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November 1, 1985 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) November 1, 1985 CLASS I - FCMC MONETARY POLICY ALTERNATIVES Recent Developments (1) Averaging through unusually volatile week-to-week fluctuations, M1 was about unchanged in October, following growth of 11-1/2 percent (annual rate) in September. Even so, M1 by October had grown about 11-3/4 percent at an annual rate from its second-quarter base, well above the upper bound of its 3 to 8 percent longer-run range. The effects of Hurricane Gloria may have added 2 to 3 percentage points to M1 growth in September and lowered M1 growth by a corresponding amount in October. It resulted in unscheduled closings of businesses and banks in the New York and Boston districts on Friday, September 27, and some depositors were unable to move funds out of demand deposit accounts to make either disbursements or investments over the weekend. Judging from the weekly pattern, NOW accounts do not appear to have been similarly affected; this component slowed further in October from an already reduced September pace. Some of the apparent weakness of M1 in October also may reflect a changing seasonal pattern for transactions deposits not yet captured in the official seasonal factors. M1 also was very weak in October 1984, and both the Board's experimental and concurrent seasonal adjustment methods show about 2 to 3 percentage points greater growth in October of this year than the official series. (2) M2 and M3 in October both grew substantially more slowly than the 6 to 7 percent rate established by the Committee for the September-toDecember period, owing to a moderation of their nontransactions components as well as weak M1. Among the core deposit components of M2, inflows to MMDAs and -2- KEY MONETARY AGGREGATES (Seasonally adjusted annual rates of growth) July Aug. Sept. Oct.pe QIV to Oct.pe Money and credit aggregates M1 9.3 20.3 11.5 -0.8 11.81 M2 8.5 11.1 7.1 2.4 8.7 M3 4.3 9.1 9.8 3.8 7.9 Domestic nonfinancial debt 11.9 11.5 10.8 11.2 12.6 Bank credit 10.2 6.9 8.6 3.0 9.3 Nonborrowed reserves 3 10.6 19.5 5.1 6.5 15.5 Total reserves 12.2 16.5 8.7 4.5 14.6 Mbnetary base 6.8 13.3 7.0 6.0 8.7 Adjustment and seasonal borrowing 600 503 633 5334 Excess reserves 855 827 668 7475 Reserve measures 2 Memo: (Millions of dollars) pe--preliminary estimate. NOTE: Monthly reserves measures, including excess reserves and borrowing, are calculated by prorating averages for 2-week reserves maintenance periods that overlap months. 1. Growth from the is 11.4 percent. 2. Growth rates of tinuities resulting Control Act. 3. Includes "other 4. Average through 5. Average through second quarter to October. Growth from QIV to October reserve measures are adjusted to remove the effect of disconfrom phased changes in reserve ratios under the Monetary extended credit" from the Federal Reserve. October 30. October 23. savings deposits were, like NOW accounts, much lower in September and October compared with the preceding months; less funds appeared to be shifting into these accounts from small time deposits, whose rate of decline moderated considerably. The non-M2 cmponent of M3 also slowed in October, although issuance of large CDs remained very strong as commercial banks compensated for a sharp decline in Treasury deposits. By October M2 had moved a little below the upper end of its annual target range, while M3 remained around the middle of its long-run range. (3) Growth of domestic nonfinancial debt has been affected by offsetting, and in some cases transient, forces in the recent period. Trea- sury cash borrowing has been delayed by the extended Congressional inaction on the debt ceiling; an unprecedented disinvestment of trust funds permitted a sizable financing to be paid on November 1 and 4, however. Very heavy tax- exempt bond issuance has continued unabated, as interest rates have remained favorable for advance refunding and fears of new tax law constraints after year-end encouraged both refunding and private-purpose issuance. Based on partial data, consumer credit appeared to surge in September, as auto sales were sparked by special incentives at captive finance companies, but preliminary bank data for October suggest a moderating underlying trend. Mortgage debt growth, on the other hand, appears to be continuing at the stronger pace seen since spring. In the nonfinancial business sector, short-term credit demands remain weak, but bond issuance picked up again in late October after a dip in September. On balance, partial data suggest growth of total non- financial sector debt of around 11 percent over the past two months. From the fourth quarter of last year to October, debt is estimated to have risen at a 12-1/2 percent annual rate, somewhat above the upper end of its annual monitoring range. -4(4) Growth of total reserves slowed in October to a 4-1/2 percent pace in association with the marked deceleration in transactions accounts. Nonborrowed reserves, however, rose somewhat more rapidly than total reserves as discount window borrowing fell off following a temporary bulge at the end of September. Subsequent to the FOMC meeting, the nonborrowed reserves path was constructed with an allowance for $500 million of adjustment plus seasonal borrowing, and over the intermeeting period borrowing has averaged very close to this level, though fluctuating from week to week. (5) The federal funds rate has varied around 8 percent over the intermeeting period, a little higher than its average in September. With the Treasury replenishing the supply of bills early in the intermeeting period, short-term bill rates are about 10 to 20 basis points above their levels at the time of the last FOMC meeting. Private short-term rates, on the other hand, have declined somewhat on balance over the intermeeting period, and yields on long-term bonds are down about 1/4 of a percentage point, helped by favorable inflation news, weakness in some economic indicators, and latterly by expectations of an easier stance of monetary policy. Continuing concerns about the financial condition of the Federal Farm Credit System have resulted in a moderate further widening of the spreads between Farm Credit and comparable-maturity Treasury securities over the intermeeting period; a 6-month issue sold this week was trading at a premium of nearly 100 basis points over Treasury securities, about 15 to 20 basis points more than on a similar issue in late September. (6) The trade-weighted average value of the dollar has declined about 1-1/2 percent further on balance since the day of the last FOMC meeting, for a total drop of 8 percent since the G-5 announcement on September 22. The dollar's value held fairly firm over most of the intermeeting period -5. Toward the end of the period, the dollar eased further, especially relative to the yen, bringing its decline against that currency to about 12-1/2 percent since the G-5 announcement. The Bank of Japan announced that it would not accomodate year-end demands for liquidity, whereupon interest rates on yen instruments rose sharply. The Desk has sold $2.8 billion since the last meeting, $1.7 billion for marks and $1.1 billion for yen. Desk activity since the G-5 announcement has totaled sales of $3.2 billion, $1.8 billion for marks and $1.4 billion for yen, divided equally between the accounts of the System and the Treasury. Policy alternatives (7) The table below gives three alternative specifications for growth in the monetary aggregates from September to December and associated federal funds rate ranges. (More detailed data can be found on the charts and table on the following pages. The detailed table includes growth rates implied by each alternative from October to December and from the base of the long-term ranges to the fourth-quarter average.) Alt. A Alt. B Alt. C Ml 6 5 4 M2 6 5-1/4 4-1/2 M3 6-1/2 6 5-1/2 5 to 9 6 to 10 7 to 11 Growth from September to December Associated federal funds rate range (8) Under all three alternatives, M1 growth over November and December would be expected to pick up following the flat October. Al- though M1 expansion would be expected to remain considerably slower than the pace of this summer, all of the alternatives would leave that aggregate by year-end well above the Committee's long-run range of 3 to 8 percent. Given growth through October, M1 would have to decline at a 1-1/2 percent annual rate over the last two months of the year to hit the upper bound of the long-run range by December. possible, especially if While such an outcome is the weakness in demand deposits in October were the first stage of a reversal of last summer's unexpected bulge in these deposits, it seems unlikely absent a very sharp tightening in money market conditions. M2 and M3, however, are expected to remain within their long-run ranges for the year under all three alternatives. Alternative Levels and Growth Rates for Key Monetary Aggregates M3 M2 M1 ------------------------------------ ------------------------ -----------------------Alt. C Alt. B Alt. A Alt. C Alt. B Alt. C Alt. A Alt. B Alt. A 1985--July August September October November December 595.8 605.9 611.7 595.8 605.9 611.7 595.8 605.9 611.7 2490.5 2513.6 2528.4 2490.5 2513.6 2528.4 2490.5 2513.6 2528.4 3114.1 3137.6 3163.3 3114.1 3137.6 3163.3 3114.1 3137.6 3163.3 611.3 616.0 621.0 611.3 615.6 619.5 611.3 615.2 618.0 2533.4 2547.8 2567.2 2533.4 2546.8 2562.2 2533.4 2545.7 2557.2 3173.2 3191.9 3215.5 3173.2 3190.8 3210.5 3173.2 3189.6 3205.6 9.3 20.3 11.5 9.3 20.3 11.5 9.3 20.3 11.5 8.5 11.1 7.1 8.5 11.1 7.1 8.5 11.1 7.1 4.3 9.1 9.8 4.3 9.1 9.8 4.3 9.1 9.8 -0.8 9.2 9.7 -0.8 8.4 7.6 -0.8 7.7 5.5 2.4 6.8 9.1 2.4 6.3 7.3 2.4 5.8 5.4 3.8 7.1 8.9 3.8 6.7 7.4 3.8 6.2 6.0 10.6 10.2 15.0 7.7 10.6 10.2 15.0 7.3 10.6 10.2 15.0 6.8 12.1 5.3 10.2 6.2 12.1 5.3 10.2 5.8 12.1 5.3 10.2 5.5 10.7 5.2 7.8 7.0 10.7 5.2 7.8 6.8 10.7 5.2 7.8 6.5 6.1 9.5 5.1 8.0 4.1 6.6 6.1 8.0 5.3 6.8 4.6 5.6 6.6 8.0 6.0 7.1 5.4 6.1 11.5 11.3 11.1 8.7 8.6 8.5 7.9 7.8 7.8 Growth Rates Monthly 1985--July August September October November December Growth Rates 1985--QI 02 Q3 Q4 1985 Sept. to Dec. 1985 Oct. to Dec. Long-run base period to 04 85 Chart 1 ACTUAL AND TARGETED M1 IIll lons of dol aIr I 640 630 0' ACTUAL LEVEL PROJECTED LEVEL SHORT RUN ALTERNATIVES 620 610 600 590 580 570 560 550 I I 1 0 N 1984 D I J I I F M I A I M I J I J 1985 I A I S I 0 I I N D 540 J Chart 2 ACTUAL AND TARGETED M2 BilI ons of dol lre 12650 2600 -ACTUAL LEVEL --- PROJECTED LEVEL * SHORT RUN ALTERNATIVES ' A * * C c 2550 -1 2500 -- 2450 2400 .. -~% -- 2350 -1 2300 III O D N 1984 1111111 J F II M A M J J 1985 A I SO I I N D 2250 J Chart 3 ACTUAL AND TARGETED M3 Bil Ilons of dol Ire 13350 ACTUAL LEVEL -- PROJECTED LEVEL SHORT RUN ALTERNATIVES -* 3250 a • o 3150 * .. * 3050 a -- 2950 I 0 I I N 1984 D I I J F I I M A M I I J J 1985 A I S 0 I I I N D 2850 J Chart 4 DEBT BIl IIons of doll r 1 6800 -ACTUAL LEVEL -- PROJECTED LEVEL -I 6600 W - 6400 -- 6200 S - o •o -- 6000 • B -- 5800 I I SN 1984 I I I I I D J I I F I I I I M A I I M I I J I I. J 1985 I. . L . A S 0 N 5600 1 . I . . D J -8(9) Alternative B contemplates maintenance of about the current degree of pressure on reserve positions, indexed by discount window borrowing of $450 to $550 million, with federal funds continuing to trade around 8 percent. Nonborrowed and total reserves would be expected to grow at roughly a 4 percent annual rate over the last two months of the year. M1 under these conditions would probably increase at about an 8 percent annual rate over November and December, bringing growth over the last three months of the year to 5 percent and growth from the second quarter through December to 11 percent.1 Demand deposits are projected to increase only slightly on balance over the remainder of the year, while NOW account growth should remain below the unusually rapid advance of the summer. On a quarterly average basis, M1 would increase at a 7-1/4 percent annual rate in the fourth quarter. Given the greenbook GNP forecast, this implies a further drop in velocity, though at only about a one percent annual rate. behavior of velocity would still This be a bit weaker than predicted by most models of money demand, although the disparity would be considerably narrower than in the third quarter. (10) Growth of the broader aggregates under alternative B would be at the lower end of, or somewhat below, the 6 to 7 percent annual rate for September to December adopted at the previous meeting. M2 would be expected to grow by 5-1/4 percent over the period, with its nontransactions as well as M1 components picking up in November and December from their relatively sluggish pace in October. Stronger expansion of core deposits in the nontransactions component than in recent months is 1. Although, as noted above in paragraph 1, concurrent seasonal adjustment yields M1 growth for October that is several percentage points faster than the current seasonal factors, it has very little effect on the seasonally adjusted growth rate for the second half of this year, calculated using the specifications of alternative B. -9anticipated, partly in association with somewhat greater household saving in the fourth quarter. M3 would be expected to increase at a 6 percent annual rate from September to December. Issuance of the managed liabili- ties in M3 over the balance of the year should decline from the rapid pace in September and October, as asset expansion at banks remains fairly moderate and Treasury deposits rebound once the debt ceiling is lifted. For the year as a whole, M2 growth under this alternative would be around 8-1/2 percent, somewhat below the upper end of its long-run range, while M3 growth of 7-3/4 percent would be at the midpoint of its long-run range. (11) With federal funds continuing to trade around 8 percent under alternative B, other short-term interest rates would probably show little net change over the intermeeting period. The foreign exchange value of the dollar also might tend to remain around recent levels, or edge off particularly if incoming data suggest a relatively sluggish economy. Under the latter circumstances, long-term rates might decline somewhat further on balance despite relatively strong credit demand. The Treasury will be in the market in volume to replenish its cash balance, depleted by debt ceiling problems, and to finance the large fourth-quarter deficit. Private borrowing meanwhile is expected to continue at near the third-quarter pace. Business credit usage is likely to strengthen as inventories are rebuilt and in response to enlarged merger activity. Household borrowing, however, should moderate, reflecting a drop-off in consumer durable spending. All in all, the debt of nonfinancial sectors is projected to increase at an annual rate of a little more than 13 percent over the fourth quarter, bringing growth for the year on a quarterly average basis to nearly 13 percent. -10(12) Alternative A contemplates an easing of reserve pres- sures, with discount window borrowing falling to $200 to $300 million and the federal funds rate dropping to around the 7-1/2 percent discount rate. Growth of the monetary aggregates under this alternative would be expected to be consistent with the 6 to 7 percent range for the SeptemberDecember period adopted for all three aggregates at the last meeting. M1 would increase at a 9-1/2 percent annual rate over the last two months of the year, and growth from the second quarter base of its long-run range would remain above 11 percent through December. A somewhat larger increase cannot be ruled out, though, as the spread of market rates over NOW account rates narrows further into a range where we have had limited experience with saver response in the NOW account era. M2 growth would also be stronger, bringing this aggregate closer to, though still a little below, the upper end of its range; flows into MMDAs and money market funds would accelerate as rates on these instruments lagged the decline in market rates. The pickup in M3, on the other hand, might be restrained as business loan demand at banks was held down by a greater issuance of bonds. (13) be appreciable. The drop in market interest rates under alternative A may The 3-onth Treasury bill rate could fall to 6-3/4 percent, or perhaps somewhat lower if became widespread. expectations of a discount rate cut The large volume of Treasury coupon issues expected over the next few weeks would be easily absorbed by strong investor demand to lock in relatively high yields. The dollar would probably drop noticeably further on foreign exchange markets. (14) Alternative C assumes an increase in borrowing at the discount window to the $700 to $800 million area, which would be expected -11to involve federal funds trading around 8-1/2 percent. The tightening of reserve conditions under this alternative would be expected to constrain M1 growth to a 4 percent annual rate from September to December, bringing this aggregate closer to, though still well above, its longer-term range. In addition there would be greater assurance that M2 would be within its long-run range for the year. An increase in the federal funds rate in the near term is not now expected by the market, and consequently other interest rates would move sharply higher under this alternative, particularly in the short run as the market works through the large volume of Treasury issues. The dollar could come under considerable upward pressure in foreign exchange markets. Both long-term interest rates and the dollar could retrace some of their immediate rise, however, if data suggested weakness in the economy. incoming -12- Directive language (15) Proposed language is shown below not only for the operational paragraph of the directive but also for a special paragraph dealing with the long-run ranges for this year. at its October 1 meeting that it range in November. The Committee indicated might wish to review the M1 long-run The added paragraph in that connection, shown immedi- ately below, could be placed in the directive just before the operational paragraph. Should the Committee add this paragraph, it may wish to consider deletion in the operating paragraph of the qualifying language in brackets that relates to Ml alone; with the new paragraph there may be less reason or need for indicating that the response to unexpectedly slow growth of M1 in the fourth quarter would be conditioned by the rapid growth last summer. PROPOSED ADDITIONAL PARAGRAPH ON 1985 RANGES AT THIS MEETING THE COMMITTEE REVIEWED THE LONG-RUN RANGES FOR THE MONETARY AGGREGATES FOR 1985, PARTICULARLY THE RANGE FOR M1 ESTABLISHED IN JULY. TAKING ACCOUNT OF THE FURTHER SHARP DROP IN Ml VELOCITY IN THE THIRD QUARTER, EVIDENCE OF A SHIFT IN PREFERENCES BY THE PUBLIC TOWARD HIGHLY LIQUID ASSETS, AND EXPANSION OF THE BROADER AGGREGATES WITHIN THEIR RANGES, THE COMMITTEE AGREED THAT GROWTH OF M1 ABOVE THE 3 TO 8 PERCENT RANGE COVERING THE PERIOD FROM THE SECOND QUARTER TO THE FOURTH QUARTER OF 1985 WOULD BE ACCEPTABLE (APPROPRIATE). THE COMMITTEE REAFFIRMED ITS EARLIER VIEWS WITH RESPECT TO THE RANGES FOR THE OTHER AGGREGATES. OPERATIONAL PARAGRAPH In the implementation of policy for the immediate future, the Committee seeks to DECREASE SOMEWHAT (Alt. A)/ maintain -13(Alt. B)/ INCREASE SOMEWHAT (Alt. C) the EXISTING degree of pressure on reserve positions [DEL: sought in recent weeks]. This action is expected to be consistent with growth in M2 and M3 over the period from September to December at annual rates of about [DEL: 7]____AND ____percent RESPECTIVELY. 6-to A marked slowing of M1 growth over the period to an annual rate of around [DEL: 6-to-7] ____ percent is also anticipated; [slower growth [DEL: the next three months]would be acceptable over in the context of satisfactory economic performance, [DEL: recent] very rapid growth in M1 OVER THE SUMMER.] given Somewhat greater or lesser reserve restraint would be acceptable depending on behavior of the aggregates, taking account of appraisals of the strength of the business expansion, developments in foreign exchange markets, progress against inflation, and conditions in domestic and international credit markets. sultation if it The Chairman may call for Committee conappears to the Manager for Domestic Operations that reserve conditions during the period before the next meeting are likely to be associated with a federal funds rate persistently outside a range of[DEL: ____ 6 10] to TO percent. Selected Interest Rates Percent November 4, 1985 Short-Tenm Long-Term Treasury bills S eonday market federal 1 2 CDs secondary 5 3 comm bank U.S. govm market 6 copw ent constant prim 7 8 10 te home mortgages mun- A utility cipal conven V S&L 11 12 13 14 1 16 maturity yields 1984--High Lor 11.77 7.95 10.65 7.71 10.76 8.01 11.09 8.39 11.71 8.24 11.35 8.04 10.72 8.38 13.00 11.00 13-44 13-84 13 81 15.40 10.39 11.30 11.36 12.70 11.44 9.86 14.68 13.14 14.00 12.50 12.31 10.81 1985--igh LOw 8.75 7.13 8.65 6.77 9.03 6.92 9.21 7.07 9.13 7.34 8.83 7.22 8.31 7.00 10.75 9.50 11.19 8.83 11.95 10.00 11-89 10.30 13.23 11.37 10.31 9.13 13.29 12.03 13.00 11.50 11.14 9.47 1984--Sept. 11.30 10.37 10.47 10.51 11.29 11.11 10.62 12.97 12.34 12.52 12.29 13.86 10.54 14.35 13.50 12.00 Dec. 9.99 9.43 8.38 9.74 8.61 8.06 9.87 8.81 8.28 9.93 9.01 8.60 10.38 9.18 8.60 10.05 9.01 8.39 10.16 9.34 8.55 12.58 11.77 11.06 11.85 10.90 10.56 12.16 11.57 11.50 11.98 11.56 11.52 13.52 12.98 12.88 10.77 10.69 10.40 14.13 13.64 13.18 13.38 12.75 12.50 11.96 11.54 11.01 1985--Jan. Feb. Mar. 8.35 8.50 8.58 7.76 8.27 8.52 8.00 8.39 8.90 8.33 8.56 9.06 8.14 8.69 9.02 7.99 8.46 8.74 8.00 7.80 7.97 10.61 10.50 10.50 10.43 10.55 11.05 11.38 11.51 11.86 11.45 11.47 11.81 12.78 12.76 13.17 9.96 10.07 10.23 13.08 12.92 13.17 12.50 12.50 12.63 10.84 10.63 10.92 Aptr. Kay June 8.27 7.97 7.53 7.95 7.48 6.95 8.23 7.65 7.09 8.44 7.85 7.27 8.49 7.92 7.44 8.31 7.80 7.34 7.97 7.71 7.21 10.50 10.31 9.78 10.49 9.75 9.05 11.43 10.85 10.16 11.47 11.05 10.45 12.75 12.25 11.60 9.85 9.46 9.18 13.20 12.91 12.21 12.75 12.30 11.50 10.83 10.56 9.89 July Aug. Sept. 7.88 7.90 7.92 7.08 7.14 7.10 7.20 7.32 7.27 7.31 7.48 7.51 7.64 7.81 7.93 7.58 7.83 7.03 7.08 7.10 9.50 9.50 9.50 9.18 9.31 9.37 10.31 10.33 10.37 10.50 10.56 10.61 11.64 11.76 11.87 9.20 9.44 9.61 12.06 12.19 12.19 11.50 11.50 11.50 9.68 9.52 9.52 7.77 7.88 7.64 7.03 7.21 7.23 7.15 7.32 7.39 7,27 7.43 7.51 7.59 7.75 7.78 7.51 7.68 7.69 7.01 7.00 7.00 9.50 9.50 9.50 9.08 9.34 9.46 10.19 10.42 10.60 10.39 10.57 10.73 11.62 11.81 11.83 9.13 9.25 9.35 11.94 12.03 12.17 11.50 11.50 11.50 9.56 9.73 9.62 7 16 21 28 7.92 7.88 8.06 7.78 7.26 7.13 7.12 7.05 7.46 7.36 7.29 7.18 7.61 7.51 7.44 7.39 7.85 7.79 7.83 7.77 7.78 7.71 7.73 7.69 7.05 7.05 7.14 7.07 9.50 9.50 9.50 9.50 9.54 9.31 9.21 9.19 10.60 10.40 10.23 10.14 10.72 10.64 10.52 10.42 11.78 11.82 11.70 11.73 9.40 9.47 9.45 9.43 12.23 12.24 12.18 12.11 11.50 11.50 11.50 11.50 9.57 9.47 9.59 9.45 Sept. 4 11 18 25 7.88 7.80 7.85 7.96 7.09 7.22 7.19 6.94 7.25 7.40 7.37 7.14 7.43 7.60 7.57 7.42 7.82 7.93 8.01 7.90 7.74 7.81 7.93 7.80 7.07 7.05 7.12 7.18 9.50 9.50 9.50 9.50 9.27 9.49 9.45 9.29 10.20 10.45 10.43 10.36 10.43 10.68 10.65 10.61 11.89 11.92 11.91 11.80 9.41 9.60 9.69 9.74 12.15 12.24 12.21 12.17 11.50 11.50 11.50 11.50 9.52 9.57 9.51 9.49 Oct. 2 9 16 23 30 8.12 7.84 8.03 8.14 7.89 7.01 7.08 7.21 7.20 7.22 7.11 7.31 7.36 7.33 7.38 7.39 7.46 7.48 7.43 7.47 7.84 7.85 7.92 7.91 7.90 7.76 7.74 7.87 7.85 7.81 7.11 7.09 7.14 7.16 7.11 9.50 9.50 9.50 9.50 9.50 9.22 9.32 9.33 9.20 9.20 10.28 10.37 10.31 10.16 10.14 10.55 10.63 10.58 10.43 10.41 11.92 11.96 11.81 11.73 11.52 9.72 9.61 9.52 9.47 9.40 12.17 12.17 12.13 12.07 12.01 11.50 11.50 11.50 11.50 11.50 9.53 9.66 9.51 9.48 9.30 Daily--Oct. 25 31 7.87 8.08 7.24 7.19 7.42 7.29 7.51 7.37 7.94 7.75 7.85 7.72 9.50 9.50 9.25 9.06 10.21 10.01 10.47 10.28 -- 7.20 7.29 7.37 7.78 7.82 9.50 9.05p Oct. 1985--July 17 24 31 Aug. Nov. 1 3 8. 5p 7.73 -- 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 and 13 are 1-day quotes for Friday and Thursday. respectively, totowing the end of the statement week. Column 13 Is the Bond Buyer revenue index. Column 14 1i an average of contract Interest rates on new commitments for conventioonl first mortgages with 80 percent loan-to-value 9.98p 2 10. 5p ratios at a sample of savings and loan associations on the Friday following the end of the staement week. Column 18 Is the verage initial contlact rate on new commitments for one-year ARMs at those institutlons offering both fixed- and adjustable-rate mortgages with the same number of discount points. FR 1367 (I/85) Money and Credit Aggregate Measures Nov. Seasonally adjusted Perlod AIUALLY M2 1 PERCENT M1 2 Money stock measures and liquid assets nontrsnsectlons components In M2 in M3 only 3 4 Bank credit total loans M3 L 5 6 and Invesltment ' i_ 7 4, 1985 Domestic nonllnancial debt U.S. goernment2 other a 2 totalh 10 9 ANNUAL GIOIH: (0U1 TO UI0) 8.8 10.4 5.2 9.1 12.2 1.7 9.3 12.8 0.6 13.6 1.1 22.1 10.0 10.0 10.1 10.2 10.5 11.8 3.2 10.6 10.2 15.0 9.1 12.1 5.J 10.2 10I.9 12.5 3.8 8.7 10.7 5.5 4.0 -1.6 11.0 10.7 5.2 7.8 9.6 10.0 5.8 3.20 198--OCT. NOV. DEC. -7.0 12.0 10.2 5.7 14.0 13.0 9.6 14.6 13.9 26.7 15.5 19.0 10.0 14.3 11.k 1985--JAl. FEE. HAR. APB. nit JUNE JULI AUG. SEPT. OCT. PE 9.0 14.3 5.7 5.9 14.0 19. 9.3 20.3 11.5 -0.0 13.0 11.1 4.J -0.9 8.5 1J.7 0.5 1.1 7.1 2.4 15.2 10.1 J.8 -3.1 6.9 11.9 8.3 0.2 5.7 3. -3.J -3.1 12.2 5.0 14.2 -2.1 -12.2 0.8 20.0 9.5 581.6 591.2 595.8 605.9 611.7 2461.9 2472.9 2490.S 2513.6 2528.4 1863.3 18U1.7 1U094.7 1907.7 1916.7 631.1 630.0 623.6 624.0 6314.8 1982 1903 1984 QUARTERLI AVERAGE 1904 4TH .TR. IST QTR. 1985 2ND UTB. 1905 1985 3RD yTr. 2.2 9.1 11.2 14.1 0.2 1oU. 10. 17.3 21.5 15.5 13.6 9.2 9.9 9.6 9.5 16.1 15.3 12.6 14.2 13.3 13.0 I. 11.0 7.4 9.8 12.9 6.6 1J.0 9.7 13.5 20.3 17.5 13.1 14.1 15. 13., 16.0 15.6 10.2 8.1 5.9 0.3 7.6 10.5 4.3 9.1 9.8 J.U 7.7 10.6 9.3 0.6 5.1 9.5 5.7 6.4 12.7 11.4 4.1 1.3 9.J 10.1 6.9 9.0 3.0 15.. 12.8 8.7 12.1 15.8 13.8 16.0 IJ.7 7.80 12.9 10.7 11.1 II.6 11.1 1 .. 10.7 10.6 11.1 13.5 11.2 10.6 11.9 12.2 1 1. 11.9 11.5 0.4 3076.0 310. . 3111. 1 3137.6 3163.3 3640.2 3669.0 3686.4 1785.3 1799.1 18d4.3 1124.0 1838.5 1442.9 1459.5 1478.9 1495.8. 1505d. 4783.3 462t7.6 4870.7 4914.6 4960.1 6226.2 6a07.3 63419.7 6410.3 6406.6 4.5 14.0 11. 13.6 1. 11.8 HOTHOLI MONTHLY LEVELS I(BILLIONS) 1985--MAI JUNE JULY AUG. SEPT. VEEKLT LEVELS 1985--5SEP. OCT. 1/ 2/ (SBILLINIS) 2 9 16 23 JO 609.5 613.7 610.2 609.6 614.8 7 14P 21P 611.9 605.1 613.6 ANNUAL RATES FOB LANK CEDIT ARE IADJUSTED bEGiNNINII SEPTEMBER 26. 19:4. DIEbT DATA ARE ON A MONTIUL AVENAGE ASIS, TO REMOVE DISLONTINU1IIES. P-PLELI MINA PE-PEELIMINAh ES2IRAIE FOR A TBANSFER DSHIVED HE OF LOANS FKOH CCNINEIBLTIL AVEMAGING IID-Of-,O'L ILL1NOI NAILOIAL khAi LEVELS OF ADJACLNM BO11HS, 20 2181 rL HlAf LIC ttEE ALJUSELL Components of Money Stock and Related Measures NOV. otherwise noted Seasonally adjusted unless Small Period Cunrency 1 X ANNUAL GROVTH: ANNUALLT(U4 TO C4) 1982 198) 1984 Savings deposits 3 5 6 7 7.2 4.5 -13.7 -6.3 5.2 -10.3 13.5 31.1 -26.3 17.0 2 34.0 28.5 10.5 4 19.4 31.7 7.3 46.7 -16.6 33.6 97.4 31.2 7.7 1.3 Large 10 11 1Z2 13 14 15 1I 10.1 -4.0 -2.0 26.0 39.1 45.6 21.3 8.2 -0. 1 4.6 20. 16.9 26.i 5.0 38.3 11.0 0.7 -1.8 18.4 9.0 6.4 -3.3 12.9 4J. 1 17.7 20.8 -8.2 -2.3 1.1 13.3 11.5 0.2 5.0 -4.4 28.1 32.7 -0.7 3.9 -14.5 11.3 8.8 -3.4 17.8 17.5 2.1 27.5 -10.3 10.5 31.8 37.9 -8. -7.8 -8.7 I.* 11.4 8.0 27.6 49.4 40.7 135.6 140.2 90.6 27.9 16.3 16. 1 2.4 12.5 1.0 2.9 15.7 23.0 0.9 14.3 12.7 -12.6 24.7 22.6 14.2 13.j 15.5 22.9 24.7 38. 1 16.4 9.8 108.3 129.9 -24.1 0.0 3.3 31.5 22.3 17.1 92.9 -18.8 -9.5 69.1 9.1 5.4 53.8 40.4 25.7 6,J 9.1 29.2 22.2 19.6 10.7 11. 7 11.6 2.0 6.9 12.3 10.5 2. 5 167.1 167.9 264.0 266.8 168.8 71. 1 66.1 66.6 167.5 167. 7 167.9 168. I 168.0 265.9 267.8 265.1 265.0 271.3 170.2 172.3 171.3 170. 169.6 168.3 168.6 169.0 266.4 259.9 265.7 171.4 170.8 173.0 1985-JAN. FEB. R*.B. HAT JUNE JULt AUG. SEPT. OCT. PB LEVELS (SBILLIOIS) 1985-10LU. SEPT. EEKLY 1985-SEPI. 2 9 16 23 30 7 21P 21P 9.7 -3.3 6.3 11.6 16.0 17.4 5.6 11.5 9.1 3.0 -7.6 -13.4 -5.1 -3.8 -27.2 22.3 2.7 6.1 -2.0 2.0 44.0 -51.7 -52.1 2.0 78.5 68.0 -37.6 -25.8 -24.5 17. 491.8 496.2 300.3 301.7 878.6 874.9 176.7 176.4 63.6 62.3 65.0 66.0 64.4 66.1 70.5 494.2 49b.8 497.3 495.3 495.0 CB'S 124.2 124.5 124.7 124.8 124.6 ONLY 383.3 382.6 62.9 63.0 64.3 62.0 383.0 176.8 116.0 176.5 176.8 176.3 67.2 65.6 66.8 498.5 500. 4 500.8 125.0 125.1 125.2 382.7 381.9 381.7 175.9 177.2 177.0 177.0 62.5 63.5 63=5 63. q 63.41 -154.8 -5.0 -3.3 -9.5 Shortterm Commr1T asury cll paper securities Tem RPS NSA 2.1 65.4 -28.7 19.3 DEC. 1985 denomlnation llme deposits' 8.5 21.1 16.1 25.9 -1.0 7.0 8.6 11.9 IONTHLI 1984-OCT. OCT. MMDAs NSA denomlnatlon time deposits ' 0.9 2.7 1.1 QUARTEBLI AVERAGB 4IT UT0. 1984 1ST T. 1985 2ND UQT. 1985 3JD QT1. 1985 Money market mutual funds, NSA genrral Institupurpose lions d brokel only dealer 8 9 Other Ovrnlght Demnd checkable RPs and deotlls depoall Eurodollar NSA 4, Term Eurodollar NSA -8.3 Savings bonds 4.2 24.5 16.2 -11.0 -22.6 2.4 -12.1 -17.5 3.3 11.0 5.4 6.9 5.2P -58.61 -0.8 -39.5 15.1 -3.7 6.6 -2.8 25.81 -13.3P -70.1 39.6 -19.5 1.6 3.3 J.2 -1.1 6.9 37.0 -51.3 -61.6 -33.9 4.9 -2.2 16.2 24.9 8.3 -4.3 33.8 -16.3 39.1 -6.4 -14.5 50.0 -. 1 -27.8 -8. I -40.9 -6.9 -14.9 Il.4 -17.0 11.1 17.6 -80.9 -12.2 3.7 19.7 13.5 5,.2 -51.7 -33.1 -35.S 46.2 41.0 -13.8 -28.9 3.0 50.2 -5b. 7 1.5 -37. I -27.6 -7.8 I1.1 -12.5 421.2 428.1 62.4 69.) 76.0 76.2 -11.2 Bankers acceplances 58.0 5U.4 8. I 6. 4 8.O 6.3 6.3 I.6 -3.6 4.8 46.6 ABI SULIALY2CI CB'S ONLY 269.2 35.5 270.6 33.6 273.3 34.1 273.4 33. 1 274.0 33.1 3J. 5 31,5 276.8 277.2 J2.7 32.7 275.8 32.1 275.8 32.1 INCLUDES RETAIL BEPUNCHASE AGBEEHENTS. ALL IRB AND KEOGH ACCOUMIS AT CO8BEICIAL EANKS AND 21IErI J NS1JIUIlJQS PFRO SIALL lINE DEPOSitS. EXCLUDES IRA AND KEGGH ACCOUNIS. NEI OF LARGE DENOMILAIION TIME DEPOSITS HELD UI HOMET MARKET MUTUAL FUNDS IAC IHBIFT ISIiSUlICMS. P-PRELIHINARB PE-PRELLaNAiT E51IIMAl STRICTLY CONFIDENTIAL (FR) CLASS II-FOMC Net Changes in System Holdings of Securities 1 Millions of dollars, not seasonally adjusted November 4, 1985 Federal agencies net purchases' coupons net purchases TrTreasury within Penwodithin 1 year ne hag' -3,052 1980 1981 1982 1983 1984 5.337 5,698 13,068 3,779 5-10 1-5 1 1 ea over 10 total 1-year 5-10 1-5 II over 10 total Net change outright holdings total' Net RPs' I-Lt 2,138 1,702 1,794 1 896 1,938 4,564 2,768 2,803 3,653 3,440 2,035 8,491 8,312 16,342 6,964 2,462 684 1,461 -5 445 1,450 808 1,918 169 6,432 70 1,982 -316 462 -350 -3,446 491 -424 4,880 1,130 1,484 600 1,657 -2,044 7,183 4,377 465 846 6 1,326 1,295 -339 -735 8,409 3,962 -138 465 1,426 1,289 Apr. May June 6,026 -942 2,099 846 1,295 7,321 -951 2,039 6,141 -9,257 2,766 July Aug. Sept. -200 3,056 1,521 -246 3,038 1,171 -1,815 -53 -1,578 1984--QTR. II III IV 1985--QTR. I II III 1985--Mar. 1985--Aug. 7 14 21 28 4 11 18 25 2 9 16 23 30 356 78.2 6 -- 12 79 494 32 155 LEVEL--Oct. 34.9 - 14.9 -- 6 21.5 1 Change from end of period to end of period 2 Outright transactions in market and with foreign accounts, and redemptions (-) in bill auctions 3 Outright transactions in market and with foreign accounts, and short term notes acquired in exchange for maturing bills Excludes redemptions, maturity shifts, rollovers of maturing coupon issues, and direct Treasury borrowing from the System 4 Outright transactions in market and with foreign accounts only Excludes redemptions and maturity shifts -350 90.5 2.5 4.2 1.2 .4 8.2 813 1,207 -5,192 4,785 -265 - 406 1,369 -1.669 2,224 2,615 10 307 510 6 -265 31 12 -350 2,615 10 307 510 Oct. --- - 68 524 32 155 Sept. 6 6 -318 -5,445 1,970 -1,563 -1,977 -10,048 182.8 -5.9 5 In addition to the net purchase of securities, also reflects changes in System holdings of bankers' acceptances, direct Treasury borrowing from the System and redemptions (-) of agency and Treasury coupon issues 6 Includes changes in RPs (+), matched sale purchase transactions (-), and matched purchase sale transactions (+)
@FedFRASER