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Strictly Confidential (FR) Class I FOMC MONETARY POLICY ALTERNATIVES Prepared for the Federal Open Market Committee By the staff Board of Governors of the Federal Reserve System Strictly Confidential (FR) Class I - FOMC November 12, 1993 MONETARY POLICY ALTERNATIVES Recent Developments (1) Since the September 21 FOMC meeting, the federal funds rate has averaged close to its intended level of 3 percent, while most short-term rates have moved up 15 to 20 basis points. For maturities that recently crossed the turn of the year, much of that increase owed to the anticipated pressures on overnight rates associated with window-dressing efforts at year end. The Treasury bill sector has been pressured, in part, by increases in supply: With the elimina- tion of the seven-year note and no thirty-year bond issuance in the fourth quarter under the new auction schedule, the Treasury will, on net, retire coupon securities this quarter, and rely more heavily on bills. On October 18, Morgan Guaranty trimmed its prime lending rate 1/2 percentage point, to 5-1/2 percent, but no other major money center bank followed suit. (2) Intermediate- and long-term rates fell in the weeks fol- lowing the September FOMC meeting, reaching twenty-year lows. However, strength in incoming economic data over the latter part of the intermeeting period has contributed to upward revisions to market participants' expectations of economic growth over the intermediate run. With 1. With the usual summer bulge in seasonal borrowing receding, the Desk lowered the borrowing allowance by $150 million in four steps, to $100 million. Actual borrowing, boosted by quarter-end pressures and a miss in nonborrowed reserves related to an unexpected swing in the Treasury balance, exceeded the allowance by about $45 million, on average, in the three complete maintenance periods since the previous FOMC meeting. 2. Rate quotes are taken as of noon on Friday, November 12. 3. Term contracts currently imply about a 10 percent federal funds rate for the three-day weekend beginning December 31. However, those now using these contracts to lock in funds are said to be primarily foreign banks, which in the past have paid premiums for year-end funding. firmer credit demands and a tighter monetary policy now foreseen over time, intermediate-term Treasury rates rose sharply, and have increased about 25 basis points on balance since the September meeting. Treasury and private long-term rates have increased as many as 20 basis points on net. The robust gains in most equity indexes that were posted early in the period were whittled back when interest rates rose in recent weeks: most major indexes registered net gains of 2 to 6 percent. (3) The dollar's weighted-average foreign exchange value in- creased 2-1/4 percent, on balance, over the intermeeting period. The strength of the dollar reflected not only upward revisions to expectations about growth in the United States, but also downward revisions in the outlook for Europe and Japan. On average over the intermeeting period, both short- and long-term interest rates declined about 25 basis points in major foreign countries. In Mexico, financial markets were roiled by anxieties about the fate of NAFTA, and the peso depreciated 3 percent on balance against the dollar. In recent days, these anxieties appear to have abated, and the peso has steadied. In contrast to the general strength of the dollar, its value fell against the Canadian dollar, as the new government in Canada affirmed its support for antiinflationary macroeconomic policies, resolving some of the uncertainties that had troubled market participants. The Desk did not intervene. (4) Growth of the monetary aggregates ran a bit faster over the past two months than the staff had envisioned in the previous bluebook. Although somewhat more rapid income and spending than anticipated likely contributed to this overage, special factors also appear to have played a role. M2 flattened in October after a relatively strong advance in September, with growth averaging 2-1/4 percent over the two months--twice the expected pace. most volatile component: The upward surprise in M2 owed to its Overnight RPs by the end of October were about $6 billion above the level anticipated at the time of the September meeting.4 Household M2 (M2 less demand deposits and overnight RPs and Eurodollar deposits) was in line with projections of no growth. This weakness in household M2 apparently owed largely to the continued allure of capital market instruments. While flows into stock and bond mutual funds tapered off in September, partial data for October point to a substantial pickup to a near-record pace.5 Through October M2 grew at a 1-1/4 percent annual rate from the fourth quarter of 1992, placing it in the lower portion of its annual range. percent rate over September and October. M1 expanded at a 12 Currency growth averaged a 10-3/4 percent rate over the past two months, in part reflecting continued strong demands for U.S. dollars abroad. In addition, the surge in mortgage prepayments over the last two months provided a temporary lift to demand deposits and perhaps to other checkable deposits as well. 9 4. As expected, NationsBank spun off its recently acquired dealer into a nonbank subsidiary, removing $4-1/2 billion of overnight RPs from M2 in late September. 5. M2 plus bond and stock mutual funds (excluding institutional holdings and IRA/Keogh accounts) is estimated to have grown at an 81/4 percent pace over the past two months. 6. M2 velocity rose at a 1-1/4 percent rate in the third quarter, down from about a 4 percent rate of growth over the first half of the year. 7. M1 velocity plunged in the third quarter. This decline reflects the lagged effects of prior reductions in competing interest rates as well as identifiable special factors, such as currency flows abroad and mortgage prepayments. 8. Foreign currency shipments are estimated to have accounted for about 2 percentage points of the growth in M1 over this period. 9. Total reserves and the monetary base grew at 18-1/4 and 11-1/2 percent rates, respectively, over September and October. (5) M3 grew at a 2-1/2 percent pace over the past two months, in contrast to the staff anticipation that it would be about flat. In October, M3 was about 1/4 percent at an annual rate above the zeropercent lower bound of its annual cone. Aside from the unexpected boost provided by M2, the broader aggregate was aided by a runup in institution-only money funds. months. Large time deposits edged lower over the two Bankers apparently have had little reason to compete for deposit funds of late. Bank credit was unchanged in October and, even abstracting from the effect of the restructuring by NationsBank, expanded at only about a 3-3/4 percent rate over the past two months. (6) The growth of nonfederal sector debt dipped to about a 3-1/2 percent rate in September but still remained ahead of its pace in the first half of the year. Short-term credit flows to businesses have remained anemic, likely reflecting further refinancing of bank loans with the proceeds of capital market offerings. Business loans at com- mercial banks fell over September and October, despite greater efforts by banks to extend such credit, as evidenced by some additional easing of standards and terms on business credit reported by bank loan officers in our most recent survey. Household borrowing has picked up, perhaps indicating a sense of brighter income prospects and greater comfort with financial positions. Consumer credit expanded at a 10-1/4 percent rate in September and bank data suggest another strong month in October. Net mortgage growth is estimated to have remained modest over the past few months, however, despite the apparent surge in refinancings. Similarly, the heavy gross flow of issues by state and local governments has mostly reflected efforts to pay down existing debt; net tax-exempt debt has risen at a shade above 4 percent in recent months. On balance, from the fourth quarter of 1992 through September, nonfederal debt grew at about -5- a 3 percent rate. With the growth of federal debt continuing to slow, the total debt of nonfinancial sectors expanded at a 4-1/2 percent rate in September, sufficient to keep the aggregate a little above the fourpercent lower bound of its monitoring range. MONEY, CREDIT, AND RESERVE AGGREGATES (Seasonally adjusted annual rates of growth) QIV. Aug. Sep. Oct. to Oct. M1 10.1 13.6 10.4 10.6 M2 1.6 4.0 0.5 1.3 M3 0.6 3.4 1.7 .3 Domestic nonfinancial debt Federal Nonfederal 5.1 9.0 3.7 4.4 7.0 3.5 Bank credit 3.2 4.0 0.1 Nonborrowed reserves 7.5 15.2 23.0 12.2 Total reserves 9.7 16.6 19,9 12.5 11.5 15.2 7.8 10.6 Adjustment plus seasonal borrowing 352 428 286 Excess reserves 952 1090 1081 Money and credit aggregates ---- 4.7 9.2 3.1 4.5 Reserve measures Monetary base Memo: (Millions of dollars) QIV to September for debt aggregates. Includes "other extended credit" from the Federal Reserve. NOTE: Monthly reserve measures, including excess reserves and borrowing, are calculated by prorating averages for two-week reserve Reserve data incormaintenance periods that overlap months. porate adjustments for discontinuities associated with changes in reserve requirements. Policy Alternatives (7) Three policy alternatives are presented for consideration by the Committee. Under alternative B, the federal funds rate would continue to trade around 3 percent.1 0 This alternative is consistent with the monetary policy assumption of a steady federal funds rate for several quarters ahead that underlies the greenbook projection of economic activity and inflation. In that forecast, real GDP growth settles into a 2-1/2 percent pace next year, as the stimulus imparted by past interest rate declines and diminishing balance-sheet and credit supply constraints about offsets the drag from continued fiscal retrenchment; the unemployment rate remains around 6-3/4 percent, and core inflation edges down. Market participants generally seem to believe that the economic expansion will run a little faster than projected by the staff and to avoid a pickup in inflation down the road the Federal Reserve will begin to firm reserve conditions in the first half of next year. If economic and inflation data over coming months instead prove to be closer to the staff forecast, bond yields probably will retrace some of their recent runup. (8) The staff expects that a little faster expansion of spend- ing and less cautious attitudes toward credit on the part of borrowers and lenders will contribute to a slight pickup in the growth of nonfederal debt over coming months. Securities markets should remain very receptive to offerings, as spreads of both investment-grade and junk issues relative to Treasuries stay narrow. With long-term rates not much above their recent lows, borrowing by households and firms is 10. The allowance for adjustment and seasonal borrowing would be maintained initially at its current level of $100 million. Further small reductions in the allowance likely would be needed over the intermeeting period as demands for seasonal credit continue to fall off. expected to continue to be focused on longer-term sources. The recent trend toward a greater willingness to lend by banks and other inter- mediaries is unlikely to be reversed. However, credit flows through depositories, while firming in early 1994, are likely to remain subdued, limiting banks' and thrifts' need to bid for deposits. For 1993, domes- tic nonfinancial sector debt is projected to finish the year 4-1/2 per- cent above its 1992:Q4 base, a little above the lower edge of its 4 to 8 percent monitoring range. From the fourth quarter of this year through next March, debt is projected to expand at a 5-1/4 percent rate; this growth would place it well within its tentative 1994 monitoring range of 4 to 8 percent. Alt. A Alt. B Alt. C Growth from October to December M2 2-1/2 M3 M1 1-1/4 11-1/2 2 1 10-1/2 1-1/2 1 9-1/2 3 1-3/4 11-1/4 2-1/2 1-1/2 10-1/2 2 1-1/4 9-1/2 Growth from October to March 1994 M2 M3 M1 (9) As shown in the lower panel of the above table, M2 under alternative B is projected to grow at a 2-1/2 percent rate over October to March. This would leave M2 in the fourth quarter 1-1/4 percent above its Q4 1992 base, just within its 1 to 5 percent annual range. By next March, this aggregate would be 2-3/4 percent at an annual rate above its fourth quarter 1993 base, and well within its provisional range. The firming in M2 growth over the next several months reflects forecasts of stronger expansion in nominal GDP late this year, the effects of the recent surge in mortgage refinancing activity, and lagged stimulus from Alternative Levels and Growth Rates for Key Monetary Aggregates Alt. A Levels in Billions Sep-93 Oct-93 Nov-93 Dec-93 Jan-94 Feb-94 Mar-94 M1 M3 M2 Alt. B Alt. C Alt. A Alt. B Alt. C Alt. A Alt. B Alt. C 3532.9 3534.7 3540.1 3549.4 3563.0 3571.7 3580.0 3532.9 3534.7 3539.3 3546.5 3558.3 3565.7 3573.2 3532.9 3534.7 3538.4 3543.5 3553.6 3559.8 3566.3 4176.8 4183.2 4186.6 4192.4 4202.0 4207.9 4213.6 4176.8 4183.2 4186.2 4190.9 4199.5 4204.7 4210.0 4176.8 4183.2 4185.9 4189.5 4197.0 4201.6 4206.3 1106.5 1116.2 1126.4 1137.8 1148.4 1158.7 1169.0 1106.5 1116.2 1125.9 1135.9 1145.4 1154.9 1164.5 1106.5 1116.2 1125.3 1134.0 1142.3 1151.1 1160.1 Monthly Growth Rates Sep-93 Oct-93 Nov-93 Dec-93 Jan-94 Feb-94 Mar-94 4.0 0.6 1.9 3.2 4.6 2.9 2.8 4.0 0.6 1.6 2.5 4.0 2.5 2.5 4.0 0.6 1.3 1.8 3.4 2.1 2.2 3.4 1.8 1.0 1.7 2.8 1.7 1.6 3.4 1.8 0.9 1.4 2.5 1.5 1.5 3.4 1.8 0.8 1.1 2.2 1.3 1.4 13.6 10.5 11.0 12.1 11.2 10.8 10.6 13.6 10.5 10.4 10.7 10.0 10.0 10.0 13.6 10.5 9.8 9.3 8.8 9.2 9.4 Quarterly Averages 93 Q2 93 Q3 93 Q4 94 Q1 2.2 3.1 2.0 3.4 2.2 3.1 1.9 2.9 2.2 3.1 1.7 2.4 2.3 1.2 1.9 1.9 2.3 1.2 1.8 1.7 2.3 1.2 1.7 1.5 10.5 12.9 11.5 11.3 10.5 12.9 11.2 10.3 10.5 12.9 11.0 9.2 Growth Rate From Sep-93 Oct-93 Dec-93 Oct-93 To Dec-93 Dec-93 Mar-94 Mar-94 1.9 2.5 3.4 3.1 1.5 2.0 3.0 2.6 1.2 1.5 2.6 2.1 1.5 1.3 2.0 1.7 1.4 1.1 1.8 1.5 1.2 0.9 1.6 1.3 11.3 11.6 11.0 11.3 10.6 10.6 10.1 10.4 9.9 9.6 9.2 9.4 92 Q4 92 Q4 93 Q4 Oct-93 Dec-93 Mar-94 1.3 1.5 3.3 1.3 1.4 2.8 1.3 1.3 2.3 0.3 0.4 1.9 0.3 0.4 1.7 0.3 0.4 1.4 10.6 10.9 11.2 10.6 10.8 10.3 10.6 10.6 9.3 91 Q4 92 Q4 92 Q4 93 Q4 1.7 1.4 1.7 1.3 1.7 1.3 0.2 0.4 0.2 0.4 0.2 0.3 14.3 10.8 14.3 10.7 14.3 10.6 1993 Target Ranges: 1.0 to 5.0 0.0 to 4.0 Chart 1 ACTUAL AND TARGETED M2 Billions of Dollars * 3750 Actual Level Short-Run Alternatives -1 3700 -- 3650 -- 3600 -- 3550 - 3500 '' -13450 I O I N I D I J I F I M I A I M I J J 1993 I I A I S I O I N I D I J I F I M I A 1994 I M 3400 J Chart 2 ACTUAL AND TARGETED M3 Billions of Dollars | * 4400 Actual Level Short-Run Alternatives -1 4350 4300 4% 4250 * * SA C 4200 0% -- 4150 I ON I I D I J I F I I M A I M I I J 19319 A J 1993 I I SO I - .1** ND I I J I F I MA 1994 I I M 4100 J Chart 3 M1 Billions of Dollars 1220 15% - Actual Level * Short-Run Alternatives ..' - 1200 - 1180 15%10% - .'. .. " * .A' *.** .* o\: 1 1 6 0 B5% .-*:-" o, . ./ .. . ...... 1140 .. .. ................. ""0% .- - 1120 10% - - 1100 1080 5% - - 1060 1040 - ....... .. . .. .. ........ ........ II O N D J F M A I M I J J 1993 0% ....................... ... I I A I S - I O N D J F M A 1994 M 1020 1020 1000 J Chart 4 Debt Billions of Dollars 13000 * Actual Level Projected Level 12800 12600 12400 12200 12000 11800 ON D J F MA M J J 1993 A S ON D J F MA 1994 M 11600 J -10- the previous flattening of the yield curve. Despite the latter two effects, M2 velocity rises noticeably further in the fourth and first quarters as funds continue to be diverted from deposits into longer-term mutual funds. For that reason, the velocity of M2+, which adds the market value of net holdings of bond and stock mutual funds to M2, seems likely to remain more stable than that of M2 in coming quarters. Ml, which is projected to expand at a 10-1/2 percent rate from October to March, would still account for all of the increase in M2. The continued brisk pace of M1 growth mainly owes to earlier declines in its opportunity cost, but sustained strong foreign currency demands also are seen as supporting expansion of this aggregate. With core deposits and non-deposit sources continuing to fund the bulk of moderate expansion of bank credit, issuance of managed liabilities in M3 should remain weak. M3 would increase at a 1-1/2 percent rate from October to March. This aggregate would be a little above the lower bound of its 0 to 4 percent range for 1993 and more distinctly within its tentative 1994 range by March. (10) Under Alternative C, the federal funds rate would rise 1/2 percentage point to 3-1/2 percent.12 An immediate firming of reserve market conditions is not embedded in market interest rates, and consequently, short-term interest rates are likely to rise by nearly the full 1/2 percentage point increase in the federal funds. Long-term rates probably would rise appreciably at first, but some of those increases could be reversed over time as market participants interpreted that action as trimming the trajectory of economic activity and prices and reducing the need for more aggressive tightening in the future. 11. In association with continued rapid growth in M1 and required reserves, total reserves would expand at a 9.6 percent pace over the October-March period and the monetary base at a 9.3 percent rate. 12. The borrowing allowance would be increased to $125 million. -11With dollar-denominated returns rising significantly, the dollar likely would appreciate considerably on foreign exchange markets. (11) The Committee might favor alternative C if strength in recent economic data were seen as implying that any delay in firming ran an unacceptably high risk that economic activity could develop excessive momentum that would rapidly erode the remaining degree of slack and produce an acceleration of prices. Even if growth in aggregate demand turns out to be as moderate as in the staff forecast, a tightening would better ensure a resumption of a distinct downward trend to inflation. Under this alternative, M2 would expand at a 2 percent rate from October through March of next year, leaving growth from the fourth quarter of this year in the lower half of its tentative range. M3 would expand at a 1-1/4 percent rate from October through March, also in the lower half of its provisional range. (12) Alternative A contemplates an easing in reserve market pressures and a decline in the federal funds rate to 2-1/2 percent.13 Implementation of alternative A would be especially surprising to market participants, given their view that underlying economic growth is strengthening. Short-term interest rates, including the prime rate, probably would fall by about the 50 basis point reduction in the federal funds rate, and the value of the dollar on foreign exchange markets likely would decline. In these circumstances, any lasting reduction in intermediate- and longer-term interest rates likely would be limited by a belief that the action would need to be reversed before too long, as well as by perceptions that the Federal Reserve was placing less weight 13. The reduction in the federal funds rate would be accomplished either through a commensurate cut in the discount rate or through a reduction in the borrowing allowance to $75 million. -12on containing inflationary pressures and more weight on promoting nearterm growth in output and employment. Issuance of bonds and mortgages likely would be heavy, as borrowers reacted to a sense that this was the last window of low long-term rates for quite some time. (13) Alternative A might be viewed as appropriate if the Com- mittee wished to make appreciable progress in reducing remaining slack in the economy, in contrast to the plateau for the unemployment rate seen in the staff forecast. Lower short rates might also be seen as desirable if the Committee were concerned about the possibility of renewed weakness in economic growth over coming quarters, perhaps brought on by tax increases becoming effective in 1994. This alterna- tive would provide somewhat greater assurance that growth of the broad monetary aggregates would be well within their annual ranges in the first half of next year. Although the steeper yield curve under alter- native A would make bond and stock funds more attractive, experience of the last few years suggests some net shift of funds from market instruments to M2 in the months following monetary policy easings. Thus, the staff projects that M2 in March would be 3-1/4 percent at an annual rate above its fourth-quarter base, a little above the middle of its tentative range, and M3 would be higher by 2 percent, around the middle of its range. -13Directive Language (14) Presented below is draft wording for the operational paragraph that includes the usual options for Committee consideration. OPERATIONAL PARAGRAPH In the implementation of policy for the immediate future, the Committee seeks to DECREASE SOMEWHAT/maintain/INCREASE SOMEWHAT the existing degree of pressure on reserve positions. In the context of the Commit- tee's long-run objectives for price stability and sustainable economic growth, and giving careful consideration to economic, financial, and monetary developments, slightly (SOMEWHAT) greater reserve restraint (WOULD/MIGHT) or slightly (SOMEWHAT) lesser reserve restraint (WOULD) might be acceptable in the intermeeting period. The contemplated reserve conditions are expected to be consistent with modest growth in M2 and M3 over COMING MONTHS[DEL:balance of the year]. the November 15, 1993 SELECTED INTEREST RATES (percent) Short-Term CDs secondary market Treasury bills secondary market federal funds comm. paper money market mutual bank prime U.S. government constant maturity yields Long-Term corporate conventional home mortgages A-utility municipal secondary primary recently Bond market market ARM 6-month 1-year 3-month 1-month fund loan 3-year 10-year 30-year offered Buyer fixed-rate fixed-rate 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 92 -- High -- Low 4.20 2.86 4.05 2.69 4.22 2.82 4.51 2.91 4.32 3.07 5.02 3.17 4.51 2.74 6.50 6.00 6.32 4.24 7.65 6.30 8.07 7.29 8.99 8.06 6.87 6.12 9.09 7.73 9.03 7.84 6.22 4.97 93 -- High -- Low Monthly Nov 92 Dec 92 3.24 2.87 3.10 2.82 3.26 2.94 3.48 3.07 3.36 3.06 3.39 3.07 2.92 2.59 6.00 6.00 5.06 4.07 6.73 5.24 7.46 5.83 8.28 6.79 6.44 5.41 8.17 6.72 8.14 6.74 5.36 4.14 3.09 2.92 3.13 3.22 3.34 3.36 3.52 3.55 3.58 3.48 3.25 3.71 2.83 2.82 6.00 6.00 5.14 5.21 6.87 6.77 7.61 7.44 8.51 8.27 6.56 6.43 8.35 8.22 8.31 8.22 5.26 5.45 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Weekly Jul 93 93 93 93 93 93 93 93 93 93 3.02 3.03 3.07 2.96 3.00 3.04 3.06 3.03 3.09 2.99 3.00 2.93 2.95 2.87 2.96 3.07 3.04 3.02 2.95 3.02 3.14 3.07 3.05 2.97 3.07 3.20 3.16 3.14 3.06 3.12 3.35 3.25 3.20 3.11 3.23 3.39 3.33 3.30 3.22 3.25 3.19 3.12 3.11 3.09 3.10 3.21 3.16 3.14 3.12 3.24 3.21 3.14 3.15 3.13 3.11 3.19 3.15 3.14 3.14 3.14 2.83 2.72 2.66 2.65 2.62 2.62 2.64 2.64 2.65 2.65 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 4.93 4.58 4.40 4.30 4.40 4.53 4.43 4.36 4.17 4.18 6.60 6.26 5.98 5.97 6.04 5.96 5.81 5.68 5.36 5.33 7.34 7.09 6.82 6.85 6.92 6.81 6.63 6.32 6.00 5.94 8.13 7.80 7.61 7.66 7.75 7.59 7.43 7.16 6.94 6.91 6.40 6.12 5.85 5.99 5.92 5.87 5.80 5.67 5.50 5.48 8.03 7.65 7.57 7.46 7.48 7.41 7.19 7.05 6.89 6.85 8.02 7.68 7.50 7.47 7.47 7.42 7.21 7.11 6.92 6.83 5.23 4.98 4.79 4.71 4.65 4.64 4.56 4,48 4.36 4.25 28 93 3.03 3.09 3.24 3.46 3.18 3.15 2.65 6.00 4.59 5.92 6.68 7.37 5.87 7.19 7.25 4.55 Aug Aug Aug Aug 4 11 18 25 93 93 93 93 3.10 2.98 3.06 2.98 3,06 3.03 3.01 2.99 3.20 3.17 3.12 3.10 3.40 3.36 3.28 3.25 3.16 3.16 3.13 3.14 3.16 3.15 3.15 3.12 2.65 2.64 2.64 2.64 6.00 6.00 6.00 6.00 4.52 4.48 4.38 4.26 5,84 5.82 5.71 5.58 6.55 6.48 6.32 6.21 7.31 7.17 7.09 6.97 5.83 5.68 5.61 5.56 7.23 7.12 6.97 6.87 7.21 7.17 7.10 6.97 4,55 4,51 4.45 4.41 Sep Sep Sep Sep Sep 1 8 15 22 29 93 93 93 93 93 3.08 2.99 3.03 3.12 3.05 3.01 2.96 2.97 2.94 2.92 3.11 3.05 3.07 3.07 3.05 3.23 3.16 3.22 3.26 3.23 3.13 3.11 3.12 3.12 3.10 3.13 3.13 3.13 3.14 3.16 2.64 2.64 2.64 2.65 2.65 6.00 6.00 6.00 6.00 6.00 4.19 4.07 4.17 4.21 4.17 5.45 5.30 5.33 5.42 5.35 6.10 5.93 5.94 6.07 6.01 6.83 6.85 6.99 7.07 6.95 5.52 5.44 5.49 5.51 5.53 6.82 6.91 6.88 6.94 6.95 6.93 6.82 6.96 6.95 6.89 4.40 4.33 4.36 4.34 4.29 Oct Oct Oct Oct 6 13 20 27 93 93 93 93 3.24 2.91 2.97 2.97 2.95 3.00 3.03 3.06 3.06 3.09 3.11 3.17 3.23 3.21 3.24 3.30 3.24 3.22 3.22 3.26 3.16 3.15 3.13 3.14 2.68 2.64 2.65 2.64 6.00 6.00 6.00 6.00 4.18 4.12 4.11 4.24 5.36 5.28 5.24 5.42 6.01 5.94 5.83 5.98 6.93 6.79 6.97 6.97 5.52 5.41 5.44 5.56 6.78 6.72 6.87 6.94 6.87 6.81 6.74 6.86 4.28 4.33 4.14 4.19 Nov Nov 3 93 10 93 3.04 2.96 3.07 3.09 3.22 3.25 3.37 3.40 3.34 3.36 3.15 3.15 2.66 2.65 6.00 6.00 4.39 4.49 5.54 5.70 6.03 6.20 7.25 7.23 5.72 5.69 7.26 7.24 7.11 7.12 4.17 4.28 Nov Nov Nov 5 93 11 93 12 93 2,95 2.91 3.06 - 3.26 -- 3.42 - 3.36 -- 3.15 - --- 6,00 6.00 4.53 5,75 6.22 2,98p 3.11 3.25 3.38 3.36 3.14 -- 6.00 4.45 5.66 6.15 S3-month Daily 1 16 NOTE: Weekly data for columns 1 through 11 are statement week averages. Data in column 7 are taken from Donoghue's Money Fund Report. Columns 12, 13 and 14 are 1-day quotes for Friday, Thursday or Friday, respectively, following the end of the statement week. Column 13 is the Bond Buyer revenue index. Column 14 is the FNMA purchase yield, plus loan servicing lee, on 30-day mandatory delivery commitments. Column 15 is the average contract rate on new commitments for fixed-rate mortgages (FRMs) with 80 percent loan-to-value ratios at major institutional lenders. Column 16 is the average initial contract rate on new commitments for 1-year. adjustablerate mortgages (ARMs) at major institutional lenders offering both FRMs and ARMs with the same number of discount points. p - preliminary data Stoctly Confadential (FR) ClassilFOMC and Money Credit Measures Aggregate NOVE Seasonally I Money stock measures and liquid Bank assets nontransactions components Period M1 M2 1 2 BER15,1%B adjusted In M3 only 3 4 M3 nonfinancial t' 6 U , r gove nment' other' total' 7 L 5 In M2 Domestic credit total loans total loans and investments' 8 9 10 Annual growth rates(%): Annually 1990 19911992 (Q4 to 04) 4.3 8.0 14.3 4.0 2.8 1.7 3.9 1.1 -2.7 -6.5 -6.2 -6.7 1.8 1.1 0.2 2.0 0.3 1.3 5.6 3.4 3.8 10.2 11.3 10.7 5.5 2.6 3.1 6.6 4.6 5.0 Quarterly Average 1992-4th QTR. 1993-lst QTR. 1993-2nd QTR. 1993-3rd QTR, 16.8 6.5 10.5 12.9 2.6 -1.9 2.2 3.1 -3.0 -5.4 -1.4 -1.1 -15.0 -14.0 3.3 -9.3 -0.4 -3.9 2.3 1.2 1.4 -2.4 3.3 1.6 4.1 1.8 6.1 7.2 6.7 7.6. 10.4 9.2 3.5 2.5 2.5 3.9 4.3 3.8 4.6 5.3 Monthly 1992-OCT. NOV. DEC. 19,3 15.6 8.8 3.8 2.2 -0.5 -2.4 -3.3 -4.3 -24.9 -15.2 -20.8 -1,1 -0.7 -3.8 0.6 2.2 -2.0 3.3 2.7 2.2 1.0 7.2 13.8 3,7 3.3 2.7 3,0 4.3 5.6 7.7 -0.2 2.6 9.0 27.3 7.2 13.3 10.1 13.6 10.5 -3.2 -4.0 -0.9 0.6 10.5 2.5 1.9 1.6 4.0 0.6 -7.7 -5.6 -2.4 -3.0 3.3 0.4 -3.2 -2.1 -0.3 -3.9 -28.8 10.3 -4.0 15.8 -2.7 -14.3 -15.0 -3.9 0.0 8.6 -7.3 -1.7 -1.4 3.0 6.4 -0.2 -0.8 0.8 3.4 1.8 -5.8 -0.9 -0.2 3.8 9.4 0.5 -0.5 3.4 -1.5 -1.2 3.3 6.3 4.2 8.2 9.1 9.2 3.2 4.0 0.1 4.0 4.7 11.8 10.7 10.2 12.2 7.4 9.1 7.0 2.8 1.8 1.8 2.4 2.8 4.1 4.5 3.7 3.5 3.1 2.5 4.4 4.6 4.8 6.2 5.3 5.1 4.4 1073.1 1085.0 1094.1 1106.5 1116.2 3510.9 3516.4 3521.1 3532.9 3534.7 2437.8 2431.3 2427.0 2426.4 2418.5 654.2 646.0 643.9 643.9 648.5 4165.1 4162.4 4165.1 4176.8 4183.2 5067.8 5065.6 5079.9 5073.4 3014.6 3037.8 3046.0 3056.2 3056.5 3207.9 3227.8 3252.2 3271.2 8764.1 8796.9 8823.8 8849.5 4 11 18 25 p 1112.6 1111.7 1116.5 1114.5 3537.3 3536.3 3535.2 3530.2 2424.7 2424.6 2418.7 2415.7 649.1 646.6 646.6 654.0 4186.4 4182.9 4181.7 4184.2 1 p 1118.7 3529.1 2410.4 646.4 4175.5 1993-JAN. FEB. MAR. APR. MAY JUNE JULY AUG. SEP. OCT. p Levels ($Billions): Monthly 1993-JUNE JULY AUG. SEP. OCT. p Weekly 1993-OCT. NOV. 1. 2. Adlusted for breaks caused by reclassifications. Debt data are on a monthly average basis, derived by averaging end-of-month levels of adjacent months, and have been adjusted to remove discontinuities. p pe preliminary preliminary estimate 11972.0 12024.7 12076.0 12120.7 Strictly Confidential (FR)Class II FOMC Components of Money Stock and Related Measures NOVEMBER 15. 1993 Seasonally adjusted unless otherwise noted ~ Period , I - -I---_- Levels ($Billions): Annually (4th Qtr.) 1990 1991 1992 Other checkable deposits Demand Sdeposits Currency - Overnight RPs and Eurodollars NSA' I - I , - Savings 2 deposits , - , , 1 - 1 Money market mutual funds general purpose institutions and only broker/ dealer* 7 8 - I __ Large denomination time deposits' L Term Euro- 1 ~ I Savings dollars NSA' bonds .- , I .- 12 I 13 348.2 362.9 344.1 131.5 175.6 207.5 496.9 432.3 360.8 68.0 60.7 125.2 137.0 329.9 319.4 47.0 154.5 1170.5 1180.4 1186.0 894.4 879.3 867.3 346.3 343.7 342.3 210.9 366.6 209.2 360.2 202.3 355.7 48.1 47.2 45.6 73.3 74.1 74.5 1184.4 1182.4 1178.8 858.3 197.7 201.9 348.5 848.1 340.0 333.2 332.7 200.9 338.1 386.2 395.5 397.8 72.7 1181.6 1193.7 1198.8 841.1 834.4 826.7 331.5 336.4 336.2 200.4 202.8 343.2 343.1 198.1 339.8 401.9 403.1 406.0 75.7 78.4 81.4 1200,1 817.6 335.9 803.3 334.3 332.4 195,0 193.3 194.1 335.2 1205.1 1208.7 810.0 316.4 365,7 370.7 376.4 318.2 380.0 410.2 83.7 1209.3 795.8 333.0 196.6 277.7 287.0 338.8 293.1 329.6 380.2 78.8 73.4 75.4 919.8 1028.8 1179.0 288.0 289.8 292.3 336.0 339.5 340.8 373.7 381.6 385.2 75.7 75.8 74.8 1993-JAN. 294.8 FEB. MAR. 296.9 299.0 341.9 341.8 341.9 388.6 386.4 386.3 APR. MAY JUNE 301.4 304.0 306.8 347.2 359.1 360.5 JULY AUG. SEP. 309.6 312.6 OCT. p 70.0 73.5 853.1 ankers acceplances ommercial paper' Short-term Treasury securities 1171.6 1081.0 880.3 245.4 265.8 290.0 Monthly 1992-OCT. NOV. DEC. _ Small denomination time 3 deposits I 14 I 36.3 24.4 325.6 356.2 336.3 369.6 151.9 154.7 156.8 320.2 325.1 331.4 368.0 372.4 368.4 20.5 20.3 20.4 43.5 46.7 49.8 158.9 161.1 162.7 337.5 342.9 341.6 360.7 355.9 360.3 20.6 20.2 19.3 48.7 48.7 45.5 163.9 340.7 347.1 349.2 365.5 368.4 369.1 19.3 19.4 18.7 166.8 349.9 349.4 329.3 369.1 381.4 381.7 17.5 333.7 41.9 43.8 44.7 334.5 45.3 344.0 335.4 1. 2. 3. 4. 5. Net of money market mutual fund holdings of these items. Includes money market deposit accounts Includes retail repurchase agreements. All IRA and Keogh accounts at commercial banks and thrift institutions are subtracted from small time deposits. Excludes IRA and Keogh accounts. Net of large denomination time deposits held by money market mutual funds, depository institutions, U.S. government and foreign banks and official institutions. p preliminary 164.8 165.7 167.8 168.8 20.4 16.2 16.8 NET CHANGES IN SYSTEM HOLDINGS OF SECURITES Millions of dollars, not seasonally adjusted November 12, 1993 Treasury bills Period 1990 1991 1992 Net purchases Redempions (-) ,Treasurycoupons SNet Net change 1,280 2,818 -2,600 4,415 867 8,805 2,452 2,193 3,900 4,572 597 945 1,276 7,749 1,268 ---Q4 -1,000 4,415 867 8,805 1993 ---Q1 --- 02 ---03 7,749 1,268 1992 November December 1,064 3,669 --Q3 1993 January February March April May June --- 425 3,043 1,096 Weekly August 4 11 18 25 September 1 8 15 22 29 October 6 13 20 27 November 3 10 Memo: LEVEL (bil. $) 6 November 10 Net Change Federal agendes redemptions Net change outright holdings total 4 1,064 3,669 461 375 11,282 19,365 13,240 27,726 30,219 11,128 -1,614 -13,215 2,452 3,730 5,927 7,256 -233 7,896 6,617 15,939 -14,636 1,137 14,195 -13,912 3,141 4,990 6,326 2,851 12,648 7,067 -461 10,624 -8,644 4.172 200 6,756 300 7,820 3,848 2,425 2,929 -103 -85 3,039 5,083 308 7,258 -166 2,577 4,656 857 -6,128 4,788 879 -5,514 4,112 12,027 -14,435 4,528 1,262 -6,723 300 379 1,426 368 304 4,036 63 6,299 -1,159 2,726 -4,815 3,833 -3,206 1.867 18,292 -15,535 -6,182 472 1,314 -1,910 -2,301 3,738 655 731 947 --. 121 349 7,280 379 276 143 104 10 63 65 304 82 281 361 1,235 3,859 65 304 82 -188 361 1,235 3,859 1,441 2,490 3,141 4,990 100 411 902 366 927 379 276 143 104 10 63 279 244 121 349 7,280 902 366 1,396 200 1,100 2,400 200 1,800 4.326 200 165.1 5 Net RPs 1,441 2,490 3,700 July August September October Redemptions (-) over 10 -100 50 6,583 13,118 13,048 19,038 11,486 ---Q2 purchases 3 p 5-10 1-5 17,448 20,038 13,086 1992 ---Q1 STRICTLY CONFIDENTIAL (FR) CLASS II-FOMC 1 100 211 650 250 200 2,300 200 230 404 77 -218 326 1,335 3,859 100 100 201.1 75.7 21.6 31.1 329.5 1. Change from end-of-period to end-of-period. 2. Outright transactions in market and with foreign accounts. 3. Outright transactions in market and with foreign accounts, and short-term notes acquired in exchange for maturing bills. Excludes maturity shifts and rollovers of maturing issues. -2.6 336.9 ' ' 4. Reflects net change in redemptions (-)of Tre asury and agency securities. 5. Includes change in RPs (+), matched sale-puirchase transactions (-), and matched purchase sale transactions (+). 6. The levels of agency issues were as follows: within 1 year November 10 1.9 1-5 2.1 5-10 0.6 over 10 0.1 total 4.7
@FedFRASER