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Prefatory Note The attached document represents the most complete and accurate version available based on original copies culled from the files of the FOMC Secretariat at the Board of Governors of the Federal Reserve System. This electronic document was created through a comprehensive digitization process which included identifying the bestpreserved paper copies, scanning those copies, 1 and then making the scanned versions text-searchable. 2 Though a stringent quality assurance process was employed, some imperfections may remain. Please note that some material may have been redacted from this document if that material was received on a confidential basis. Redacted material is indicated by occasional gaps in the text or by gray boxes around non-text content. All redacted passages are exempt from disclosure under applicable provisions of the Freedom of Information Act. 1 In some cases, original copies needed to be photocopied before being scanned into electronic format. All scanned images were deskewed (to remove the effects of printer- and scanner-introduced tilting) and lightly cleaned (to remove dark spots caused by staple holes, hole punches, and other blemishes caused after initial printing). 2 A two-step process was used. An advanced optical character recognition computer program (OCR) first created electronic text from the document image. Where the OCR results were inconclusive, staff checked and corrected the text as necessary. Please note that the numbers and text in charts and tables were not reliably recognized by the OCR process and were not checked or corrected by staff. Content last modified 6/05/2009. CONFIDENTIAL (FR) May 24, 1968. MONEY MARKET AND RESERVE RELATIONSHIPS Recent developments All debt markets tightened sharply in the period since the last meeting of the Committee, with interest rates in the U.S. Government, municipal, and corporate bond markets rising 15-40 basis points, and short-term rates on Treasury bills, bankers' acceptances, and commercial and finance company paper 30-40 basis points. The rise in long-term rates was especially sharp, as compared with normal movements in such yields; these rates had in recent months lagged more than usually behind the rise in short rates. In the short-term market, the 3-month bill reached a peak of 5.92 per cent (and the 6-month bill 6.08 per cent), while bankers' acceptances and finance company paper was yielding rates of 6 -- 6-1/4 per cent in the 3- and 6-month areas. Most recently, short-term market rates have eased somewhat, with the 3-month bill rate dropping to 5.75 per cent. The rise of interest rates to new peaks in good part reflected market disappointment at the further delay in Congressional consideration of the fiscal package, and dimming of hopes for the eventual passage of the legislation; similarly, new flickers of hope for fiscal action The net increase have led to some rate declines in the last few days. in interest rates since the last meeting of the Committee also reflected the tightening of conditions in money markets that resulted from the mid-April discount rate increase and the subsequent restraint in provision of reserves through open market operations. Both the expecta- tional shift and the cumulative impact of monetary restraint came FINANCIAL MARKET RELATIONSHIPS IN PERSPECTIVE (Monthly averages and, where available, weekly averages of daily figures) Flo" of Reserves, Bank Credit and Money Bond Yields Money arket Indicators Total Bank Money Time Corporate MuniciNonFree Borrow- Federal 3-month teserves ings Funds TreasU.S. New pal borrowed ReCredit Supply Deposits _ Proxy Reserves serves (Aaa) Issues Gov't. ury Rate (In millions Perd Bill of dollars) 1967--Apr. May June July Aug. Sept. Oct. Nov. Dec. 1968--Jan. Feb. Mar. Apr. 1968--May (20 yr) (Aaa)l/ ( m 199 275 257 311 270 252 212 225 148 4/ 4/ 4/ 4/ p 1 8 15 22 p p p p Year 1967 First Half 1967 Second Half 1967 Recent variations in growth Mar. 29-June 28 Jun. 28-Nov. 29 Nov. 29-May 22 150 94 88 132 86 82 141 124 185 4.03 3.94 3.97 3.78 3.88 3.99 3.87 4.14 4.49 3.84 3.60 3.53 4.20 4.26 4.42 4.55 4.72 4.96 4.64 4.90 4.99 5.01 5.12 5.16 5.36 5.66 5.59 5.38 5.62 5.79 5.78 3.86** 5.85** 6.08 6.50 6.51 3.50 3.71 3.80 3.86 3.78 3.81 3.88 3.99 4.15 + 92 + 96 + 95 +307 +291 + 96 +250 +223 -292 142 21 -312 -341 275 368 649 689 4.60 4.68 5.02 5.74 5.00 4.98 5.17 5.38 5.39 5.38 5.59 5.46 6.24** 5.29** 6.56** 6.52 4.06 4.01 4.28 4.13 +240 +189 -268 -210 -407 -411 -314 -390 674 823 712 669 6.20 6.00 6.38 5.99 5.50 5.50 5.58 5.84 5.49 5.50 5.50 5.63 6.63** 6.64** 6.62** 6.84** 4.20 4.16 4.25 4.35 195 153 238 173 222 123 4.19 4.36 4.02 A v e r 4.29 4.07 4.51 e s 5.01 4.70 5.31 5.77 5.45 6.10 3.74 3.56 3.91 245 254 -109 110 112 472 4.00 3.96 5.07 3.66 4.41 5.16 4.83 5.25 5.49 5.63 5.96 5.71 (In billions of dollars) nar (Seasonally Adjusted) + 49 + 2.1 - 0.3 + 2.0 8 + 1.2 + 1.6 + 1.9 +164 + 2.0 + 1.7 + 2.5 + 3.2 + 1.7 + 2.2 +223 +269 + 3.7 + 1.2 + 2.5 +193 + 2.3 + 0.1 + 1.7 + 1.1 + 2.0 +311 + 2.7 + 0.9 + 1.7 +157 + 1.9 + 1 -145 - 0.1 + 0.3 3.68 3.86 4.14 a S5 -.. +11.5 +15.0 + 7.4 + + + - 1.8 2.3 1.0 1.0 + 1.0 -+ 0.9 + 1.3 + + + + + +389 +248 + 46 -177 0.4 0.7 0.7 0.7 + + + + 0.4 Annual rates of increase 3/ + 6.5 +11.6 + 9.8 + 6.8 +12.1 +10.7 + 6.0 +10.5 + 8.5 +18.8 +12.5 + 3.2 ,.nll 0.5 1.5 0.1 1.8 nrntinn a -yeir car [v**r > Includes issues carrying 5-year and iu-year call procection, "issues carry Time deposits adjusted at all commercial banks. week shown. Base is change for month preceding specified period or in case of weekly periods, the first Reserve aggregate changes have been adjusted for change in reserve requirements held against net demand deposits effective at mid-month, January 1968. May 24, 1968. p - Preliminary. + 6.9 + 6.3 + 6.7 0.2 1.3 1.7 0.2 + 0.2 - 0.4 +15.8 +17.3 +13.1 +14.+14.1 + 4.1 CONFIDENTIAL (FR) -2- May 24, 1968. together to affect markets at a time when intermediate- and long-term markets particularly were in a weak technical position--with a sizable volume of corporate issues in syndicate or foreseeable, with dealer holdings of State and local government securities building up, and with the Treasury coupon market in process of absorbing the mid-May combined cash and exchange offering (which raised $2 billion of new cash). Thus far in May (and also in the last three business days in April) Federal funds have traded most frequently in a 6-1/8 -6-1/2 per cent range, well above the April range of 5-1/2 -- 5-3/4 per cent. And new loan rates to dealers posted by major money market banks moved generally into a 6-5/8 -- 6-7/8 per cent range from a 6 -- 6-1/4 per cent range the month before. In the last few days both Federal funds and dealer loan rates have run a little below their earlier peaks, partly because large Euro-dollar borrowings by major money market banks eased the reserve position of such banks. This substantial a tightening of the market for one-day money occurred with relatively little further deepening in banks' net borrowed reserve positions. Member bank borrowing during the four statement weeks ending May 22 have averaged $720 million and net borrowed reserves $380 million, only slightly larger than the averages of $690 million and $340 million, respectively, in the previous four weeks. The rise in the discount rate to 5-1/2 per cent in mid-April, and subsequent expectations of further tightening of monetary policy, were -3- CONFIDENTIAL (FR) May 24, 1968. factors pressing Federal funds and dealer loan rates further upwards, as banks sought to hold down current borrowing at the discount window. But in addition, the continued sharply reduced net inflows of time and savings deposits, particularly at large banks, increasingly placed a premium on banks' borrowing from other sources, principally the Federal funds and Euro-dollar markets, and contributed to the rise in yields in such markets. And dealer financing demands related to the mid-May refunding were another factor exerting pressure on the money market. With higher money market rates prevailing, the System charged a rate of 5-3/4 per cent (1/4 per cent above the discount rate) on its repurchase agreements, and made substantial use of this instrument in meeting reserve needs during the period. The tightness of the central money market contributed to the sharp rise in Treasury bill rates that developed once bill trading positions of dealers increased and expectations of the likelihood of a tax increase became more pessimistic. The increased level of market interest rates has continued to hold back net inflows of time and savings deposits to banks, and such deposits in May are estimated to rise at only about a 1/2 per cent annual rate. The growth rate in time and savings deposits is lower than anticipated at the previous Committee meeting largely because banks, as it turned out, did not add to outstanding CD's over the month. Part of the explanation for this is that most banks were not particularly aggressive bidders for what funds were available when there was leeway under the new Regulation Q ceiling rates after they were first announced. Later, short-term interest ratesrose so rapidly -4- CONFIDENTIAL (FR) May 24, 1968. that banks suddenly found their ability to compete on a rate basis virtually gone. With U.S. Government demand deposits continuing to decline in May, the money supply appears to be rising at about a 9 per cent annual rate. The decline in U.S. Government deposits did not turn out to be as large as earlier projected, however, because the Treasury raised about $1.3 billion more cash at mid-May than assumed (after allowing for the $300 million that was spent by Treasury investment accounts to help reduce the overhang of new issues in dealer positions following the further delay in tax action). The bank credit proxy in May is estimated to rise at about a 1/2 per cent annual rate. This growth rate, after allowance is made for the larger-than-assumed Treasury financing, is at the bottom end of the range projected at the time of the previous meeting. The additional financing added about 2-1/2 percentage points to the growth rate of the proxy, which had been projected -2 to +2 per cent range absent the additional financing. After including also the sharp rise in Euro-dollar borrowings by banks during the month--over $1 billion in the last three statement weeks--the adjusted credit proxy would show a 3 per cent annual rate of growth. On balance, during the past two months (April and May), there has been no bank credit growth, as measured by the proxy on a daily average basis, even after allowing for funds from non-deposit sources. The sharp rise in market interest rates during this period has reduced the growth rate in time and savings deposits to fractional proportions. The growth in money supply over the past two months has CONFIDENTIAL (FR) -5- May 24, 1968. matched the decline in U.S. Government deposits almost dollar for dollar. The behavior of key monetary variables over the past two months, in comparison with earlier periods, is shown in the table below (all figures being annual rates of increase). May '67Nov. '67 Dec. '67May '68 Dec. '67March'68 Apr. '68May '68 9.6 2.3 6.5 -5.9 10.0 -2.2 0.4 -6.0 Proxy 11.3 3.0 5.5 -1.9 Proxy plus Euro-dollars 12.1 3.8 5.7 --2/ 8.4 5.4 3.6 8.8 14.7 4.8 6.7 1.0 1/ 5.7- 6.1 3/ 4.0- Total reserves Nonborrowed reserves Bank credit, as measured by: Money supply Time and savings deposits Savings accounts at thrift institutions NOTE: 9.1 Dates are inclusive. 1/ Dec. '67-April '68. 2/ The last Wednesday of month series on total loans and investments appears to diverge sharply from the proxy series, adjusted for Eurodollars, in the recent period, at least insofar as can be judged by the data for April, when the Wednesday series shows a substantial increase. (Data are insufficient to make a reasonable estimate for May). Divergent seasonal factors are most of the explanation for April. In addition, of course, the last Wednesday series is often subject to sharp changes resulting from special circumstances that affect single day figures. It is the staff's view that the "proxy plus Euro-dollar" measure is probably the best indicator of recent bank credit movements because its seasonals appear more accurately to take account of the recent tax speed-ups and also because it is less subject to the vagaries of day-to-day bank reserve position management and adjustments. 3/ April only. CONFIDENTIAL (FR) May 24, 1968. Prospective developments Two financial threats on the horizon are (a) that banks will experience a sharply larger than seasonal attrition of outstanding CD's in June, and (b) that other savings institutions as well as banks will experience large withdrawals of funds from time and savings accounts in the late June-early July reinvestment period. Whether and to what degree these threats materialize will depend importantly on the progress of fiscal legislation. In the absence of a tax increase and if the worst market expectations are realized with respect to disintermediation, there would likely be a further substantial tightening in bank lending terms to business customers, sharp further cut-backs in mortgage lending, and perhaps liquidity crises affecting selected institutions. Of the two threats, that of a CD run-off threat is more likely to arise between now and the next meeting of the Committee on June 18. Bill rates are higher relative to ceiling rates now than they were in early April. That is, rate relationships alone--with a bill rate structure currently anchored around a 5.75 per cent 3-month rateprovide banks with practically no leeway to attract funds, not e% with the minimum leeway in the very short-term area such as exist in the earlier period. It is, of course, likely that long-term customer relationships will enable banks to roll-over some CD's. At the moment, the staff's best guess is that attrition could run anywhere from around 20 to 40 per cent of maturing CD's, depending chiefly on the course of market interest rates. CONFIDENTIAL (FR) May 24, 1968. We do not have the end of May CD maturity survey, which would provide definite figures on the amount of CD's maturing in June, but the survey taken at the end of April indicated $4.3 billion of maturities in June (with $1.1 billion maturing on the dividend and tax dates). Assuming only a few sales into June in the ensuing month, total June maturities would be about $1 billion less than banks were faced with in April, when nearly $1.1 billion of CD's ran off before the Regulation Q revision on April 19. On the basis of present information, the staff would estimate a further decline of outstanding CD's in June of somewhat over $1 billion if the 3-month bill rate were more toward the lower end of a 5.65 -- 6.00 per cent range. Where within this range the bill rate is most likely to be will depend in large part on market expectations as to the course of monetary policy and of debt management. Prospects for fiscal restraint are, of course, critical to the market's evaluation of the direction of monetary policy and of market interest rates. If fiscal restraint begins to appear more likely the bill rate could readily move toward, or possibly below, the lower end of the range in the next few weeks. The following constellation of money market conditions may be consistent with a continuing taut situation in credit markets, but one perhaps somewhat less tense than developed at the peak of market pressures in the recent period of adverse expectations. conditions would encompass a Federal funds rate in a 6 -- Such money market 6-1/4 per cent range, net borrowed reserves in a $300 - $450 million range, and member CONFIDENTIAL (FR) May 24, 1968. bank borrowings averaging around $650 - $700 million. The more conditions are toward the lower end of these ranges, the more likely is it that the bill rate will be in the lower half of the range. As was the case at times during the past few weeks, however, markets are likely to be so sensitive in the period ahead to various international and domestic developments that the various money market indicators, taken together or individually, may be subject to abrupt and unprojected movements. The odds would tilt somewhat further toward moderation of upward bill rate pressures between now and the next meeting of the Committee if the Treasury holds off from raising cash in June in anticipation of its large July-August need (estimated at as much as $9 billion without a tax increase, and $7.5 billion with an increase). However, if sizable additional Treasury bill offerings were to be announced in the next few weeks, it is not at all clear that even the lower end of the ranges for money market variables specified above would keep bill and other short-term rates from rising significantly further absent signs of positive action on a tax increase. And any further rise in short-term rates is likely to encourage additional longterm interest rate increases, as banks come under more and more pressure to continue tightening loan policies and to withdraw from the municipal market and also to accelerate their net liquidation of U.S. Government securities. The strong loan demands on banks expected in June, partly because of tax payments, will tend to force banks out of securities -9- CONFIDENTIAL (FR) markets in any event. May 24, 1968. And if these demands develop in very large size, many money market banks would become less willing lenders to dealers in an effort to preserve their loanable funds for good corporate Thus, strong loan demands could lead to a wider than customers. usual spread of dealer loan rates over the Federal funds rate and to strong upward pressure on bill rates. Given all the conflicting possibilities inherent in the nearterm outlook, the staff's maximum likelihood projection for the credit proxy in June is for a decline in a 1 to 4 per cent annual rate range. The mid-point of this range assumes a CD run-off of somewhat over $1 billion during the month, or a decline of about $600 million more than seasonal. It appears unlikely that enough additional Euro- dollars can be obtained by banks, at interest rates they may be willing to countenance, to raise the proxy by more than two or three percentage points. The very large Treasury cash financing needs in July and August will impose a heavy underwriting burden on the banking system. But given maintenance of current interest rate relationships, any bank credit expansion is likely to be quite modest since banks may sell off of the next issues quite quickly. With the CD assumption, noted above time and savings deposits of banks in June are expected to show virtually no growth, or to decline slightly. There is no reason to expect consumer-type time and savings deposits to show any more strength than in the preceding two months, and they could be even weaker, given the higher level of market interest rates that has developed recently. CONFIDENTIAL (FR) -10- May 24, 1968. The money supply in June is expected to continue rising in a 7 - 9 per cent annual rate range, about the same as in the last two months as the Treasury balance continues to decline sharply (assuming no large cash financing in June). Strong loan demands over the tax period may also be a factor tending to keep money growth up. Businesses may be unwilling to draw down existing cash balances, or other liquidity instruments to any very great extent, in view of the uncertain future state of credit conditions. Investors may also tend to keep funds idle in cash for short periods as they assess the credit outlook. Table A-1 MARGINAL RESERVE MEASURES (Dollar amounts in millions, based on period averages of daily figures) Excess reserves Period As Member banks borrowings r evised to Free reserves I I date 4 Monthly (reserves weeks ending in): As first published each week expected at conclusion of each week's open market operations 1967--April May June July August September October November December 349 369 345 449 356 334 353 349 333 150 94 88 132 86 82 141 124 185 199 275 257 317 270 252 212 225 148 1968--January February March April p 417 389 337 348 275 368 649 689 142 21 -312 -341 3 10 17 24 31 653 564 157 376 336 495 180 224 233 241 158 384 - 67 143 95 71 398 - 55 133 44 45 363 - 28 73 35 Feb. 7 14 21 28 375 488 379 313 241 384 405 442 134 104 - 26 -129 85 75 - 44 -143 88 89 - 57 -148 Mar. 6 13 20 27 316 458 414 161 500 779 733 582 -184 -321 -319 -421 -151 -309 -332 -410 -155 -320 -289 -407 Apr. 3 10 17 24 331 406 527 126 696 646 763 651 -365 -240 -236 -328 -173 -230 -340 -198 -220 -525 -536 -557 1 8 15 22 267 412 398 674 823 712 669 -407 -411 -314 -390 -428 -308 -377 -390 -390 Weekly: 1968--Jan. May p - Preliminary 279 -408 -307 -378 TABLE A-2 AGGREGATE RESERVES AND RELATED MEASURES Retrospective Changes, Seasonally Adjusted (In per cent, annual rates based on monthly averages of daily figures) Re s erve g re ates 2/ Monet al y Var i able s Required reservesTotal Member Time Money Supply oborrowed Against B Dep Deposits Private Nonborrowed Bank Deposits Total Demand it(comm. Total Demand DeposReserves 1/2 Deposits (credit) 1/_(credi) banks) SDeposits Total S Reserves Annually: 1966 1967 + 1.2 + 9.8 _ __ _ +10.2 + 0.9 + 7.0 + 3.7 +11.6 + 8.8 +15.8 + 2.2 + 6.5 +26.0 +17.4 +29.4 + 4.7 + 4.9 +14.4 +12.0 +15.3 + 8.1 +14.0 +11.6 + 9.8 + 5.0 - 0.7 + 8.5 - + 4.9 + 4.8 - +16.0 +15.8 +18.0 +14.4 + 7.2 +16.1 - 7.0 -14.2 + 5.5 - 0.3 + 2.8 -10.2 +15.2 +17.1 +11.4 +13.3 +11.2 + 8.5 +11.6 +15.6 +15.3 + 7.6 +15.2 +14.7 + 4.8 +12.4 +10.9 +16.1 +15.9 +14.3 + 9.9 + 5.6 + 8.8 +15.2 +16.9 +10.3 +12.0 + 7.9 - 0.4 +16.5 +19.3 +19.0 +14.4 +13.5 +17.5 +11.3 +13.5 + 9.6 _ + 1.4 +11.5 + 8.4 +18.9 +11. 9 1968--Jan. Feb. 3/ Mar. S3/ Apr. p i/ + 0.8 +19.2 +11.5 +21.6 + 2.5 - 0.4 Monthly: 1967--Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. __ A +16.7 +13.8 + 8.3 + 1.8 +17.8 +16.3 + 0.3 - + 6.6 - 5.8 - 8.3 + 9.2 -12.9 -10.2 + 2.2 - 8.4 _ I 1.2 + 9.0 _____ a _ 2.1 2.8 _ _ + 7.9 +10.0 + 4.3 - 4.3 _ _i._ __ _ _ 1.3 +11.2 _ _i_ - 2.7 + 9.1 +12.7 2.8 - 5.4 +12.5 +11.7 +15.3 +13.3 +14.0 - + 8.1 + 0.7 + 7.4 + 6.0 + 2.0 + 8.4 +11.0 + 1.3 + 1.2 + 6.8 + 5.9 + 8.5 I +10.4 - 0.9 + 6.9 + 7.7 - 0.9 + + + 6.8 0.8 4.2 8.4 _ 1 Includes all deposits subject to reserve requirements. Movements in this aggregate correspond closely witt movements in total member bank credit. Changes in reserves, total deposits and time deposits have been adjusted for redefinition of time deposits effective June 9, 1966. Reserve aggregate changes have been adjusted for change in reserve requirements held against net demand deposits effective at mid-month, January 1968. Preliminary. Chart 1 MEMBER BANK RESERVES MONTHLY AVERAGES 25.0 I -I T- -T DOLLARS, BILLIONS OF OF DAILY FIGURES i SEASONALLY I i I i I I I I I I r( ADJUSTED - - 24.5 f 24.5 I7v - -- --- - 24.0 . V __ 23.5 23.0 - - RESERV ES- -TOTAL REQUIRED RESERVES 22.5 22.0 21.5 - ' __ - _____________ r -- _ BILLIONS OF DOLLARS 1.0 MEMBER EXCESS I I BORROWINGS --- .5 - o . BANK i RESERVES 11 1 1966 1967 INIo lle - Chart 2 MEMBER BANK DEPOSITS AND LIABILITIES TO OVERSEAS BRANCHES DOLLARS BILLIONS OF 286 I I I TOTAL MEMBER SEAS ADJ WEEKLY I I I I BANK DEPOSITS I I I I I I I [CREDIT PROXY) AVERAGE OF DAILY FIGURES 282 278 274 270 266 262 258 254 250 246 242 6 LIABILITIES TO OVERSEAS NOT SEAS (WEEKLY REPORTING BRANCHES BANKS) ADJ., WEDNESDAYS 4 2 o0 J ----D 1966 J 1967 i------J M 1968 Chart 3 MONEY SUPPLY AND BANK DEPOSITS SEASONALLY ADJUSTED WEEKLY I I I I II BILLIONS OF DOLLARS AVERAGES OF DAILY FIGURES I I I I I I -I 190 190 186 186 182 192 V I MONEY SUPPLY 178 188 174 184 170 180 176 172 TIME DEPOSITS ADJUSTED (All Commercial Banks) 168 164 160 156 24 NEGOTIABLE (Unadjusted) CD'S 20 16 12 J 1966 1967 1968 Chart 4 DEMAND DEPOSITS AND CURRENCY SEASONALLY ADJUSTED WEEKLY I I I I I I I AVERAGES OF DAILY FIGURES I I I I BILLIONS OF DOLLARS 41 44 BANKS OUTSIDE CURRENCY 40 36 146 142 138 134 130 12 8 4 0 D 1966 M J 1967 S D J M 1968 S Table B-1 MAJOR SOURCES AND USES OF RESERVES Retrospective and Prospective (Dollar amounts in millions, based on weekly averages of daily figures) Factors affecting supply of reserves Federal Reserve Gold Currency Technical credit (excl. o outside factors Period Year: 1966 (12/29/65 - 12/28/66) 1967 (12/28/66 - 12/27/67) net 2/ banks float) I/ = Change in total = Bank use of reserves Required Excess reserves 3/ reserves +1,085 +1,522 +1,111 - 26 +1,517 + 5 577 -1,084 - 335 - 974 172 - 110 163 236 579 81 447 40 271 441 617 + + - 137 29 656 587 - 33 104 + 535 + + + 170 75 121 - 186 - 401 108 656 27 57 442 291 82 36 + + - 11 203 344 21 + + 141 145 - 14 119 - + 805 - 165 +3,149 +4,718 - 627 725 -2,243 -2,305 +1,005 +1,891 - 50 611 317 -2,649 332 280 134 418 347 568 238 23 Year-to-date: (12/28/66 - 5/24/67) (12/27/67 - 5/22/68) 5/ -1,964 - Weekly: 1968--Apr. + + + 3 10 17 24 May I 8 15 22 + + p p p p 14 - 130 + 58 - 330 + 98 100 - 100 PROJECTED 4 + 75 - 185 --- - 475 260 + + 35 75 - 15 15 - 15 15 355 -- + 160 + 480 + 285 + 285 100 -- + 180 - 25 + 55 + 55 July 520 900 --- - 375 650 + 200 100 + 55 350 + 55 350 + 95 5 12 + + 425 170 - 26 June 29 19 1968--May - 3 10 + + - 85 p - Preliminary. For retrospective details see Table B-4. For factors included, see Table B-3. For required reserves by type of deposits, see Table B-2. See reverse side for explanation. Includes increase in reserve requirements of $360 million effective Jan. 11, 1968 and $190 million effective January 18, 1968. Explanation of Projections in Table B-1 1. Changes in Federal Reserve credit indicate reserves needed to offset projected changes in required reserves and factors affecting the supply of reserves. 2. Projected changes in currency outside banks reflect seasonal movements plus an allowance for growth of about $40 million per week. 3. Projected effects of Treasury operations, included in "technical factors," reflect scheduled and assumed calls in current two weeks and thereafter, maintenance of Treasury balances with Federal Reserve at $1.0 billion. 4. Projected changes in required reserves assume the existing net reserve position of banks and the structure of interest rates in the market, as well as the current economic outlook. On the basis of these assumptions of projections reflect expected movements in bank credit and money in the period ahead, including the effects of such elements as the public's loan demand, repayments of previous loans, bank's investment preferences and willingness to supply loans, bank's desires and abilities to obtain time and savings deposits, and the Government's financing needs. The projections thus encompass normal seasonal developments, temporary bursts of loan demand and expected associated repayments not currently reflected by the seasonals, and whatever cyclical and growth demands for money and credit are expected in the projection period. Assumed Treasury financing operations include: $0.2 billion, May 31; $0.1 billion increase in the weekly Treasury bill auction through June 27; $4.0 billion, July 3. Table B-2 CHANGES IN REQUIRED RESERVE COMPONENTS Retrospective and Prospective Seasonal and Nonseasonal Changes (Dollar amounts in millions, based on weekly averages of daily figures) Tol T .U. Supporting S. Gov't. U.. Gov't. required Period reqired demand Period reserves private deposits _Supporting Time Demand deposits Other than Other than seasonal changes Seasonal changes Total Demand Time ar: 1966 (12/29/65 - 12/28/66) 1967 (12/28/66 - 12/27/67) +1,111 +1,517 + 87 261 +1,198 +1,256 + 14 59 + 4 6 5 +1,023 +1,221+ 1681/ Year-to-date: (12/28/66 - 5/24/67) (12/27/67 - 5/22/68) 2/ - 974 172 + - 158 74 -1,132 98 -1,340 -1,321 + + 104 101 + 449 +1,021 + 345 101 + - 33 104 535 186 + 233 208 122 300 + + + - 200 104 657 486 + + + - 145 221 248 131 + - 5 5 11 + + - 56 112 419 333 - 6 + - 1 22 + + 130 58 330 98 + + + 97 217 218 117 - 227 159 112 19 - 161 308 74 279 + 6 + + 94 152 51 267 + + - 22 3 8 12 29 - 100 + 35 - 135 - 100 - 30 - 5 45 + 5 + 5 - 5 10 - 10 Weekly: 1968--Apr. May 3 10 17 24 I 8 15 22 p p p p --+ + 5 5 PROJECTED 1968--May -- 5 - 15 - 250 + 235 + 190 - 5 12 - 15 - 260 + 245 + 250 - 10 19 26 June + + 285 55 + 60 515 + - 345 460 + - 285 325 - 10 5 + - 75 120 + 105 + 10 + 165 + 5 - 90 3 - 55 - 335 + 280 10 July + 350 + 445 - 95 -- + -- Reflects reserves requirements changes in July, September 1966, and March 1967. Includes increase in reserve requirements of $360 million effective Jan. 11, 1968, and $190 million effective January 18, 1968. p - Preliminary. 1/ 2/ Table B-3 TECHNICAL FACTORS AFFECTING RESERVES Retrospective and Prospective Changes (Dollar amounts in millions, Technical factors (net) Period based on weekly averages of daily figures) Foreign deposits and gold loans (Sign indicates effect on reserves) Treasury operations ACTUAL Other nonmember deposits and F. R. accounts Year: 1966 (12/29/65 - 12/28/66) 1967 (12/28/66 - 12/27/67) + - 805 165 + - 673 85 + - 64 389 - 30 7 + + 98 316 Year-to-date: (12/28/66 - 5/24/67) (12/27/67 - 5/22/68) -2,649 - 577 - 645 160 -1,245 - 572 + + 47 18 + 806 137 3 10 17 24 + + + - 40 271 441 617 + + + - 308 22 94 616 + + + 85 188 167 37 + + + - 23 14 20 12 + + - 206 47 160 26 1 8 15 22 + - 442 291 82 36 + - 32 149 120 123 + + + 380 6 26 323 + + - 34 45 15 13 + + - 4 91 3 223 29 - 185 + 145 - 350 + 20 5 12 19 26 + + + - 35 75 480 25 + 85 + + - 50 50 350 20 3 10 + 200 100 + 200 100 Weekly: 1968--Apr. May PROJECTED 1968--May June July p - Preliminary. ------ - ----- + + - 25 130 5 Table B-4 SOURCE OF FEDERAL RESERVE CREDIT Retrospective Changes (Dollar amounts in millions of dollars, based on weekly averages of daily figures) Total Federal Reserve credit (Excl. float) Period U.S. Government securities Total Bills ther Repurchase agreements holdings ar: 1966 (12/29.65 - 12/28/66) 1967 (12/28/66 - 12/27/67) +3,149 +4,718 +3,069 +5,009 +2,158 +4,433 + 474 +1,153 Year-to-date: (12/28/66 - 5/24/67) (12/27/67 - 5/22/68) +1,005 +1,891 +1,609 +1,616 +1,948 + 979 319 574 6 13 20 27 410 479 516 323 344 199 573 219 200 94 631 246 Apr. 3 10 17 24 332 280 134 418 177 346 68 285 132 234 1 54 May 1 8 15 22 347 568 238 23 306 369 89 33 176 97 131 333 Weekly: 1968--Mar. ______________________________________________________ .1 _____________________________ -. - _________________ Federal Bankers' Agency acceptances Securities I Member banks borrowings 437 577 - 658 63 - 26 - 4 - + 95 53 43 27 49 52 101 9 2 11 - 1 + 47 58 279 46 151 145 82 1 29 164 30 66 260 45 36 2 7 + - 4 20 49 14 114 50 117 112 130 272 42 300 5 10 7 5 + + 13 40 - 31 - 8 23 149 111 43 _______________ I m-- - - - - I1 - 498 + 80 - 45 324 Chart Reference Table C-1 TOTAL, NONBORROWED AND REQUIRED RESERVES 1/ Seasonally Adjusted (Dollar amounts in millions, based on monthly averages of daily figures) Nonborrowed Total Period reserves reserves reserves Total reserves Required reserves Required reserves Against private deposits TotalDemand Total Demand 1965--Jul. Aug. Sept. Oct. Nov. Dec. 21,857 21,923 21,869 21,986 21,976 22,186 21,356 21,417 21,318 21,533 21,589 21,722 21,488 21,533 21,494 21,645 21,671 21,861 20,626 20,719 20.904 21,073 21,170 21,285 15,921 15,943 16,065 16,147 16,196 16,266 1966--Jan. Feb. Mar. Apr. May June Jul. Aug. Sept. Oct. Nov. Dec. 22,358 22,401 22,452 22,679 22,703 22,707 22,861 22,571 22,655 22,524 22,465 22,449 21,899 21,943 22,007 22,028 22,077 22,252 22,308 22,339 22,431 22,274 22,256 22,200 22,142 22,175 21,411 21,464 21,600 21,771 21,782 21,883 21,841 21,842 21,860 21,741 21,716 21,772 16,375 16,413 16,506 16,605 16,562 16,606 16,512 16,473 16,475 16,365 16,364 16,378 1967--Jan. Feb. Mar. Apr. May June Jul. Aug. Sept. Oct. Nov. Dec. 22,808 23,026 23,441 23,490 23,482 23,646 23,869 24,138 24,331 24,642 24,799 24,654 22,360 22,685 22,442 22,666 22,955 23,110 23,086 23,178 23,488 23,794 24,444 24,437 21,803 22,044 22,297 22,293 22,559 22,890 23,049 23,275 23.330 23,453 23,605 23,628 16,328 16,478 16,647 16,578 16,786 17,024 17.115 17,246 17,237 17,316 17,404 17,386 25,043 23,337 24,738 24,927 24,659 24,718 24,889 24,927 23,753 23,796 23,906 17,512 17,530 17,600 S25,160 24,449 24,806 23,969 17,670 1968 -- 2/ Jan. Feb. Mar. 22,140 21,900 21,864 21,748 21,898 21,885 23,240 23,332 23,428 23,523 23,830 24,121 24,217 24,467 24,690 24,398 25,291 2/ Apr. 21,873 22,027 22,020 22,030 p 2/ d h 23 972 24,332 h d p - Preliminary. 1/ 2/ Ulne Reserves have been adjusted for redefinition of time deposits effective J. requirements Reserve aggregates have been adjusted for change in reserve January 1968. held against net demand deposits effective at mid-month, .L1 , OCiF V .. Table C-2 DEPOSITS SUPPORTED BY REQUIRED RESERVES AT ALL MEMBER BANKS Seasonally Adjusted (Dollar amounts in billions Period based on monthly averages of daily figures) Total member bank deposits (credit) 1/2/ Time Private demand deposits 2 deposits 3J U.S. Gov't. demand deposits 238.0 121.7 111.7 4.7 239.0 239.8 242.2 243.9 244.8 246.7 246.5 246.4 245.5 244.8 245.2 122.0 123.0 124.8 126.1 127.5 128.7 129.7 130.1 129.9 129.3 130.3 112.0 112.6 113.3 113.0 113.3 112.6 112.4 112.4 111.6 111.6 111.7 5.0 4.2 4.1 4.8 4.0 5.3 4.4 3.9 4.0 4.0 3.2 1967--Jan Feb. Mar. Apr. May June Jul. Aug. Sept. Obt. Nov. Dec. 248.5 251.8 254.8 256.9 258.1 260.0 263.3 267.0 269.3 272.0 273.8 273.7 132.2 134.4 136.5 138.0 139.4 141.7 143.3 145.6 147.2 148.2 149.8 150.8 111.4 112.4 113.6 113.1 114.5 116.1 116.7 117.6 117.6 118.1 118.7 118.6 4.9 4.0 4.8 5.8 4.1 2.2 3.2 3.7 4.5 5.6 5.3 4.4 1968--Jan. 275.5 150.7 119.4 5.3 277.8 278.8 277.8 151.3 152.3 152.1 119.6 120.1 120.5 6.9 6.4 5.1 1966--Jan. Feb. Mar. Apr. May June Jul. Aug. Sept. Oct. Nov. Dec. Feb. Mar. Apr. p 1/ Includes all deposits subject to reserve requirements--i.e., the total of time, private demand, and U.S. Government demand deposits. Movements in this aggregate correspond closely with movements in total member 2/ 3/ bank credit. Deposits have been adjusted for redefinition of time deposits effective June 9. 1966. Private demand deposits include demand deposits of individual, partnerships and corporations and net interbank balances. TABLE C-2a DEPOSITS SUPPORTED BY REQUIRED RESERVES AT ALL MEMBER BANKS Seasonally adjusted (Dollar amounts in billions., based on weekly averages of daily figures) Total member Week ending: bank deposits (credit 1/2/ Time deposits 2/ Private demand deposits 3/ U. S. Govit. demand deposits 1967--Dec. 6 13 20 27 274.3 273.6 273.2 273.6 150.6 150.9 150.8 150.7 119.1 118.5 117.9 118.3 4.5 4.1 4.5 4.4 1968--Jan. 3 10 17 24 31 274.9 274.7 275.5 276.4 275.4 150.5 150.6 150.6 150.7 151.1 120.4 119.6 119.9 119.3 118.5 3.9 4.5 5.0 6.4 5.8 Feb. 7 14 21 28 277.6 276.6 276.6 279.8 150.8 151.2 151.6 151.9 119.8 119.1 120.2 119.2 7.0 6.3 4.9 8.7 Mar. 6 13 20 27 280.2 279.2 278.2 278.3 152.0 152.3 152.5 152.3 120.3 119.9 119.4 120.4 8.0 7.1 6.4 5.7 Apr. 3 10 17 24 278.2 277.4 279.4 277.6 152.3 152.3 152.3 151.8 120.5 119.8 122.3 120.3 5.4 5.3 4.9 5.4 May 1 8 15 22 277.2 277.9 277.2 277.9 152.2 152.1 152.2 151.9 119.7 121.0 121.0 122.7 5.3 4.8 4.0 3.3 p - Preliminary. 1/ Includes all deposits subject to reserve requirements--i.e., the total of time, private demand, and U.S. Government demand deposits. Movements in this aggregate correspond closely with movements in total member bank credit. 2/ Deposits have been adjusted for redefinition of time deposits effective June 9, 1966. 3/ Private demand deposits include demand deposits of individuals, partnerships and corporations and net interbank balances. TABLE C-3 MONEY SUPPLY AND TIME DEPOSITS AT ALL COMMERCIAL BANKS Seasonally adjusted (Dollar amounts in billions, based on monthly averages of daily figures) Money Supply Monthly Currency 1/ Private Demand Deposits 2/ Time Deposits Adjusted 3/ 1966--Jan. Feb. Mar. Apr. May June 167.9 168.3 169.2 170.5 170.2 170.6 36.6 36.7 36.9 37.1 37.3 37.4 131.4 131.6 132.3 133.4 132.9 133.2 147.5 148.3 149.8 151.8 153.4 154.8 Jul Aug. Sept. Oct. Nov. Dec. 169.9 170.1 170.5 170.1 170.1 170.4 37.7 37.8 37.9 38.0 38.1 38.3 132.3 132.4 132.6 132.1 132.0 132.1 156.9 158.1 158.6 158.8 158.5 159.8 1967--Jan. Feb. Mar. Apr. May June Jul. Aug. Sept. Oct. Nov. Dec. 170.3 171.5 173.1 172.7 174.5 176.2 177.9 179.1 179.2 180.3 181.2 181.5 38.5 38.7 38.9 39.1 39.2 39.3 39.5 39.6 39.8 39.9 40.0 40.4 131.8 132.8 134.2 133.6 135.3 136.8 138.4 139.6 139.5 140.3 141.2 141.1 162.0 164.6 167.2 169.2 171.1 173.6 175.8 178.3 180.0 182.0 183.7 185.0 1968--Jan. Feb. Mar. 182.5 182.5 183.4 40.5 40.7 41.1 141.9 141.8 142.3 184.8 186.1 187.8 184.7 41.4 143.3 188.0 Apr. p /1 Includes currency outside the Treasury, the Federal Reserve, and the vaults of all commercial banks. 2/ Includes (1) demand deposits at all commercial banks, other than those due to domestic commercial banks and the U.S. Government, less cash items in process of collection of Federal Reserve float; and (2) foreign demand balances at Federal Reserve Banks. 3/ Deposits have been adjusted for redefinition of time deposits effective June 9, 1966. p - Preliminary. TABLE C-3a MONEY SUPPLY AND TIME DEPOSITS AT ALL COMMERCIAL BANKS Seasonally Adjusted (Dollar amounts in billions, based on weekly averages of daily figures) 1967--Dec. 6 13 20 27 1968--Jan. 3 10 17 24 31 Feb. 7 14 21 28 Mar. 6 13 20 27 Apr. 3 10 17 24 May 1 8 15 22 181.5 181.0 180.8 181.8 40.1 40.3 141.4 140.8 140.5 141.3 184.9 185.2 185.1 184.7 183.1 182.5 183.1 182.1 181.3 40.4 40.5 142.7 142.0 142.6 141.6 140.8 184.4 184.6 184.7 184.7 185.2 182.7 181.9 183.4 182.1 40.7 40.7 40.7 142.0 141.1 142.6 141.4 185.2 185.7 186.2 186.8 183.6 183.4 182.8 183.8 40.9 41.1 41.1 41.1 142.7 142.3 141.7 142.6 187.0 187 6 188.0 188.0 184.4 184.3 187.1 184.0 41.2 41.4 41.5 41.3 143.2 142.9 145.6 142.6 188.1 188.3 188.1 187.7 183.5 185.0 185.1 186.9 41.3 41.5 41.6 41.7 142.2 143.5 143.5 145.2 188.1 188.1 188.3 187.9 40.3 40.5 40.5 40.6 40.5 40.7 Includes currency outside the Treasury, the Federal Reserve and the vaults of all commercial banks. 2/ Includes (1) demand deposits at all commercial banks, other than those due to domestic commerical banks and the U.S. Government, less cash items in process of collection and Federal Reserve float; and (2) foreign demand balances of Federal Reserve Banks. 3/ Deposits have been adjusted for redefinition of time deposits effective June 9, 1966. p - Preliminary. 1/
@FedFRASER