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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) November 12, 1971. MONETARY AGGREGATES AND MONEY MARKET CONDITIONS Prepared for the Federal Open Market Committee By the Staff BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM CONFIDENTIAL (FR) November 12, 1971. MONETARY AGGREGATES AND MONEY MARKET CONDITIONS Recent developments (1) (M1) Since the October meeting, the narrowly defined money stock has been running well below the path associated with the policy directive adopted at that meeting. This marks the third consecutive inter-meeting period in which there has been a substantial shortfall. On the average in October, M1 declined at a 2.6 per cent annual rate, in contrast to the expectation that it would rise at a 3 per cent rate. M2 and the adjusted bank credit proxy also fell below target paths in October, as the table on the next page shows. However, shortfalls in these aggregates were much less than for M1, as time and savings deposits other than large CD's grew more rapidly than expected, offsetting part of the weakness in demand deposits. (2) In recent months the staff has been projecting that growth in M1 would slow considerably in the fourth quarter, partly in response to lagged effects of earlier high interest rates. But a sustained contraction in the outstanding money stock was not anticipated. The shrinkage which has occurred began shortly after the President's announcement of his new economic program-suggesting that the changed circumstances created by the program may have induced important shifts in the demand for domestic money balances at given interest rates. As previously reported, the Demand Deposit Ownership Survey for August indicated that the relative drop-off in IPC accounts for that month was centered in deposits of nonfinancial businesses--a development that is -2- RECENT PATHS OF KEY MONETARY AGGREGATES 1/ (Seasonally adjusted, billions of dollars) M1 Oct. M2 19 Oct. Adjusted Proxy 19 Oct. 19 Path Actual 6.5 1.6 4.7 5.5 8.9 3.7 227.3 226.8 459.0 456.5 458.3 355.1 353.6 354.7 226.4 226.5 227.2 226.6 227.2 459.3 461.0 460.4 461.0 457.5 458.4 459.5 459.3 460.2 354.5 356.9 357.9 358.2 353.4 354.9 355.7 357.8 358.3 Path Actual 3.0 -3.7 -2.6 227.9 227.8 229.3 229.1 228.4 Path Actual Annual Rates of Growth, per cent September October Levels, billions of $ September October Week ending 13 20 27 November 3 l0p October 1/ In order to be consistent with the October 19 paths noted at the last meeting, actual data are unrevised--i.e., they do not reflect new seasonal factors. p/ Partly projected. -3consistent with other evidence suggesting heavy transfers of business funds Ownership data just available for September indicate into foreign currencies. that the continuing relative weakness of demand deposits in that month was spread more widely through all major ownership groups. Whether this September pattern of change carried through into October is not yet known. (3) With the money supply aggregates falling persistently below path the Desk aimed for gradually easier money market conditions as the intermeeting period progressed. Initially, the objective was to achieve money market conditions characterized by a funds rate in the 5 to 5-1/8 per cent range, but as new evidence on the aggregates emerged, the aiming point was lowered to around 5 per cent or a little less. Most recently, with the discount rate reduced to 4-3/4 per cent, Federal funds have been trading around 4-7/8 per cent. And, asweakness in the aggregates continued, the Desk has begun to aim at a 4-3/4 per cent funds rate. Over the three full state- ment weeks of the inter-meeting period the net reserve position of member banks fluctuated between $200 million free reserves and $370 million net borrowed reserves, with the average for the period $ 90 million on the negative side. Over the same period weekly member bank borrowing ranged from $122 million to $414 million and averaged $250 million. (4) Between the last meeting of the Committee and the discount rate reduction of November 10, the easing in day-to-day money market conditions and growing uncertainty about business prospects brought further reductions in market interest rates of 10-15 basis points on some types of longer-term securities and of from 20 to 50 basis points on short-term -4securities. The bank prime rate was cut from 6 to 5-1/2 per cent. As rates declined market expectations of a discount rate cut became widespread. At the same time, the overhang of unsold securities in the market was building up. Government security dealers added more than $2 billion to their net positions-about half in maturities of more than 5 years--as a result of the recent financings. Aggressive bidding by underwriters for new corporate, Federal agency, and municipal issues also added to security inventories. With the technical position of markets thus coming under some strain, there were scattered yield advances just prior to the discount rate cut. (5) move. There was little immediate reaction to the discount rate The market did steady, but attitudes nevertheless appear to remain cautious. The 3-month bill rate was most recently quoted 4.17 per cent bid, about the same as its level just prior to the discount rate reduction and about 30 basis points below its level at the time of the previous FOMC meeting. (6) Over the three statement weeks ending November 10, required reserves fell consistently below path as shown in the table on the following page. Nonborrowed reserves available to banks also remained below path over the period on balance, as the Desk, while easing, attempted to avoid an overly rapid easing of money market conditions. With banks also reducing their borrowings from the Federal Reserve under the easier conditions, total reserves were well below path. (7) The preceding analysis has not been based on the newly revised monetary aggregate series since those were not available during the intermeeting period. This latest annual revision is generally minor in its effect. This is particularly true for the monthly money supply series, for which Reserve Aggregates: October 19 Paths vs. Actual (Seasonally unadjusted, in millions of dollars) Statement Week Ending Actual October 19 Path Actual Minus October 19 Path 30,424 30,010 30,380 44 414 30,764 (30,692) 30,364 (30,292) 30,514 (30,442) 250 400 -340 (-268) -354 (-282) -134 (- 62) -206 + 14 30,974 30,759 30,561 413 215 30,898 (30,919) 30,498 (30,519) 30,648 (30,669) 250 400 + 76 (+ 55) +261 (+240) - 87 (-108) +163 -185 30,616 30,494 30,597 19 31,076 (31,099) 30,676 (30,699) 30,826 (30,849) 250 -460 (-483) -182 (-205) -229 (-252) -231 October 27 Total reserves Nonborrowed reserves Required reserves Excess Borrowings November 3 Total reserves Nonborrowed reserves Required reserves Excess Borrowings November 10 Total reserves Nonborrowed reserves Required reserves Excess Borrowings NOTE: 122 400 -278 Figures in parentheses reflect adjustment of the path for unanticipated changes in U.S. Government deposits. -6seasonal factor changes were small and benchmark adjustments were minimal-raising the level of M 1 by only about $150 million and lowering M 2 by about $600 million. The intra-monthly weekly seasonals have been changed more substantially, however. A for the old and new series table comparing levels and annual rates of change is appended on page 19. The text table on page 7, showing major financial aggregates for selected recent periods, is based on the revised data insofar as it is currently available (revised figures for reserves and the end-of-month bank credit series are not yet available). Fourth and First Qtrs. combined (March over Sept.) Total Reserves Nonborrowed Reserves Second Quarter (June over March) Third Quarter (Sept. over June) Latest Month Oct. over Sept.) 8.9 6.6 10.4 -15.9 10.3 5.3 10.8 -13.0 6.5 10.6 13.6 12.4 14.5 14.5 8.4 9.4 8.4 4.8 Concepts of Money M 1 (Currency plus demand deposits 1/) - 0.5 M2 (M1 plus time deposits at commercial banks other than large CD's) M3 (M2 plus deposits at thrift institutions) 4.4 6.3 Bank Credit Total member bank deposits (Bank Credit proxy adj.) Loans and investments of Commercial banks 2/ 10.5 9.1 Short-term market paper (Actual $ change in billions) Large CD's Nonbank commercial paper $ 6.1 $ 1.3 $ 2.3 $ 1.1 - 0.4 - 0.9 - 0.1 n.a. Other than interbank and U.S. Government. Based on month-end figures. Includes loans sold to affiliates and branches. N.S.A. N.A. NOTE: Not Seasonally Adjusted. Not Available. All items are based on averages of daily figures, except for data on total loans and investments of commercial banks, commercial paper and thrift institutions--which are either end-of-month or last Wednesday of month figures. Prospective developments Two alternative sets of specifications for Committee (8) consideration are summarized in the text table below. The two sets of specifications correspond to three directive alternatives, with the first set associated with both directive A and B and the second set with directive C. As noted in the final section of this blue book, the choice between directives A and B depends on the degree of emphasis the Committee wishes to place on monetary aggregates as compared with money market conditions. Alternative A/B Federal funds rate Member bank borrowings Growth in M Alternative C 4-1/2--4-7/8 3-7/8--4-1/2 150-300 50-150 (SAAR) November December 4th Q. 1971 1st Q. 1972 -1 1-1/2 0 6 -1 3 1/2 8 (9) Money market conditions consistent with alternative A/B might encompass a Federal funds rate in a 4-1/2--4-7/8 per cent range; member bank borrowings in a $150-$300 million range; and, taking account of recent wide swings in excess reserves, a net reserve position for member banks in a plus $250 million to minus $150 million area. These conditions are somewhat easier than prevailed at the time of the last Committee meeting, and reflect a response over the past few weeks to the weakness of the monetary aggregates and, in recent days, to the reduction in the discount rate. Alternative C would imply a significant further easing of money market conditions from those that have recently evolved, with, for example, the Federal funds rate thought to be consistent with this alternative in (10) a 3-7/8--4-1/2 per cent range. Under alternative A/B, we would expect the 3-month bill rate to be in a 4--4-5/8 per cent range between now and mid-December. The bill rate could rise from recent levels in response to normal seasonal pressures, particularly in view of the current wide spread of the funds rate above the bill rate. In addition, the Treasury is expected to raise $3 billion of new cash in the bill area in late November. The Treasury will have to raise another $2--$3 billion of cash before year-end, but it seems likely at this point that this operation will not be undertaken until late December. event of Sizable sales of bills by foreign central banks in the reflows of funds from abroad would also tend to exert pressure on the bill market. Under alternative C, however, short-term interest rates would almost certainly decline over the period ahead, with the bill rate likely to be in a 3-3/4--4-1/4 per cent range. (11) The monthly and quarterly paths for monetary aggregates for the two sets of suggested specifications are detailed in the table on the next page. These paths are based on the newly revised series. (Two tables on pages 17 and 18 at the end of the text show weekly paths for the monetary aggregates and more detail on aggregate reserves.) (12) The narrow money supply (M1) under alternative A/B is expected to show only a slight decline in November at a one per cent annual rate, but to resume growth beginning in December. On the basis -10Alternative Monthly and Quarterly Paths of Key Monetary Aggregates Alt. A/B Alt. C Alt. A/B Alt. C 1971 September October November December 227.4 227.3 227.1 227.4 227.4 227.3 227.1 227.7 455.4 457.8 460.4 461.8 455.4 457.8 460.4 462.3 1972 March 230.7 232.2 469.2 472.5 Per Cent Annual Rates of Growth -1.0 1.5 -1.0 3.0 4th Q. 1971 1st Q. 1972 0 6.0 .5 8.0 1971 5.9 6.0 November December Year Adjusted Credit Proxy Alt. A/B Alt. C 7.0 3.5 7.0 5.0 6.0 9.0 10.4 10.6 Total Reserve Alt. C Alt. A/B 1971 September October November December 353.3 354.7 356.5 356.4 353.3 354.7 356.5 356.9 32.1 31.6 31.8 31.6 32.1 31.6 31.8 31.7 1972 March 359.8 363.1 31.8 32.1 Per Cent Annual Rates of Growth November December 6.0 - .5 6.0 1.5 6.5 -8.5 7.5 -5.5 -6.0 2.0 -4.5 5.0 5.6 5.9 4th Q. 1971 1st Q. 1972 3.5 4.0 4.0 7.0 Year 7.8 8.0 1971 -11of past relationships, the depressant effect on money demand of the high short-term interest rates of late spring and summer should have about run its course. Prospects for a reduced rate of inflation in- duced by the new economic program have probably also encouraged money holders to reduce cash balances relative to income, offsetting the large build-up of spring and early summer. With these two types of adjustments largely completed, it appears that money supply should soon begin rising more in line with the transactions demands implicit in the staff's GNP forecast, which indicates about a 9 per cent rate of rise on average in nominal GNP in the fourth and first quarters. M1 is expected to grow at only a 1-1/2 per cent annual rate from November to December, but to be followed by a 6 per cent growth rate in the first quarter. The lower interest rates and greater reserve supply under alternative C would likely lead to a more rapid 3 per cent rate of growth in December, followed by an 8 per cent expansion in the first quarter. (13) Growth in time and savings deposits other than large CD's is expected to slow in late November and December from the recent rapid pace. On balance, under alternative A/B, we would anticipate a growth rate in consumer-type time deposits of around 11 per cent in the fourth quarter, but slowing to about 7 per cent in the first quarter as consumer spending continues to rise. Such a development would lead to growth rates for M 2 of 5-1/2 and 6-1/2 per cent in the fourth and first quarters, respectively. Growth rates would be somewhat more rapid under alterna- tive C as lower market interest rates enhanced the relative attractiveness of bank deposits. -12- (14) Although the outstanding amount of large CD's and non- deposit sources has shown little net change in recent weeks, these sources of funds, particularly large CD's, are expected to resume expansion in the period ahead. either alternative. The expansion is likely to be moderate, however, under Over the balance of this year, business loan demands are expected to be modest in view of the continued comparatively large volume of capital market financing and the relatively small rate of business inventory accumulation anticipated. Under alternative C there could be a pick-up in business borrowing from banks as lending terms ease further, but the increased inflow of demand and consumer-type deposits associated with that alternative would probably generate enough resources so that banks would not need to be more aggressive in that CD market. (15) With private demand deposits flat and outstanding U.S. Government deposits declining on balance over the fourth quarter, the bank credit proxy is expected to grow at only about a 3--4 per cent annual rate over the period, followed by only a modest pick-up in the first quarter. Banks may initially take a substantial share of the bills offered in the forthcoming Treasury cash financings, but it is anticipated that the banks will find it economical to sell them as U.S. Government deposits are drawn down to finance the budgetary deficit. And more generally, with bill rates below the Federal funds anddiscount rates, banks have an incentive to reduce their generally ample liquid asset holdings as loan demands develop. Under alternative C, bank credit expansion would be somewhat more rapid in the last few weeks of the current quarter, and considerably larger than under alternative A/B in the first quarter of next year as growth in M2 accelerates. -13- (16) Assuming the tight end of the money market range for alternative A/B, it is possible that the technical position of markets will lead to an increase in interest rates over the near-term despite the recent discount rate reduction. Factors that may put bill rates under upward pressure have been noted in paragraph (10). In longer- term markets, dealer and syndicate positions are large in the wake of the recent Treasury financings and the sizable volume of municipal and corporate bond offerings; and uncertainties as to the viability of the announced wage-price program could result in nervous holders pressing their inventories on the market. An easing on the money market toward the lower end of the alternative A/B range would likely offset such a tendency should it arise. alternative C range, And if the money market moved into the the whole market would likely adjust downward in yield, impelled in part by expectations of a further decline in the discount rate. -14Possible directive language (17) if Alternative A. This language is proposed for possible use the Committee decides to place more emphasis on money market conditions than on the aggregates and wishes to call for maintenance of the conditions "that have evolved since the discount rate reduction", subject to a proviso clause. achieve to seeks Committee the "To implement this policy, [DEL: months te over aggregates credit and monetary in growth moderate ahead.] System open market operations until the next meeting of the reserve bank achieving Committee shall be conducted with a view to [DEL: that with consistent and] MAINTAINING THE money market conditions [DEL: financings.] Treasury forthcoming the of account taking objective, that have evolved since the discount rate reduction; provided that somewhat easier conditions shall be sought if it appears that the monetary and credit aggregates are falling significantly below the growth paths expected." If the Committee adopts this alternative, it may wish to consider the money market conditions noted for alternative A in paragraph (9) as a description of the conditions to be maintained, and for purposes of the proviso clause to adopt the aggregate growth paths discussed earlier in connection with alternative A as the "expected" paths. The proviso clause has been formulated in one-way terms, guarding against significant shortfalls but not excesses, on the assumption that the -15Committee would not want money market conditions to be tightened in the coming period if the aggregates should appear to be expanding on paths above those projected, which involve no growth over the fourth quarter for M1 and relatively low growth rates for M 2 and the bank credit proxy. (18) Alternative B. The language for alternative B, "To implement this policy, the Committee seeks to achieve moderate growth in monetary and credit aggregates over the months ahead. System open market operations until the next meeting of the Committee shall be conducted with a view to achieving bank reserve and money market conditions consistent Treasury forthcoming the of account ,taking with that objective [DEL: financing]." is proposed for use if the Committee wishes to continue its emphasis on monetary aggregates. It could involve the same initial specification as A, but the reaction to specification misses would be different. For instance, if the Committee adopts this alternative, it presumably will want the Desk to be more sensitive to movements away from the paths in the aggregates and to adjust the Federal funds rate promptly, and perhaps more aggressively, in response to such deviations. As in alternative A, the Committee may wish to indicate a greater willingness to countenance overshoots in the aggregates than shortfalls. (19) B in Alternative C. This language differs from that of alternative indicating that the Committee seeks "to promote substantial growth" rather than "to achieve moderate growth" in the aggregates over the months ahead. It -16is proposed for possible use if the Committee decides to pursue the more aggressive course contemplated by the specifications given earlier for alternative C. "To implement this policy, the Committee seeks to PROMOTE SUBSTANTIAL[DEL: moderate] achieve over the months ahead. growth in monetary and credit aggregates System open market operations until the next meeting of the Committee shall be conducted with a view to achieving bank reserve and money market conditions consistent with that objective[DEL: financing]." Treasury forthcoming the of account ,taking -17Alternative Weekly Paths of Key Monetary Aggregates (Seasonally adjusted, billions of dollars) M Alt. A/B 1 Alt. C Alt. A/B Alt. C November 17 24 227.0 227.0 227.0 227.1 460.3 460.6 460.3 460.7 December 1 8 15 226.5 226.9 227.0 226.7 227.2 227.3 460.3 460.9 461.2 460.6 461.4 461.8 Credit Proxy Alt. Alt. A/B November 17 24 356.6 355.9 December 1 8 15 355.4 357.2 356.7 Total Reserve C 356.6 356.0 355.7 357. 7 357.3 Alt. A/B 32.1 32.0 31.7 31.7 31.4 Alt. 32.1 32.1 31.8 31.8 31.5 C -18Total and Nonborrowed Reserve Paths (Daily averages in millions of dollars, seasonally adjusted) Total Reserves Alt. A/B Nonborrowed Reserves Alt. C Alt. A/B Alt. C 1971 November December 31,817 31,594 31,839 31,692 31,543 31,295 31,619 31,517 31,754 32,093 31,421 31,886 1972 March Per cent annual rates of growth November December 6.5 -8.5 7.5 -5.5 -9.5 12.5 -4,0 4th Q. 1971 1st Q. 1972 -6.0 2.0 -4.5 5.0 -4.5 1.5 -1.5 4.5 9.5 Weekly Paths--Seasonally Adjusted Total Reserves Alt. A/B November 17 24 December Alt. C Nonborrowed Reserves Alt. A/B Alt. C 32,129 32,050 32,129 32,100 31,833 31,600 31,833 31,775 31,718 31,700 31,409 31,768 31,765 31,478 31,280 31,109 31,653 31,470 31,320 31,495 Weekly Paths--Not Seasonally Adjusted Alt. A/B November December 17 24 Alt. C Alt. A/B Alt. C 31,233 30,935 31,233 30,985 30,933 30,635 30,933 30,810 30,793 30,718 30,663 30,843 30,768 30,746 30,493 30,418 30,363 30,668 30,593 30,571 -19- REVISIONS IN MONETARY AGGREGATES Comparison of Levels M1 Revised series 1970--December 214.6 214.8 1971--January 214.8 February Old series Comparison of Annual Growth Rates (per cent) Adjusted Credit Proxy M2 Old series 1st. ($ billions) Old Revised Adjusted Credit Proxy Old Series Revised series Old series Revised series series series 419.0 418.2 331.2 330.6 6.2 6.7 13.0 215.3 423.0 423.1 334.1 333.4 1. 1 2.8 217.3 217.7 430.8 430.4 337.7 336.7 14.0 March 219.4 219.7 437.6 437.1 340.2 339.6 April 221.1 221.2 442.0 441.5 341.7 May 223.9 223.8 447.3 446.6 June 225.6 225.5 451.4 July 227.5 227.4 August 228.0 September October 10 mos. Revised series Old series Revised series 11.3 16.5 15.1 11.5 14.1 10.5 10.2 13.4 22.1 20.7 12.9 11.9 11.6 11.0 18.9 18.7 8.9 10.3 342.0 9.3 8.2 12.1 12.3 5.3 8.5 343.8 344.5 15.2 14.1 14.4 13.9 7.4 8.8 450.6 345.7 346.7 9.1 9.1 11.0 10.7 6.6 7.7 454.1 453.4 348.0 349.8 10. 1 10. 1 7.2 7.5 8.0 10.7 228.0 455.9 454.5 351.0 351.0 2.6 3.2 4.8 2.9 10.3 4.1 227.3 227.4 456.5 455.4 353.6 353.3 -3.7 -3.2 1.6 2.4 8.9 7.9 226.8 227.3 458.3 457.8 354.7 354.7 -2.6 -0.5 4.7 6.3 3.7 4.8 8.9 9.1 17.8 18.0 10.9 11.3 3.0 10.6 3.4 12.6 4.5 12.4 4.4 10.9 6.5 9.1 11.3 11.4 8.5 8.7 6.8 7.0 8.4 7.6 CHART 1 STRICTLY CONFIDENTIAL (FR) 11/12/71 MONETARY AGGREGATES MONEY SUPPLY M1 BILLIONS OF DOLLARS 2.5% PATH I I iI Ii i I 1 I I I II J I J J MONEY SUPPLY M2 (1/0/1 390 I 1970 -- Actual Currently Projected 1971 --- Wkly. Path, Indicated at FOMC Meeting (10/19/71) A i 1 J I J S O _Z- < N 0 Longer Run Path STRICTLY CONFIDENTIAL (FR) CHART 1A 11/12/71 MONETARY AGGREGATES BILLIONS OF DOLLARS / ADJUSTED CREDIT PROXY -1364 (1111 0 - 360 /71 4.5% PATH 356 352 348 -344 305 I I I I I I TOTAL RESERVES 3.5% -32 7 '71) 31 J I 1971 1970 J A S 0 0 '71 - Actual -" Currently Projected --- Wkly Path, indicated at FOMC Meeting (10/19/71) -Z- Lorger Run Path CHART ,2 11/12/71 INTEREST BEARING SOURCES OF BANK FUNDS BILLIONS OF DOLLARS TOTAL TIME AND SAVINGS DEPOSITS TIME AND SAVINGS DEPOSITS OTHER THAN CD'S CD'S 1970 1971 CHART 3 MONEY MARKET CONDITIONS AND INTEREST RATES INTEREST RATE Short-term INTEREST RATES Long-term PER CENT WEEKLY NEW CORPORATE Aaa WEDNESDAY FHA MORTGAGES FNMA MONDAY AUCTION nA 9 A.A 7 1970 1971 1970 1970 1971 1971 ,I STRICTLY CONFIDENTIAL (FR) Table 1 PATHS OF KEY MONETARY AGGREGATES Broad Money Supply (M 2 ) Narrow Money Supply (M1 ) 1/ 1 Period Path as of Oct. 2 Actuals & Path as of Current Prol 19 oct. 5 Path as of Oct. Current Prol 19 6 Actuals & 1971 Total Reserves Adjusted Credit Proxy / Actuals & 4 19 November 12, 7 Current Prol Path as of Oct. 19 8Actuals & Current Prol Monthly Pattern in Billions of Dollars 1971- Juno 221.1 223.9 225.6 442.0 447.3 451.4 341.7 343.8 345.7 30.8 31.3 31.3 July Aug. Sept. 227.5 228.0 227.3 454.1 455.9 456.5 348.0 351.0 353.6 31.3 31.7 32.1 Apr. May Oct. Nov. 226.8 (226.6) 227.9 228.1 459.0 460.3 355.1 358.0 458.3 (460.8) 354.7 (356.4) 31.7 32.0 31.6 (31.8) I Annual Percentage Rates of Change--Quarterly and Monthly 1971- 1st Qtr. 2nd Qtr. 3rd Qtr. 8.9 11.3 3.0 17.8 12.6 4.5 10.9 6.5 9.1 11.0 6.6 10.4 1971. Apr. May June 9.3 15.2 9.1 12.1 14.4 11.0 5.3 7.4 6.6 2.7 17.0 0.2 July Aug. Sept. 10.1 2.6 -3.7 8.0 10.3 8.9 0.3 14.7 15.8 Oct. Nov. 3.0 1.0 7.2 4.8 1.6 -2.6 (-1.0) 6.5 3.0 5.5 10.0 4.7 (6.5) 3.7 (6.0) -12.0 10.5 -15.9 (7.5) Weekly Pattern in Billions of Dollars 1971: Sept. 22 29 226.9 226.7 456.2 456.4 352.9 352.9 31.5 32.3 6 13 20 27 227.8 229.3 227.3 226.4 226.5 227.2 459.3 461.0 458.1 457.5 458.4 459.5 354.5 356.9 353.5 353.' 354.9 229.1 728.4 226.6 227.2 460.4 460.2 459.3 461.0 357.9 358.2 Oct. Nov. 3 10 pe 1- NOTES: J ______________ Annual rates of change other than those for the past are rounded to Data shown in parenthesis are current projections. 1/ Currently plus private demand deposits. 2/ M1 plus time deposits other than large CD/s. 355.7 31.7 31.8 31.8 31.7 31.7 31.4 357.8 358.3 31.7 31.9 31.7 31.4 I the nearest half per cent. pe - Partially estimated. FR712-D Rev 2/16/71 STRICTLY CON FIDENTIAL (FR) Table 1 A PATHS OF KEY MONETARY AGGREGATES November 12, 1971 Monthly Pattern in Billions of Dollars 1971 Apr. May June 5.4 4.2 3.9 248.3 251.4 254.4 221.0 223.4 225.8 27.3 2/.9 28.6 5.1 4.1 4.5 J, lv Aug. Sept 1.7 6.1 6.1 256.8 258.2 226.6 227.8 220.2 10.1 30.3 32.4 4.3 3.9 4.1 33.6 (32.9) 4.8 (5.0) 0 t. 4.6 6.3 Nov. 261.6 4.5 (5.7) 265.0 (267.0) 265.0 267.1 33.8 34.9 231.5 (714.1 ) 231.2 232.7 Annual Percentage Rates of Change--Quarterly and Monthly 1971 1st Qtr. 2nd Qtr. 3rd Qtr. 1971 Apr. May 27.2 13.7 6.0 Tune 10.7 15.0 14.3 July llly Aug. Sept. 11.3 6.5 15.8 ect. Nov. 14.8 11.0 12.9 4.3 6.4 7.4 15.6 ( 9.0) 15.5 9.5 10.5 5.0 12.0 (13.5) Weekly Pattern in Billions of Dollars 1971* Sept. Oct. 22 29 262.0 6 13 263.8 264.6 263.2 33.9 34.7 31.0 13.5 33.7 33.1 34.5 34.7 32.8 32.7 27 265.4 265.9 265.5 231 . 231.7 3 10 pe 265.8 266.5 265.5 266.4 231.3 231.8 232.7 233.7 I. NOTES: 32.7 33.5 230.8 231.1 731 9 232. 1 20 Nov. 229.3 229.7 pe - Partially estimated. Annual rates of change other than those for the past Data shown in parenthesis are current projections. 265.6 L' I- I. are rounded to the nearest half percent. A L .I____ _ & FR 712-K Rev2/16/71 CONFIDENTIAL (FR) Table 2 AGGREGATE RESERVES AND MONETARY VARIABLES Reserve Aggregates 1 2 1 Nonborrowed Total Period Total Reserves Nonboowed Reserves 3 RETROSPECTIVE CHANGES, SEASONALLY ADJUSTED (Annual rates in per cent) Monetary Variables Total 4 Money Supply Member Member Bank 7 Adlusted Adusted Credit Proxy Total Currency ____Deposits Time Deposits Adlusted 1971 Addenda 10 9 8 Private Demand Deposits November 12, Nonbank Thrift Instit. Deposits Commercial Paper Annually I- 7.9 + 2.4 + 5.1 +11.1 - 5.0 +18.4 + 6.3 + 3.4 + 7.8 - 7.3 + +787 8 + 4.6 4 5.3 + 4.7 + 7.8 +27.9 + 4.7 +10.6 +12.8 +17 +10.3 + 9.4 410.5 +20.8 +20.8 -18 2 +17.2 4 6.1 + 3.4 + 3.3 + 5.8 4 6.7 + 8.3 +32.2 -121.8 + 9.3 -11 6 -16.2 +20.4 +11.0 + 9.6 +10.9 I 6.5 +11.3 -24.7 -12.5 -110.8 + 9.8 +9 + 4.4 +22.8 +10.1 +13.1 +21.4 4 7.0 +16.5 1968 1969 1970 + 7.8 - 1.6 + 6.4 +60 1st Half 1970 2nd Half 1970 - 0.2 + 1.9 +13.0 +17.1 + 3.3 -20 0 1st Half 1971 + 8.9 + 8.2 +13.5 Quarterly 3rd Qtr. 1970 4th Qtr. 1970 +19.1 + 6.6 +24.4 + 9.4 +724.1 +15.1 1st Qtr. 2nd Qtr. 1971 1971 +11.0 + 6.6 +11.0 + 5.3 3rd Qtr. 1971 +10.4 1970--Oct. Nov. Dec. - 1.9 + 3.6 +18.4 1971--Jan. Feb. Mar. +12.2 - + 9.5 + 8.8 +15.1 + 8.8 +11 .4 + 9.2 + 9.0 -40 +11.8 +16.1 +19.3 +14.9 Apr. May June + 2.7 +17.0 + 0.2 + 9.7 +12.4 +12.2 - 6.2 4 5.3 July Aug. Sept. Oct. p + 0.3 +14.7 +15.8 -15.9 -13.1 +16.1 +29.6 -13.0 + 8.8 ~-L- Prliminarv. l- NOTE: 3.0 ' n.a. - Not 111.1 +11.9 + 8.6 + 1.0 n.a. + 8.3 + 5.4 + 6.3 S5 9 +12.9 S4 8 1 - 1 .1 + 2.7 +11 .8 +27.3 +13.5 +23.3 +17.3 + 3 0 t 5.5 + 2.3 +11.3 12.7 - 1.0 - 1 .1 4 2.8 + 7.5 - 0.7 +20.3 +15.1 +28.8 +10.6 + 9.4 +14.5 +32.4 -28.7 +58.1 +25.5 +28 6 -25.9 +25.1 +18 5 +24.9 -9 0 -10 9 -55.2 +10.7 +15.0 +14.3 +21 .8 +14.2 + 4.4 +11.3 +65 +15.8 +15.6 +15.9 + 8.4 +13.S +11.4 , 6.2 - 4.9 + 8.9 4 2.2 F6 6 1-10.5 +17.9 + 8.9 4 1.1 +14.0 11.6 + 7.4 - 4 9.8 +16.0 + 9.7 +12?. + 5.3 + 7.4 + 6.6 + 9. 1 +12.0 t +15.2 - 9.1 + 9.5 + 7.1 +17.6 +10.1 + 2.6 +11 7 + 9.6 + 2.7 +8 0 +10.3 1- 8 9 + .8 + - 3.7 .1,a n.a. + 9.0 +96 + 8.9 -2.6 --~-----I- Available. + 6.0 + 3.5 - 8.8 F 7.4 I 7.8 F 3.1 .7 I 2?.3 + 2.3 + 6.9 1.4 7.8 - 9.7 - 5.4 -5.5 ' -15 -26 +15.1 8 3 -32.1 -17 31 6 n. ' 1. - FR 712 - E changes in percentage reserve requirements against deposits, but reserve requirements Aggregate reserve series have been adjusted to eliminat on Eurodollar borrowings are included beginning October 16, 1969, and iequirements on bank-related commertial paper are included beginning October 1, 1970 CONFIDENTIAL (FR) Table 3 AGGREGATE RESERVES AND MONETARY VARIABLES November 12, 1971 SEASONALLY ADJUSTED (In millions of dollars) 1970: 1971: Weiek 1971: 28,041 28,585 29,240 26,694 27,780 28,708 27,896 28,408 29,024 296.0 303.2 308.0 4.4 6.4 6.2 210.6 211.8 212.8 48.1 48.2 48.2 162.5 163.7 164.6 208.2 213.2 218.5 16.9 19.0 21.7 191.3 184.2 196.8 315.8 321.9 324.5 Oct. Nov. Dec. 29.385 29,474 29,925 28,928 29,033 29,584 28,134 29,233 29,703 310.6 314.0 319.6 5.2 6.0 6.2 213.0 213.5 214.6 48.5 48.7 48.9 164.5 164.8 165.7 222.2 225.0 230.4 23.2 23.9 26.0 199.1 201.1 204.4 324.8 326.7 331.2 Jan. Feb. Mar. 30,229 30.515 30,748 29,801 30,176 30,398 30,029 30,255 30,534 323.9 329.1 333.2 6.7 6.2 4.8 214.8 217.3 219.4 49.2 49.6 50.0 165.5 167.7 169.4 235.3 240.9 246.1 27.1 27.4 27.8 208.2 213.5 218.3 334.1 337.1 340.2 Apr. May June 30,816 31,253 31.257 30,644 30,961 30,801 30,611 30,998 31,046 336.6 339.7 341.2 5.4 4.2 3.9 221.1 223.9 225.6 50.5 50.9 51.2 170.5 173.0 174.4 248.3 251.4 254.4 27.3 27.9 28.6 221.0 223.4 225.8 341.7 343.8 345.7 July Aug. Sept. Oct. p 31,266 31,650 32,067 31,643 30,465 30,873 31,634 31,291 31,094 31,473 31,906 31,460 343.7 347.1 349.6 349.9 3.7 6.1 6.3 4.5 227.5 228. 0 227.3 226.8 51.7 51.8 51.9 52.2 175.8 176.2 175.4 174.6 256.8 258.2 261.6 30.1 30.3 32.4 265.0 33.6 226.6 227.8 229.2 231.5 348.0 351.0 353.6 354.7 1 8 15 22 29 31,918 32,319 32,205 31,542 32,258 31,225 31,633 31,779 31,338 31,854 31,634 32,109 32,048 31,674 31,865 349.9 350.0 350.2 348.8 348.4 227.5 227.8 227.1 226.9 226.7 51.8 52.0 52.6 52.0 51.8 175.8 175.8 175.1 174.9 174.9 259.1 260.3 260.6 262.0 263.2 30.8 31.5 31.9 32.7 33.5 228.4 228.8 228.7 229.3 229.7 353.8 353.8 6 13 20 27 31.816 31,653 31,671 31,421 31,567 31,243 31,405 30,867 31,667 31,529 31,561 31,207 349.2 348.8 349.8 350.6 227.3 226.4 226.5 227.2 52.2 52.3 175.1 174.2 174.4 174.9 263.8 264.6 265.6 265.5 33.0 33.5 33.7 33.1 230.8 231.1 231.9 232.3 153.5 )53.4 354.9 355.7 3 31,709 31,506 31,296 352.8 226.6 52.1 174.5 265.5 32.8 232.7 J57.,K ending: Sept. Oct. Nov LIAlrC Nov. vuIES: (In billions of dollars) July Aug. Sept. _ _ 52.2 52.1 353.a ;52." 352. 1 _ Aggregate reserve series have been adjusteu to eliminate changes in percentage reserve re(piremcnt ngllllne dcponits, but re~vrv(< i lutrements on Euro-dollar borrowings are included beginning October 16, 1969, and requirements on bank-rel-ted commercill piper are includeld he,i 'ng October 1, 1970. Adjuisted credit proxy includes mainly total member bank deposits subject to eserve rcquircment., hank-rel ited <ommercii I p',r, and Eurodollar borrowings of U. S. banks. Weekly data are daily averages for statement wee-. Monthly data are daily averages except Lo noubank commercial paper figures which are for last day of month. p-Prelimihary. n.a. - Not Available. FR 712 - F Table 4 MARGINAL RESERVE MEASURES (Dollar amounts in millions, based on period averages of daily figures) S Free reserves Period Excess reserves revs___re Member Total __rvea Banks Borrowings ty C e Reserv Major banks 8 N.Y. Outside N.Y. Ot Country Monthly (reserves weeks ending In): 1970--January February March April May June July August September October November December - 759 - 916 - 751 - 687 - 765 - 736 -1,134 - 706 - 374 - 274 199 84 169 210 129 178 159 171 183 175 235 193 210 264 928 1,126 8O0 865 924 907 1,317 881 609 467 409 348 148 106 90 227 165 140 218 143 101 12 42 36 287 317 225 331 241 289 460 278 115 40 17 16 232 289 287 119 228 217 348 273 274 313 294 265 261 414 278 188 290 261 291 187 119 102 57 30 1971--January February March April May June July Aug. Sept. Oct. p - - 140 71 120 2 6 303 672 633 324 247 238 264 192 154 218 211 158 194 212 129 378 335 312 152 212 514 830 827 536 376 45 29 41 15 78 103 77 153 37 72 36 30 17 9 36 85 223 130 104 55 262 248 238 119 60 159 270 318 249 132 35 29 16 9 38 167 260 226 146 117 - 80 58 3 128 277 208 81 48 197 150 84 176 -17 -42 --1 34 184 127 79 86 13 6 4 14 5 12 19 26 - 191 131 204 93 365 230 102 174 174 99 306 267 46 39 134 91 40 20 47 36 61 22 74 84 27 18 51 56 Junp 2 9 16 23 30 - 361 80 149 409 518 285 73 254 210 232 646 153 403 619 750 171 46 86 103 107 100 27 4 161 132 217 25 152 202 203 158 55 161 153 308 July 7 14 21 28 - 384 986 839 478 277 5 282 67 661 991 1,121 545 -252 47 9 149 309 344 88 257 189 397 236 255 241 333 212 Aug. 4 11 18 25 - 330 566 955 680 434 27 224 91 764 593 1,179 771 43 -338 229 122 47 254 97 307 328 326 313 292 218 261 132 Sept. 1 8 15 22 29 - 324 205 247 -61 343 706 765 457 329 424 99 - 382 560 210 390 81 -86 -- 52 286 97 49 37 370 306 231 106 230 185 173 130 68 157 Oct. 6 13 20 27 p - 95 400 122 370 214 49 210 44 309 449 332 414 29 100 31 128 5 56 81 77 113 185 121 111 162 108 99 98 Nov. 3 p 10 p - 198 103 413 19 215 122 -21 --- 105 46 110 55 1971--Apr. May 7 14 21 28 S-- Preliminary. *p Preliminary. - 1 -- 1 1 Table 5 SOURCE OF FEDERAL RESERVE CREDIT Retrospective Changes (Dollar amounts in millions of dollars, based on weekly averages of daily Total Federal Reserve credit Period (Excl. float) Year. 1969 (12/25/68-12/31/69) 1970 (12/31/69-12/30/70) 1971--Apt. May K Bills 1/ holdings Other +5,192 +4,276 ) +4,279 ( -+3,220 (143) 7 14 21 28 + 145 + 4 86 128 360 +5,539 +3,351 Repurchase Federal Agency Securities Repurchase agreements Outright U.S. Government securities Total 82) 12) 70) + 707 +1,180 + 206 - 124 + + + + - 17 298 124 84 113 + 423 + + - 43 + 30 - 5 12 19 26 + + + + 712 272 304 144 + + + + 384 173 400 256 - ) + - ) - 2 9 16 23 30 - 57 418 2/ 47 2/ + 11 - 439 463 - 106 + 348 +1,151 - - ) - ) ) + + figures) agreements Bankers' acceptances + - Member banks borrowings 35 + 245 28 - 884 50 73 328 99 -167 - 168 71 56 -- 4 June Tuly Aug. Sept. Oct. Nov. +1,059 7 14 21 28 + + + 373 74 562 - 4 11 18 - 70 "- 5 73 39) 39) ) + 27 + - 57) 87) 144) + 35 + -- 162 119 + + 131 208 359 + 4 25 27 + 141 + 101 + 40 + - 1 73 + 50 25 - 49 157 25 + 296 + 397 1 8 15 22 29 + 399 + 282 + - 309 54 320 - 145 191 + 595 + 307 6 13 20 27 + 655 + 394 - 299 - 432 - 166 239 3 10 + - 48 116 + - 19 156 ~I~,-~-~L---~---LL-------L--_,_._~,,--L- + 27 - -- F 537 -386 ) + 145) 70) -- 70) ) ) -) 207 -134 109 - 101 117 218 76 411 263 145) + + 145) -) + 25 + + + + + 153 + 108 ) - 299 91) 91) + 193 - 193 ) 54) + + 29 40 - -- 91 15 - I ____ + ~__ 52 -- 39 5 __ i ~__,~ _ Figures in parenthesis reflect reserve effect of match sale-purchase agreement. Includes effect of changes in special certificates of $ +94 million of the week of June 9, $ +416 million of the week of June 16, ind $ -510 million of the week of June 23. Preliminary. _~ Table 6 MAJOR SOURCES AND USES OF RESERVES Retrospective and Prospective Changes (Dollar amounts in millions, based on weekly averages of daily figures) r e s e r v of s u pp 1 y a f f e c t i n g F a c t o r s Foreign Other nonmember Tr Gold Currency Federal Reserve credit (excl. tock outside operations Float deposits deposits and gold loans F.R. accounts banks opeand float) 1/ r e s ) c t on r e s e f n i c a t ( S g n Period Year: 1969 (12/25/68-12/31/69) 1970 (12/31/69-13/30/70) 1971--Apr. May June 7 14 21 28 + + + 279 275 348 54 5 12 19 26 + + + + 771 201 503 115 2 + 9 16 23 30 Jul, Aug. 45,539 43,351 -+1,150 - - = Change in total = Bank use of reserves Required reserves Exces reserve reserves -2,676 -3,122 - 813 + 773 + 241 + 667 + + 54 1 898 -1,655 +1,448 +1,163 +1,340 +1,257 + 108 94 ----- + 257 483 414 580 + - + 235 + 241 + 301 10 + + + 14 14 21 1 + + - 173 217 187 23 + + 270 45 313 219 + + + 171 24 440 252 99 69 - 127 33 -171 229 -- + + 129 351 465 69 + 307 - 248 + 83 + 218 + - + - 14 13 5 25 + - 72 99 45 315 + + - 623 696 278 116 + + - 306 561 406 188 + 317 - 135 - 128 + 72 - 33 + 3D - 81 + 111 + + - 36 1 5 11 + + - 28 228 33 28 + + 390 327 294 373 + + 178 146 250 351 - 212 + 181 - 44 + 22 243 249 131 384 497 211 421 177 305 -- - 80 + 169 -327 974 + 202 + 160 +1,156 ----- + 240 378 125 362 + + - 522 398 648 776 + + - 291 122 291 334 -- 7 + 362 -- - 616 - 54 + 376 - 4 - 43 + 21 - 24 14 + 364 -- - 483 - 244 + 217 + 8 + 82 - 59 + 213 - 272 21 28 + 743 -957 --- + 358 895 + 176 + 204 + 11 - 453 + 4 29 + - 110 27 + - 678 309 + - 401 94 + 277 - 215 - 51 + 266 - 153 - 37 - 89 + 271 - 179 + 450 - 168 - - 65 + 5 - 29 - 564 - 74 + 45 4 + 335 11 - 204 - 86 18 25 + - 483 116 - 114 -- + 384 55 + 125 - 113 + 178 + 16 - 7 8 - 1 332 + - 275 494 + - 78 361 + 197 - 133 Sept. 1 8 15 22 29 + 381 + 670 387 575 + 837 ------ + + 392 191 190 238 89? - 45 76 36 - 374 - 242 - 280 + 163 + 326 + 683 -742 + + + 10 29 26 11 4 + + - 31 57 256 25 39 + + + 408 336 4 491 713 + + + 175 455 46 183 309 + + + 233 119 42 308 404 Oct. 6 13 20 27 p + 576 -217 36 - 422 ----- + 235 344 566 289 - 139 + 52 1 51 -142 + 83 4 785 - 490 + - 37 49 11 11 + + + 102 85 202 37 + - 80 291 369 647 + + - 49 126 208 481 + - 129 165 161 166 3 p - 142 -- + 150 + 357 + 203 + 22 - 42 + 550 + 181 + 369 10 p - 161 -- - 230 + 202 - 166 + 15 - 18 - 358 + 36 - 394 Nov. -- 1/ For retrospective details, see Table 5. 2/ Includes $400 million in p - Preliminary special drawing account. 17 - 490 Table 7 Reconciliation--Money supply and Credit Proxy Adjusted (Billions of dollars, not seasonally adjusted) Levels, 1971 Item June I Sept. Oct.p Dollar Change 3rd Qtr. Oct. 1971 I 1. Money Supply--M 1 223.6 225.7 226.8 2.1 2. Plus: Time deposits other than large CD's 226.1 229.2 231.7 3.1 2.5 Equals: 449.6 454.9 458.5 5.3 3.6 3. Money supply--M 2 1.1 Plus: 4. 5. U. S. Gov't. deposits at member banks 4.4 6.3 4.3 1.9 -2.0 Net domestic commercial bank deposits at member banks 4.0 4.4 4.9 0.4 0.5 28.4 32.1 33.6 3.7 1.5 6. Large CD's 7. Nondeposit funds 1/ 4.5 4.1 4.8 -0.4 0.7 8. Time deposit of U. S. Gov't and commercial banks 1.9 2.2 2.4 0.3 0.2 F.R. Float 2.7 3.0 3.1 9. 0.3 0.1 Less: 10. 11. 12. 13. 14. Demand deposits at nonmember banks 39.9 40.8 41.3 0.9 Time deposits at nonmember banks 58.8 60.8 61.8 2.0 Currency component of the money supply 51.1 51.9 52.2 0.8 Deposits at Edge Act Corps., agencies and foreign branches 0.7 0.8 0.8 Foreign deposits at F.R. 0.4 0.4 0.4 0.5 0.3 0.1 Equals: 15. Credit Proxy Adjusted 344.7 352.2 355.1 p - Preliminary 1/ Includes borrowings from banks own foreign branches, commercial paper and other minor items. NOTE: Sums of levels and changes may not add because of rounding. 2.9 Table 7A Reconciliation--Money Supply and Credit Proxy Adjusted (Billions of dollars, seasonally adjusted) Levels Item 1. Money supply--M 1 2. Plus: Time deposits other than large CD's 3. Equals: June Sept. 1971 Oct.p 3rd Qtr. 1971 Dollar Percentage Change Change Sept-Oct.1971 Dollar Percentage Change Chan g e 225.6 227.3 226.8 1.7 3.0 -0.5 -2.6 225.8 229.2 231.5 3.4 6.0 2.3 12.0 451.4 456.5 458.3 5.1 4.5 1.8 4.7 Money supply-- M2 Plus: 4. 5. U. S. Gov't. deposits at member banks 3.9 6.3 4.5 Net domestic commercial bank deposits at member banks 4.3 4.3 4.4 6. Large CD's 7. Nondeposit funds 1/ 28.6 32.4 33.6 2.4 -1.8 3.8 4.5 4.1 4.8 -0.4 0.7 Currency component of the money supply 51.2 51.9 52.2 0.7 0.3 Deposits at nonmember banks, and other items 2/ 95.7 98.0 98.7 2.3 0.7 345.7 353.6 354.7 7.9 Less: 8. 9. Equals: 10. Adjusted Credit Proxy Includes borrowings from banks own foreign branches, commercial paper and other minor items. 2/ Other items include money supply type deposits at Edge Act corporations and domestic branches of foreign banks. NOTE: Sums of levels and changes may not add because of rounding. 1/ p - Preliminary.
@FedFRASER