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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 22, 1968. MONEY MARKET AND RESERVE RELATIONSHIPS Recent developments (1) The relatively firm conditions prevailing in money and short-term credit markets around the time of the last Committee meeting were generally maintained in the ensuing four week period dominated by "even keel." With money markets firm, international financial markets in flux, and with a large volume of new demands on the credit markets from Federal and private sectors, most long- and short-term interest rates rose further over the period. (2) The 3-month Treasury bill rate, however, did not show any sustained upward movement since the last Committee meeting. In fact, as of the close of business Friday, the 3-month bill was yielding around 5.42 per cent, down a few basis points from its level four weeks earlier. Over that interval, the bill fluctuated in a fairly narrow range, generally in the upper half of the 5.25-5.60 per cent range specified in the previous Blue Book. Longer-term bill rates, however, rose about 10 basis points over the interval, as did certain other short-term market rates, such as yields on certificates of deposits and bankers' acceptances. Offering rates by banks for CD's in the 3-month area generally moved up to the 6 per cent Regulation Q ceiling rate, and some banks are reported to be offering the 6-1/4 per cent ceiling for six-month money. The one leading bank whose prime loan rate was relatively low moved that rate up to 6-1/4 per cent. (3) The disparate movement of the 3-month bill rate relative to other short-term rates reflected in part the development of a shortage FI'NCIAL MARKET RELATIONSHIPS IN PERSPE. T VE doily * gurc C ) Flo- of Reserves, Bank Ciedit and Money Mo ; Market IndiLators 1 Bank I Money Corporate MuniciNonTotal FL iera 1 3-month Free Borrow lime Credit Supply borrowed Repal Funds TreasNew U.S. leserves ings Deposits Proxy Reserves serves Issues (Aaa) Gov' t. Rate ury (In millions dollars) (In millions Bill (20 yr.) (Aaa)1/ of dollars) 4/ (In billions of dollars) of dollars1 .. 3,88 +335 212 141 4.55 6.08** 3.88 +299 + 2.4 + 1.1 + 5.36 4.12 225 124 4.72 6.50 3.99 +122 + 2.1 + 0.8 + 5.66 +154 4.51 -122 185 4.96 6.51 4.15 -294 + 0.2 + 0.3 + 143 5.59 aver;aes an.r, -'tPi where avciaable, wee'l; Bond Yields r Period 1937--Oct. Nov. Dec. s ;er n.a. 5.00 4.98 5.17 5.38 5.66 5.52 5.31 5.23 5.19 5.35 n.a. 5.39 5.38 5.59 5.46 5.55 5.40 5.29 5.22 5.28 5.44 n.a. 6.22** 6.25** 6.57** 6.50** 6.64 6.65 6.50** 6.16 6.27 6.47 n.a. 4.06 4.01 4.28 4.13 4.28 4.26 4.12 4.00 4.23 4.21 n.a. 337 497 5.84 5.91 5.37 5.46 5.44 6.57 6.50 4.21 4.25 -209 -192 -368 391 675 5.49 5.44 5.43 5.46 5.50 5.56 6.43 511 6.07 6.00 5.45 6.64 4.25 4.35 n.a. Year 1967 Second Half 1967 First Half 1968 195 238 -201 173 123 567 4.22 4.03 5.39 Av rages 5.01 4.29 5.31 4.51 5.46 5.29 5.77 6.10 6.47 3.74 3.91 4.16 Recent variations in growth Nov. 29-eb. 28 Feb. 28-Jun. 12 Jun. 12 -Nov. 20 106 -360 -212 276 695 532 4,64 5.45 5.94 4.90 5.43 5.28 5.46 5.51 5.34 6.30 6.58 6.44 'f 4.08 4.23 4.16 1968--Jan. Feb. Mar. Apr. May June July Aug. p Sept. p Oct. p Nov. p e 142 21 -312 -341 -374 -386 -192 -240 -146 -197 -233 275 368 649 689 728 727 523 577 492 459 519 1968--Oct. -345 -163 Nov. 23 p 30 p 6 p 1 p 20 n " 4.60 4.72 5.05 5.76 6.12 6.07 6.02 6.03 5.78 5.92 5,46 6.54 +347 +265 + 1.0 + 0.4 + 0.7 + + + + 47 + 1.5 + 2.3 + 1.0 -189 - 1.1 + 0.9 + + 88 + + + + + + + 0.4 1.5 2.1 5.0 2.0 3.0 2.6 + + + + + + 1.8 1.3 2.0 0.9 0.8 0.8 1.6 + + + + + + + - 0.4 + 3.5 - 1.6 + 0.8 + + + 0.9 -0.3 +345 +208 -266 -197 + 46 +137 +304 +493 + 1.7 - 1.2 + 2.4 + + + +105 +107 +508 + 29 - 36 +264 +215 +133 + 14 -- Annual rates of increase + + 9.9 +11.9 +11.5 +10.6 + + 8.7 + 7.2 + + 5.3 + 4.0 + 2.2 + 9.1 - 1.1 +12.3 Includes issues carrying 5-year and 10-year call protection, ** - issues carry a 10-year call protection. 2/ Time deposits adjusted at all commercial banks. 1/ Base is change for month preceding specified period or in case of weekly periods, the first week shown. p - Preliminary. n.a. Not available. e - Estimated. 4/ Average of total number of days in period. 1/ November 22, 1968. 3F 6.4 6.0 6.6 + 4.0 + 6.6 + 8.1 +16.1 +12.6 + 5.0 + 6 + 4 +16.2 -2in the trading supply of foreign and other sources. such bills in the face of heavy demand from Net purchases of bills in the market by foreign accounts (through the agency of the System) have totalled around $850 million since the beginning of November, mostly in the shortterm area. The increased spread of longer-term over short-term bill rates also appeared to reflect general market uncertainties, including a view that evolving credit conditions were on the tight side as compared with earlier anticipations. However, the Treasury's recently announced offering of only $2 billion in June tax bills--at the lower end of the range expected in the market--helped to moderate pressures affecting longer-term bills. (4) During the first three weeks since the last meeting of the Committee the Federal funds rate mostly tended to be around 6 per cent or above, as compared with a neighborhood of 5-7/8 - 6 per cent in October. In recent days, however, the funds market has eased sharply, reflecting in the main reserve gluts around the end of the statement week just past, when float turned out to be unexpectedly high, when banks accummulated reserves in excess of need early in the week, and when foreign funds became temporarily more available in the Federal funds market. Rates on new loans to dealers were firm at 6-3/8 per cent or above for the bulk of the period since the previous FOMC mmeting. (5) In the four statement weeks ending November 20, member bank excess reserves have averaged $286 million, somewhat higher than in the previous four weeks, while member bank borrowings have averaged $519 million, also somewhat higher than earlier. Net borrowed reserves during the past four statement weeks have been in a $150-350 million range. (6) Current estimates of the bank credit proxy for November show a 10-1/2 per cent annual rate of increase on average. Euro-dollar borrowints may add about 1/2 percentage point to the proxy on average. With one week still to go in the month, the bank credit estimate is, of course, -3subject to change in either direction by a percentage point or two. In the course of November, week-by-week estimates of the credit proxy varied throughout the 9-12 per cent average annual rate range projected for the last Committee meeting, as there were wide fluctuations in reported weekly deposit figures. It should be noted, however, that after mid-month the range originally projected had to be adjusted to 8-11 per cent because the earlier assumption as to timing of the Treasury tax bill financing was not borne out; in the previous Blue Book the financing had been assumed for payment on November 27, whereas it has now been announced for payment on December 2 (in the amount of $2 billion). (7) Growth in bank credit in November was accompanied by only about a 1 per cent annual rate of expansion in nonborrowed reserves on current estimates. With the cost of reserve funds in the Federal funds and Euro-dollar markets generally higher than in the previous month, banks--to sustain credit expansion--increased their borrowings from the Federal Reserve more than seasonally, and they also appear to have economized further on excess reserves after adjusting for past seasonal patterns. (The increase in excess reserves noted in paragraph (5) would represent a less than seasonal rise.) (8) The reception of the Treasury's November refunding operation turned out to generate somewhat more total attrition than assumed by the staff; about 25 per cent of the November maturities and 50 per cent of the December maturities were not exchanged. But the interest in the re-opened 5-3/4 per cent 6-year note was greater than many in the market had anticipated, with public subscriptions reaching $1.3 billion. Dealers took around $250 million, net, of this issue into position, and sold out about one-third by payment date. Their total position in securities maturing in more than 5 years was around $630 million on Thursday, November 21, or about $100 million higher than such positions on October 29, just before books were closed on the mid-November refunding. Dealers appear to have rather mixed attitudes toward these positions; on balance they are not pressing them actively onto the market at this time. (9) Time deposit growth in November is estimated at a 12 per cent annual rate, in line with earlier projections. However, growth in the money supply, estimated at a 10 per cent annual rate, is slightly in excess of earlier projections, mainly because of an unanticipated bulge in currency in circulation. (10) Comparative average annual rates of change for major deposit and reserve aggregates are shown below. May Nov. '67'67 Dec. '67June '68 July '68Nov. '68P Total reserves 9.8 3.7 8.6 Nonborrowed reserves 9.9 -0.1 10.5 Proxy 11.5 3.7 12.7 Proxy plus Euro-dollars 12.3 4.7 13.1 8.4 6.1 5.8 14.2 5.8 17.1 9.0 6.1 6.4 Bank credit, as measured by: Money supply Time and savings deposits Savings accounts at thrift institutions NOTE: Dates are inclusive p--preliminary estimates 1/ July-October only. 1/ Prospective Developments. (11) Prevailing money market conditions might be taken to encompass a Federal funds rate fluctuating in the neighborhood of 5-7/8--6 per cent, member bank borrowings averaging in a $400-$600 million range, and net borrowed reserves fluctuating widely, probably in a $100-$400 million area. somewhat more willing to These specifications assume banks may be borrow at a given Federal funds rate than they were in most of November, as they move into the December period of traditional seasonal pressures. Maintenance of the above money market conditions between now and the next meeting of the Committee on December 17 may be associated with some moderate further upward pressures on short-term interest rates, and with a slower growth in bank credit (as measured by the proxy on a daily average basis for the month.) (12) Under these money market conditions, it would appear that the 3-month Treasury bill rate may be expected to be in a 5.305.60 per cent range between now and mid-December. However, the bill rate could be pushed to or even somewhat beyond either end of this range depending on the way in which international exchange market uncertainties are resolved (unknown by Friday 6:30 p.m.). Effects will stem both from shifts in market attitudes and also from the extent and timing of foreign purchases or sales of Treasury bills, as well as use of swap facilities. -6(13) Apart fron international influences, there will be seasonal upward pressures on the bill rate that might be accentuated by enlarged corporate tax payments around mid-December. It is also possible that the Treasury may have to maintain a relatively low cash balance at the Federal Reserve until mid-December tax payments begin coming in, with the result that commensurately less Federal Reserve open market purchases would be made. On the other hand, these interest rate pressures may be offset to some extent because the market is likely soon to begin focusing on the probability that the Treasury will be able to repay some debt in the first half of next year. (14) In projecting a slowing of bank credit growth in December-- to a 5-8 per cent, annual rate, ranges/--the staff has assumed that CD attrition will be around $800 million, or no more than seasonal proportions. This projection assumes that the 3-month bill rate begins to decline in 1/ As noted earlier, the staff estimates for November are based for November turn out to be on partial data. If final numbers significantly lower (or higher), then the present projection for December's annual rate of growth would have to be commensurately higher (or lower) for the average December level herein projected to be achieved. Euro-dollar borrowings would add 1/2 percentage point to the projection, assuming little change in such borrowings from their current level. the latter part of December from a seasonal peak. It presumes that maintenance of a Federal funds rate consistently in a 5-7/8--6 per cent area will encourage the market in the view that any upward movement of bill rates that may develop is likely to be temporary and that, therefore, banks will be able to count on a relatively normal recovery from mid-December CD attrition. If the 3-month bill rate were to reach or exceed the upper end of the range cited, it might become extremely difficult for banks, except for a few prime banks, to avoid more than seasonal attrition of outstanding CD's. There is somewhat more scope under the Regulation Q ceilings for banks to issue longerterm CD's, but the availability of such funds will probably be limited, particularly for seasonal reasons, next month. (15) As of the end of October, CD's maturing in December totalled $5.4 billion, of which about $1 billion matured on the tax date. It is difficult to tell how much banks will have added to these liabilities by the end of November, although a comparison of market rates with Q ceiling rates would suggest that they would have sold relatively little more of December maturities. Assuming no substantial build-up in December CD maturities over the last few weeks, the attrition rate of around 15 per cent which we have assumed is not likely to require banks to undertake significant liquidity adjustments that would immediately alter lending attitudes, although banks are likely to add to portfolio investments at a reduced pace. (16) Growth in time and savings deposits other than negotiable CD's is likely to slow down further in December, given the higher level -8of market interest rates that has emerged and an anticipated moderation in the growth of personal income. Taking into account both CD's and other time and savings deposits, the total of banks' time deposits may be expected to rise in an 8-11 per cent, annual rate, range in December. Money supply growth next month may be in a 6-9 per cent, annual rate, range, reflecting for the most part a relatively sharp drop in U.S. Government deposits during the month, given the small size of the new tax bill financing and the substantial cash redemptions of the midDecember Treasury bond maturities that were not exchanged in November. (17) Over the near-term, some further upward pressure on long-term interest rates remains possible. It would appear that banks would have to be considerably less active purchasers of securities, particularly of State and local Government obligations. And, while dealers have made progress in distributing the most recent longer-term Treasury note, their total positions in the over 5 year area (including the fairly sizable unsold balances from the August refunding) remain fairly large. In addition, a relatively large calendar of corporate bond issues may be developing for January, although this may have been discounted by the recent sharp rise of long-term interest rates. (18) Policy alternative. If the Committee wishes to intensify the degree of monetary restraint at this time, it may wish to consider a constellation of money market conditions including a Federal funds rate fluctuating around 6-1/8 per cent, member bank borrowings in a $550$700 million range, and net borrowed reserves of $300-$500 million. In view of the relatively firm money and short-term credit market conditions of recent weeks, and given anticipations of seasonal tightness by market participants, these money market variables would probably have to be rather consistently toward the tight ends of the indicated ranges for the market to become aware of a shift in policy over the next three weeks. (19) As the market absorbs the impact of a consistently tighter funds market and higher level of borrowings, there may be greater upward effects on longer-term bill rates and on bond yields than on the 3-month bill. The relatively small dealer holdings of short bills may tend to limit the rise in the 3-month bill rate. Longer- term bill rates are likely to be affected by banks' efforts to nail down whatever CD funds prove available in the maturity area beyond three months. Even so, banks could become uncertain about their ability to recoup December CD attrition, and would likely cut back participation in the municipal and U.S. Government securities markets fairly sharply. They are also likely to increase demands on the Euro-dollar market. Assuming existing ceiling rates, CD attrition in December might be in the order of $1--$1-1/4 billion--depending in part on the speed of adjustment of bill and other short-term market rates to the change in policy stance--and bank credit growth might slow to a 3-6 per cent annual rate. Table A-1 MARGINAL RESERVE MEASURES (Dollar amounts in millions, based on period averages of daily figures) Excess Member banks reserves Period As Free borrowings revi sed 1 to reserves date 1', Monthly (reserves weeks ending in): 1967--September October November December 334 353 349 333 82 141 124 185 252 212 225 148 1968--January February March April May June July 417 389 337 348 354 341 331 337 346 262 286 275 368 649 689 728 727 523 577 492 459 519 142 21 -312 -341 -374 -386 -192 -240 -146 -197 -233 182 433 274 410 358 493 412 470 639 602 -311 21 -196 -229 -244 7 14 21 28 342 314 514 179 737 576 619 374 4 11 18 25 255 556 374 197 454 634 404 474 - 78 - 30 -277 Oct. 2 9 16 23 p 30 p 385 225 373 - 8 334 541 403 516 337 497 Nov. 6 p 13 p 20 D 182 483 143 391 675 511 As first published each week August September October p November p e Weekly: 3 1968--July 10 17 24 31 Aug. Sept. p - Preliminary e - Estimated. As expected at conclusion of each week's open market operations -406 -419 - 93 - -284 -307 -288 -312 -315 -319 -395 -262 -105 -195 -381 -306 -109 -234 -353 -292 -199 -239 -108 -323 -196 -141 -148 -347 -156 -178 -143 -345 -163 -191 -245 -177 -368 -196 -230 -214 -141 -337 -230 -209 -192 -368 -240 -259 -368 -170 -202 -347 - 93 - 96 53 -247 TABLE A-2 AGGREGATE RESERVES AND RELATED MEASURES (In per cent, Retrospective Changes, Seasonally Adjusted annual rates based on monthly averages of daily figures) Re s e rve r e g a t e s Required reserves Against Nonborrowed N o Total Demand Reserves Deposits Total Reserves Agg Deposits Mo n e t a Total Member k De Bank Deposits / e(comm. (credit) v V a r i a b 1 e s Money Supply Time Deposits Private Total Demand banks Deposits ____ banks) Deposits Annually: 1966 1967 + 1.3 + 9.9 Monthly: 1967--July Aug. Sept. Oct. Nov. Dec. + 0.8 +11.5 + 1.5 +10.2 -0.2 + 7.0 + 3.8 +11.7 + 8.7 +16.1 + 2.2 + 6.4 + 1.2 +11.8 +14.0 + 7.7 +16.2 - +14.9 +15.2 + 6.6 +14.5 + 5.9 -14.0 +15.2 +13.7 +12.0 +16.4 + 6.6 +10.2 +18.7 + 5.7 +13.5 + 8.3 -10.5 +13.4 +16.9 +10.4 +10.7 + 9.3 + 1.3 +15.3 +16.5 +14.9 + 8.0 + 9.3 + 9.9 +12.3 + 7.4 +14.9 + 8.7 +16.7 - 9.4 + 2.2 - + 6.6 +14.5 +23.3 + 1.3 +12.2 + 0.6 + 9.6 + 7.7 +21.2 + 4.8 + 8.5 + 8.8 +15.3 +19.2 + 0.1 -11.1 + 1.5 +12.2 + 0.1 +21.8 + 6.6 +10.0 + 4.3 - 4.7 + 1.7 + 6.5 + 9.0 +21.4 + 8.4 +12.5 +10.7 + 3.9 -12.6 +11.4 +11.4 + 0.6 + 7.4 - 5.8 +16.6 +12.5 + 2.2 - 8.8 1968--Jan. Feb. Mar. Apr. May June July Aug. p Sept. p Oct. p Nov. p e + 9.9 + 4.1 + 4.9 + 5.0 +23.5 - 1.6 + 9.8 + 6.0 _____ _ ____ __ II ___ - 1.6 6.0 1.9 - 3.5 + 3.8 + 8.2 + 7.2 + 9.7 + 2.6 + 3.2 + 3.8 +14.0 +21.4 +17.3 +17.7 +12.0 + 6.7 + 1.3 + 7.4 + 5.3 + 6.9 + 6.8 + 2.0 - + 6.6 + 2.6 + 4.6 + 6.8 + 1.7 + 5.9 +11.7 0.9 + 2.5 + 6.8 +12.6 + 8.4 + 7.5 +12.8 + 5.7 +14.9 + 3.3 - - 7.3 + 6.5 5.0 + 5.1 +10.1 + 8.9 L Includes all deposits subject to reserve requirements. movements in total member bank credit. Movements in this aggregate correspond closely with Changes in reserves, total deposits and time deposits have been adjusted for redefinition of time deposits effective June 9, 1966. p - Preliminary. e - Estimated. 2/ Chart I MEMBER BANK RESERVES OF DAILY FIGURES MONTHLY AVERAGES FVT FTF- I 1 1I7 BILLIONS OF DOLLARS, SEASONALLY ADJUSTEI 26.0 - _ _ _ _ _ _ _ _ _ _ - - _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ RESERVES___ A TO 25.5 25.0 _ _ _ NONBORROWED _ RESERVES 24.5 24.0 22.5 22.0 _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BILLIONS OF DOLLARS. NOT SEASONALLY ADJUSTED 1.0 MEMBER BANK BORROWINGS EXCESS M RESERVES J 1967 S D M jSD 1968 _ _ _ Chart 2 MEMBER BANK DEPOSITS AND LIABILITIES TO OVERSEAS BRANCHES BILLIONS OF DOLLARS TOTAL MEMBER BANK DEPOSITS [CREDIT PROXY] SEAS ADJ WEEKLY AVERAGE OF DAILY FIGURES 294 2 9 0 290 ------------------------------------------------- _________ 286 282 278 - 274 270 266 262 258 254 __ 8 t LIABILITIES TO OVERSEAS BRANCHES (WEEKLY REPORTING BANKS) NOT SEAS ADJ., WEDNESDAYS 6 4 S J 1967 D M i 1968 S D M 1969 Chart 3 MONEY SUPPLY AND BANK DEI SEASONALLY ADJUSTED WEEKLY AVERAGES OF DAILi I ILLIONS OF DOLLARS BILLIONS OF DOLLARS I I I I I I I I II I I I I 190 186 182 204 178 200 174 196 170 192 188 TIME DEPOSITS ADJUSTED (All Commercial Banks) 184 180 176 172 168 NEGOTIABLE CD'S NOT SEAS ADJ, WEDNESDAYS _ _00 J 1967 1968 1969 Chart 4 DEMAND DEPOSITS AND CURRENCY SEASONALLY ADJUSTED WEEKLY AVERAGES OF DAILY FIGURES BILLIONS OF DOLLARS 48 44 40 36 146 142 138 134 130 12 U.S. GOVT. DEMAND DEPOSITS (Member Banks) 8 4 0 A S J 1967 D M J 1968 S IM D 1969 Table B-1 MAJOR SOURCES AND USES OF RESERVES Retrospective and Prospective (Dollar amounts in millions, based on weekly averages of laily figures) Perd Period Factors affecting supply of reserves = Change Federal Reserve d Currency Techical in Gold . i credit (excl. o outside factors tctal net 2/reserveserves an I banks flatstock float) 1/ net 2/ reserves I = Bank use of reserves Required Exc Excess reserves 3/ Year: 1966 (12/29/65 - 12/28/66) 1967 (12/28/66 - 12/27/67) +3,149 +4,718 - 627 725 -2,243 -2,305 + 805 +1,085 - 165 +1,522 +1,111 +1,517 Year-to-date: (12/28/66 - 11/22/67) (12/27/67 - 11/20/68) 5/ +3,339 +4,678 - 253 -2,067 -1,265 -2,266 -1 365 + 854 + 457 +1,198 + 673 +1,497 Weekly: 1968--Oct. Nov. 2 9 16 23 p 30 p 121 - + + + 519 6 p 13 p 20 p 119 665 426 - 40 + + 396 840 + 20 lr 204 403 174 225 168 274 - 152 301 340 j PROJECTED S19b8--hov. - 340 - 15 Dec. + - l15 95 605 - 120 190 290 290 +1,035 50 + + 155 +1,125 - 545 216 299 344 268 332 125 108 777 31 599 433 270 - - 335 - 335 + - 95 130 + - '5 130 + + 230 200 + + 230 200 p - Preliminary. For retrospective details,see B-4. For factory 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 1978. ibv 148 381 342 Table B-2 CHANGES IN REQUIRED RESERVE COMPONENTS Retrospective and Prospective Seasonal and Nonseasonal Changes in millions, based on weekly averages cf daily figures) (Dollar amounts Supporting private deposits TSupporting TU. required reere Period S. Gov't. U.S. Gov't. demand seasonal changes Time Demand Time Demand _______deposits Other than Seasonal changes Total Year: 1966 (12/29/65 - 12/28/66) +1,111 - 87 +1,198 - 14 - 4 - 1967 (12/28/66 - 12/27/67) +1,517 + 261 +1,256 + 59 + 6 +1,023 + + 673 + 60 + 613 - 529 + 6 + +1 497 - 208 +1,705 - 111 + 170 344 268 332 125 108 + + - 228 487 35 150 307 + + + + 116 219 367 25 199 + + + + 188 239 176 35 15 + + - 5 +1,221 1/ 168 1/ lear-to-date: (12/28/66 - 11/22/67) (12/2'/67 - 11/20/68) 2/ 997 + 139 +1,077 + 569 + + 74 7 162 50 157 + + + + + I 29 32 23 Weekly: 1968--Oct. 2 9 16 23 p 30 p + + + - -8 4 4 -- - 204 + 38 - 242 - 48 - 8 - 230 + 40 13 p + 403 + 213 + 190 + 27 - 13 + 136 + 27 20 p Nov. + 174 - 159 + 333 + 148 - 17 + 176 + 17 27 - 335 - 100 - 235 - 15 - 245 + 25 4 + 95 - 240 + 335 - 65 - 15 + 395 + 20 130 + 175 + 305 - 115 - 15 + 425 - 10 230 200 + 125 85 + + 355 115 + + 290 115 + 55 + + 10 6 p* PROJECTED 1968--Nov. Dec. 11 18 25 1/ 2/ + + -- -- 10 -- Reflects reserve requirement changes in July, September 1966, and March 1967. Includes increase in reser.e requirements of $360 million effective January 11, 1968 and $190 million effective January 18, 1968. p - Preliminary. Table B-3 TECHNICAL FACTORS AFFECTING RESERVES Retrospective and Prospective Changes (Dollar amounts in millions, based on weekly averages of daily figures) Other Foreign Technical deposits and gold loans (Sign indicates effect on reserves) Treasury operations factors (net) Period ACTUAL Float nonmember deposits and F. R. accounts Year: + 805 + 573 + 64 - 165 - 85 - 389 -1,365 + + 474 743 + 209 2 9 16 23 p 30 p + 330 143 + 103 - 50 51 6 p 13 p + + + 30 63 426 + 348 + 596 S75 - 500 185 85 345 930 + + + 250 70 585 400 1966 (12/29/65 1967 (12/28/66 - 12/28/66) 12/27/67) 30 7 Year-to-date: (12/28/66 (12/27/67 - Weekly: 1968--Oct. Nov. 11/22/67) 11/20/68) + 854 20 p Dec. 20 27 + 4 11 18 25 + 50 + 155 +1,125 - 545 p p -Preliminary. 124 53 161 - 489 - 35 93 40 31 12 162 17 + - 385 114 - 47 2 153 + 645 + 115 + 195 - 15 II PROJECTED 1968--Nov. - + + + + + + 5 5 -1,000 -Preliminary.I + + + - - 50 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 float) _ E Reserve credit Ecl. float Period (Excl. U.S. Government securities cBankers ar ents FederalBankers' Securtie 0th Total I Ier Repurchase Agency hold Bills Other racceptances hld agreements holdinos float) Securities Member banks Member banks borrowings Year: +3,149 +4,718 +3,069 +5,009 +2,158 +4,433 + 474 +1,153 + - 437 577 +3,339 +4,678 +3,913 +4,572 +3,482 +3,477 + 967 +1,176 - 536 81 7 14 21 28 490 135 294 385 352 35 280 122 76 52 392 59 4 11 18 25 390 454 942 283 312 634 711 214 241 659 698 214 71 12 2 9 16 23 30 ,121 31 599 433 270 ,048 171 430 211 120 899 82 334 165 113 96 152 6 13 90 119 665 426 20 345 225 51 261 53 1966 (12/29/65 1967 (12/28/66 - 12/28/66) 12/27/67) Year-to-date: (12/28/66 - 11/22/67) (12/27/67 - 11/20/68) 26 19 + - + 52 - 69 + - 23 7 - 130 53 - 13 i 10 3 - 10 - 9 - 19 - 15 2 203 - 21 166 Weekly: 1968--Aug. Sept. Oct. Nov. -- .------. 276 17 112 181 + - + - 13 13 - 63 63 96 46 7 I 31 84 172 + + + + + + + + - 2 135 161 43 245 I 1 1 80 180 230 70 5 1 53 - 47 - 3 67 138 113 179 160 30 24 0OF 28, 164 _______________________ art Reference Table C-1 TOTAL, NONBORROWED AND REQUIRED RESERVES Seasonally Adjusted (Dollar amounts in millions, based on monthly averages of daily figures) Total reserves e r i Perid od Nonborrowed reserves reserves Total Total Required reserves Aainst private deposits Total Demand 1966--Jan. Feb. Mar. Apr. May June 1/ July Aug. Sept. Oct. Nov. Dec. 22.785 22,857 22,888 23,118 23,192 23,149 23,293 23,029 23,065 22,954 22,915 22,895 22,325 22,376 22,331 22,490 22,486 22,472 22,552 22,336 22,319 22,243 22,303 22.286 22,456 22,507 22,512 22,714 22,773 22,780 22,864 22,687 22,712 22,629 22,593 22,600 21,936 21,996 22,115 22,283 22,331 22,361 22,344 22,320 22,349 22,229 22,198 22,262 16.822 16,877 16.957 1-,043 17,030 17,043 16,963 16,908 16,922 16,827 16,810 16,825 1967--Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. 23,217 23,471 23.869 23 910 23,952 24,105 24,342 24,627 24,786 25,121 25,275 25,13 22,770 23,107 23,668 23,775 23,874 23,982 24,279 24.586 24,721 25,020 25,142 24,848 22,875 23,134 23,383 23,529 23,531 23,660 23,960 24,234 24,476 24,810 24,947 24,914 22,298 22,559 22,785 22,779 23,071 23,387 23,578 23,776 23,850 23,995 24,122 24,157 16,774 16,959 17,101 17,015 17,244 17,472 17,582 17,701 17,704 17,805 17,879 17,860 1968--Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. p Nov. p e 25,500 25,765 25,812 25,623 25,711 25,816 25,923 26,431 26,395 26,610 26,743 25,193 25,401 25,135 24,938 24,984 25,121 25,425 25,918 25,947 26,211 26,225 25,151 25,389 25.402 25,276 25,236 25,438 25,601 26,053 26,158 26,344 26,537 24,270 24,333 24,431 24,487 24,751 24,925 25,188 25,340 25,294 25,528 17,974 18,025 18,082 18,133 18,387 18,550 18,727 18,765 13,621 18,746 25,739 18,883 p - Preliminary. 1/ e - Estimated. Break in series due to redefinition of time deposits effective June 9, 1966, which reduced required reserves by $34 million. Table C-2 DEPOSITS SUPPORTED b. REQUIRED RESERVES AT ALL MEMBER BANKS Seasonally Adjusted (Dollar amounts in billions based on monthly averages of daily figures) Period Total member bank deposits (credit)I/ Time deposits Private demand deposits 2/ U.S. Gov't. demand deposits 1966--Jan. Feb. Mar. Apr. May June3/ July Aug. Sept. Oct. Nov. Dec. 238.0 239.0 239.8 241.9 243.9 244.4 245.8 245.6 245.5 244.4 244.0 244.6 121.8 121.9 122.8 124.8 126.2 126.6 128.1 128.8 129.2 128.6 128.3 129.4 111.7 112.1 112.6 113 2 113.1 113.2 112.6 112.3 112.4 111.7 111.6 111.7 4.5 5.0 4.4 4.0 4.6 4.6 5.1 4.5 4.0 4.0 4.1 3.5 1967--Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. 267.7 251.0 254.0 255.8 257.2 259.5 262.4 266.1 268.4 270.3 272.9 273.2 131.5 133.3 135.3 137.2 138.7 140.8 142.8 144.6 146.3 147.4 148.6 149.9 111.4 112.6 113.6 113.0 114.5 116.0 116.7 117.5 117.6 118.2 118.7 118.6 4 8 5.1 5.1 5.6 4.0 2.6 2.9 4.0 4.5 5.2 5.6 4.6 1968--Jan. Feb. Mar. Apr. May June July Aug Sept. Oct. Nov. 274.7 277.0 278.0 276.9 277.3 278.8 280.9 285.9 149.9 150.2 151.2 151.3 151.5 151.8 153.8 156.5 119.4 119.7 120.1 120.4 122.1 123.2 124.3 124.6 5.4 7.1 6.7 5.2 3.7 3.9 2.7 4.8 288.0 290.Q 293.5 158.9 161. 163.2 123.6 124. 125.4 5.3 4.9 4.9 p - Preliminary. n p p p e e - Estimated. 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. Private demand deposits include demand deposits of individuals, partnerships and corporations and net interbank balances. Break in series due to redefinition of time deposits effective June 9, 1966, which reduced total member bank deposits and time deposits by $850 million. TABLE C-2a DEPOSITS SUPPORTED BY REQUIRED RESERVES AT ALL MEMBER BANKS Seasonally adjusted (Dollar amounts in millions, based on weekly averages of daily figures) Week ending: Total member bank deposits (credit) I/ Private demand U. S. Gov't. demand deposits 2/ Time deposits deposits 1968--June 5 12 19 26 278.2 278.4 277. 7n0.2 ' /'8. 2 151.6 151.8 151.8 151.7 123.4 122.2 122.2 123.0 3.2 4.4 3.9 5.5 July 3 10 17 24 31 .i8.8 278.0 280.6 282.4 28 6 152.2 152.7 153.6 154.4 155.1 125.2 123.8 124.4 123.9 124.5 1.4 1.5 2.7 4.1 4.0 Aug. 7 14 21 28 284.7 285.0 286.4 287.0 155.5 156.0 156.8 157.4 125.0 123.9 124.7 4.2 5.2 4.7 4.9 Sept. 4 11 18 25 286.7 287.0 287.8 288.8 157.9 158.3 158.9 159.4 124.7 124.1 123.5 123.4 4.1 4.6 5.4 6.0 Oct. 2 9 16 23 30 290.3 290.4 289.9 289.5 292.9 160.1 160.8 161.1 161.9 162.3 124.0 123.9 125.1 123.7 124.4 6.2 5.7 3.7 3.9 6.2 Nov. 6 13 20 293.9 293.6 293.5 162.5 163.0 163.6 125.5 124.2 126.6 5.8 6.3 3.3 124.9 p - Preliminary. l/ 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/ Private demand deposits include demand deposits on 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 ot daily figures) Private Demand Currency 1/ Money Supply Monthly Time Deposits / Deosits ________________________________Deposits ±/ _ Adjusted __ _____ 1966--July Aug. Sept. Oct. Nov. Dec. 169.9 170.0 170.5 170.2 170.2 170.4 37.6 37.8 37.9 38.0 38.2 38.3 132.3 132.2 132.6 132.1 132.0 132.1 155.9 156.9 157.7 157.3 156.9 158.1 1967--Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. 170.3 171.8 173.2 172.5 174.4 176.0 177.8 178.9 179.1 180.2 181.0 181.3 38.5 38.7 38.9 39.0 39.1 39.3 39.4 39.5 39.7 39.9 40.1 40.4 131.8 133.0 134.3 133.5 135.3 136.7 138.4 139.4 139.4 140.2 141.0 140.9 161.0 163.5 165.9 168.1 170.1 172.6 174.8 177.2 179.4 180.6 182.0 183.5 1968--Jan. Feb. Mar. Apr. May June July Aug.p Sept. p Oct. p Nov. p e 182.3 182.7 183.4 184.3 186.1 187.4 189.4 190.3 189.5 190.3 191.9 40.6 40.7 41.1 41.4 41.6 42.0 42.2 42.6 42.7 42.8 43.2 141.7 141.9 142.2 143.0 144.5 145.4 147.2 147.6 146.7 147.5 148.6 184.1 185.2 186.7 187.1 187.6 188.2 190.4 193.8 196.6 199.6 201.6 I I I II 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 and Federal Reserve float; and (2) foreign demand balances at Federal Reserve Banks. p - Preliminary. e - Estimated. 1/ 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) Week Ending Money Supply Private Demand Deposits Currency 1/ S . 2/ Time Deposits adj adjusted 5 12 19 26 187.7 186.4 186.8 187.6 41.8 42.0 42.0 42.0 145.9 144.3 144.8 145.6 188.0 188.1 188.1 188.0 July 3 10 17 24 31 189.7 188.8 190.0 188.6 189.5 42.1 42.2 42.2 42.2 42.2 147.6 146.6 147.8 146.4 147.3 188.6 189.2 190.2 191.1 191.8 Aug. 7 14 21 28 190.4 189.7 190.4 190.2 42.2 42.5 42.6 42.7 148.1 147.1 147.8 147.5 192.5 193.3 194.0 194.6 Sept. 4 11 18 25 190.3 190.2 188.7 188.5 42.7 42.6 4?.7 42.6 147.5 147.5 146.0 145.9 195.2 195.8 196.6 197.2 2 9 16 23 30 190.0 189.9 191.0 190.2 42.7 42.9 42.8 42.8 42.8 147.3 147.1 148.2 146.6 147.3 198.1 198.7 199.1 200.0 200.6 6 13 20 191.9 190.7 193.1 42.9 43.2 43.4 148.9 147.4 149.7 200.8 201.4 201.6 1968--June Oct. Nov. 189.4 I 1/ 2/ I £ I Includes currency outside the Tresury, the Federal Reserve and the vaults of all commercial banks. 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 and Federal Reserve float; and (2) foreign demand balances of Federal Reserve Banks. p - Preliminary. CONFIDENTIAL (FR) November 22, 1968. MONEY MARKET AND RESERVE RELATIONSHIPS Recent developments (1) The relatively firm conditions prevailing in money and short-term credit markets around the time of the last Committee meeting were generally maintained in the ensuing four week period dominated by "even keel". With money markets firm, international financial markets in flux, and with a large volume of new demands on the credit markets from Federal and private sectors, most long- and short-term interest rates rose further over the period. (2) The 3-month Treasury bill rate, however, did not show any sustained upward movement since the last Committee meeting. In fact, as of the close of business Friday, the 3-month bill was yielding around 5.42 per cent, down a few basis points from its level four weeks earlier. Over that interval, the bill fluctuated in a fairly narrow range, generally in the upper half of the 5.25-5.60 per cent range specified in the previous Blue Book. Longer-term bill rates, however, rose about 10 basis points over the interval, as did certain other short-term market rates, such as yields on certificates of deposits and bankers' acceptances. Offering rates by banks for CD's in the 3-month area generally moved up to the 6 per cent Regulation Q ceiling rate, and some banks are reported to be offering the 6-1/4 per cent ceiling for six-month money. The one leading bank whose prime loan rate was relatively low moved that rate up to 6-1/4 per cent. CONFIDENTIAL (FR) November 23, 1968 Attached is a corrected page 1 for Money Market and Reserve Relationships, dated November 22, 1968. The last 2 lines shown on the attachment were inadvertently omitted from the copy sent to you earlier.
@FedFRASER