + 60 - 25 ---90 -+ + - 35 165 25 - II Total S8 ------------------------------------- --------- ~ Sign indicates effect on reserves. Factors affecting reserves 1/ Other 1C~ency Treasury nonmember Goldandstock F. R. in opera- deposits Float circu- tions and F. R. foreign lation deposits accounts - 132 + 325 - 19 - + 160 135 150 150 180 + 20 - 135 + 75 + 105 - 240 60 + 255 50 - 60 60 15 + 60 + -- + + -- 240 30 40 25 75 60 30 40 - - 65 - + + --+ 95 + 30 + 65 + 30 95 60 + 45 + 30 - 140 65 + 40 -- 25 --+ 9035 - + + - 165 25 30 + - - 70 - 100 50 ------- -------------------------- -------- + 25 30 30 40 75 4S 85 --- 5 + 5 - 105 - 71 + - 20 25 25 25 2.5 25 25 25 25 2S ---15 - 25 - 25 --- 115 - 25 + lJO + + -+ + -+ + 45 5 5 15 5 25 30 30 - 25 - 25 - 25 - 25 - 25 - 25 - 25 - 2S - 25 - 25 + 277 - 250 - 230 15 -+ 145 + 85 55 50 + 210 - 170 - 75 -+ + - -+ - - + + + - 15 30 220 315 20 10 245 200 70 75 215 140 310 Open market operations Member bank borrowings - 344 - 275 68 181 - 113 - 21 + + - 170 30 - 220 - 270 + 75 30 -- 105 200 30 - 180 + 220 - 295 + + + 205 + 75 + 80 90 -+ 175 220 80 -- 170 + + 50 380 Estimated level of "free" reserves - 283 - 253 33 237 162 192 297 97 67 - 247 27 322 117 42 38 52 - 123 - 343 - 263 93 - -- 43 - 423 Authorized for public release by the FOMC Secretariat on 2/25/2020 Confidential (F. R.) Table 2 ESTIMATED CHANGES IN BANK RESERVES, WITH RELEVANT FACTORS (Based on weekly averages for last week in each month; in millions of dollars) I Member Bank Reserves Factors affecting reserves 1/ Periodj' ~--·-· ! ! Other I (figures in parenCurrency Treasuryjnornnember Gold stock I I theses indicate Required F..xcess Total in I onera- deposits and Ti'• R. I number of weeks) cir cu- f tions and 4'. R. f orei~ I Float , lation accounts deposi "s l I I I I I r-rember bank borrowings Open market operations ---------------1------1----.------.....---..:.------.-----....---....-------+-----l950. * I + 365 October (4) + 219 + 62 + 281 - 84 - 52 + 109 - 184 + 731 + 55 + 843 + 124 November (5) + 239 - 14 + 225 - 758 + 42 - 103 33 + 1101 + 306 + 211 December (4) + 279 + 148 + 427 - 399 - 53 + 6 - 178 + 531 I 1959: January February March April May June July August September Or·1ber N, .:mber December (4) (4) (5) (4) (5) (4) - + (4) 85 - 90 - 90 + 220 + + 130 80 + + + + 425 + (5) (4) (4) (5) (4) 248 10 + - 61$ - 175 + 85 - 40 - 238 - 615 - 175 + 85 +l,311 + - 90 60 + 64 - so + 37 ... 190 - 20 40 + 155 + 160 220 + 85 - - 90 90 + 55 95 - 100 + 40 - 160 - 30 - 220 130 80 425 - - 95 - 410 ::: I 40 - 95 - 16 109 - 100 125 - 100 + 120 - 125 - 40 + + + 20 + + + h6o 80 - 245 20 + - 173 - 50 80 - 150 + 190 + 881 - 350 + 170 - 55 + 30 - - lhO + - 95 - 475 - 580 - 1S + 315 + 30 60 + + + 50 585 125 600 230 1958:* Jan.-Mar. Apr.-June July-Sept. Oct.-Dec. -1,212 + 374 - 430 + 737 31 -1,181 +1,323 + - 41 + - 527 +135 - 195 + + 933 52 -1,241 + 10 196 333 - 625 + 10 -1,028 +1,341 + 1959: 22 - 63 II --14 - 231 - 241 - 325 - 735 - 15 : 6~5-___.__-_-_:___.,_:_6.aa,.~~~-=-9:;._§iJ __ :_:_:___,__:_.~~~ * "2/ As::tual. Sign indicatea effect on :..~s:scrves. + 130 - 120 + January 23, 1959 39 89 - 113 July-Sept. Oct.-Deco --- - 774 12 + -1,038 130 265 -1,036 - 476 - 395 33 Jan.-Mar. Apr.-June + - + + + - + 100 + + 714 60 695 - - 512 745 +1,803 - 499 - 47 + +1,514 - 881 + + 490 + 100 + 955 303 390 - 353 Banking Section, Division of Research and Statisticb
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