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Authorized for public release by the FOMC Secretariat on 2/25/2020
Confidential
(F. R.)
TO:
IN RECORDS SECTION
OCT 1 21959
Open Market Committee
SUBJF;CT:
FROM: Division of Research and Statistics
Board of Governors
he Outlook for
Member Bank reserve
Positions
Projections of member bank reserve positions indicate that, in
the absence of further System action, net borrowed reserves, which should
continue to average about $500 million in the current week will decline
somewhat next week and then increase to above $500 million in the last week
of the month. These projections, which reflect seasonal monetary and credit
demands, prospective Treasury financing operations, and an assumed further
gold outflow, show further increases in needs for reserves aggregating over
$800 million from late October until early Decerrbcr. The usual large and
rapid release of rese:rvos will occur in January.
In the absence of System action, net borrowed reserves may ease
to about $250 million in the week of October 21, as the large mid-month
rise in float is expected to more than offset an increase in required
reserves. The projected increase in required reserves in the last half
of October is largely due to increases in U. s. Government deposits,
reflecting Treasury cash financing on October 15 and 21. Net borrowed
reserves should rise above $500 million again in tho week of October 28, with
the end-of-month decline in float the principal tightening factor. After
the end of October, there will be a tendency for net borrowed reserves to
increase in most weeks until mid-December and to continue at a high level
until the end of the year.
Tho fourth quarter typically is the period when seasonal reserve
needs are greatest. The cumulative drain for the quarter this year is
estimated at about $850.
In the absence of System action, the drain of
reserves would amount to about $1,025 million by December 16, just prior
to the very largo mid-month expansion of Federal Reserve float. Seasonal
tightening influences will have their greatest impact on member bank
reserve positions after October.
The principal drain during the fourth quarter is due to a seasonal
outflow of currency. Currency in circulation may be expected to show a
small net increase in October and larger increases in the following two
months, amounting to nearly $600 million in November and $350 million in
December. After increasing more than seasonally in tho second quarter of
the year, currency has been below seasonal expectations since July--perhaps
reflecting tho influences of tho steel strike.
Projected net increases in required reserves during the fourth
quarter indicate nearly $500 million additional pressure on member bank
reserve positions as a result of seasonal credit demands. This tightening
should be concentrated mainly in the first three weeks of December,
although a large increase in required reserves is projected for the second
half of October. Tho October increase reflects a buildup of U. s. Government deposits, and it is largely offset in November when the Treasury is
Authorized for public release by the FOMC Secretariat on 2/25/2020
- 2 expected to draw its balances down. Private deposits generally increase
in most weeks of the fourth quarter. Their greatest increase this year
is expected in the week of December 16.
Federal Reserve float constitutes the only major seasonal offset to the drain associated with increases in currency in circulation and
in required reserves. In tho fourth quarter, a net expansion in float of
about $600 million is projected, nearly all of which is expected in
December. F. R, credit may increase as much as $750 million in tho two
weeks ending December 23, as a result of the mid-month rise in float.
Thus, seasonal drains produced by all factors combined are
estimated at about $50 rn:i.llion in October, $550 million in November,
and $250 million in December, totalling nearly $850 rn:i..llion in the fourth
quarter,
In January, the effects of the major factors affecting reserves
are reversed, producing a rapid easing of considerable magnitude, With
no System action, the seasonal inflow of currency alone could provide
about $1,200 million in reserves. Net seasonal declines in credit demands
would be expected to release about $400 million additional reserves in
January. Reductions in float are expected to provide an offset of about
$700 rn:i..llion to the easing produced by other factors.
The net easing tendency in January is estimated at about $950
million, or slightly greater than the fourth quarter drain of reserves
Thus, the net effect of estimated seasonal influences and an assumed gold
outflow during these four months would, in the absence of System action,
establish net borrowed reserves at the end of January a little below the
current level.
Projections of changes in member bank reserve positions are
shown weekly in Table 1 and monthly in Table 2 through January 1960.
Estimated levels of free reserves (last column in T<1ble 1) are net results
of other factors, which are derived on the following basis:
1.
Customary seasonal changes in currency in circulation,
which show substantial increases in November and
December, followed by a rapid decline in January.
2.
Any gold outflow is offset by assumed IMF sale to u. S.
until mid-November, after which an outflow of $20
million a week is assumed through Decerr.ber.
3. Treasury balance at Federal Reserve Banks maintained at
$500 rn:i..llion following the week ending October 21.
4, Required reserves estimated as follows:
Authorized for public release by the FOMC Secretariat on 2/25/2020
- 3 -
5.
a)
Usual seasonal changes in demand deposits adjusted,
time deposits, and interbank deposits, with no
allowanco for growth. Weeklyprojections of demand
deposits adjusted indicate a. genorally rising
seasonal trend through the end of the year, followed
by seasonal declines in January. The increase
from the end of September to tho end of December
is estimated at $2.4 bi1lion, and the projected
January decline is $1.1 billion.
b)
Treasury tax and loan accounts projected on basis of
cash receipts and expenditures and of attrition on
maturing issues as estimated by Board's staff.
Estimates include effects of cash financings of $2.0
billion each on October 15 arid 21 and assume additional
cash financings of $2.0 billion each on December 3 and
January 7. Tax and loan account halances which averaged
$4. 9 billion in the week of October 7, are expected
to decline to $3.1 billion in the week of October 14
and to rise to a peak of $5.2 bi1lion in the weok of
October 28. Moderate fluctuations at levels somewhat above $3.0
billion are expected through the
end of the year.
Open market operations data include changes in System holdings
through October 8, with run-offs of repurchase contracts on
maturity dates stated.
Authorized for public release by the FOMC Secretariat on 2/25/2020
z0
b
~i<tantia .. (F • R.)
I.(')
.....
Cl)
O')
C
0::::
C>
Table l
C'.J
.-1
Ed
0::::
CHANGES IN BANK RESERVES, WITH RELEVANT FACTORS
(Weekly averages; in millions of dollars)
ESTIMATED
I(.)
25
0
-
-
Member Bank Reserves
b..
Period
Excess
Required
I
1959:
Oct. 7-~
Oct. 14
Nov.,
21
28
- 105
+ 225
+ 80
4
+
2
Dec. 9
16
23
30
1960:
Jan. 6
13
20
27
Feb. 3
.
*
I
I
ft
•I
i
t
~
,,)_
Actual
15
-+ s
-- 90.35
18
25
D1::t! •
-------------------
75
11
+ 150
+ 180
+ 155
-
2.5
l
•
t
5
+
, '-100
-- 12590
--
75
·'
!
-------
-----
I -----f
'
·-·--- ,-·'y-
Total
I
+ 234
8
+
Currency
in
circulation
---
Factors affecting reserves 1/
Other
TREASURYnonmember Gold stock
and
F. R.
deoosits
operaforeign
Float
tions
and F.R.
deposits
accounts
I
+ 242
- 124
+
153
... 105
+ 225
+ ·80
- 160
+
44
-
15
75
- 110
- 160
-
90
35
+
+
+
150
180
+
+
-
+
+
+
-
5
120
85
- 70
- 160
- 110
- 130
- 135
+ 20
155
25
+ 340
+ 285
5
- 100
-
so
+
90
- 125
75 ,
l
290
+ 240
,. 40
.
-----~-- - - --
+
5
- 16
-------
-
15
+
+
30
- 30
------- 20
- 20
-- 20
65
+
+
55
-
35
-
40
---
-----
95
-+ so
-----
---5
-----
-+
------
------+
...---
----
Sign indicates e:'f~ct on reserves
I
--
--
15
65
{
40
0
20
20
20
20
I
-
I
93
+
70
-+ 470
+
Estimated
level of
"free"
reserves
285
- 513
-- 24511
- 502
+
- 257
- 528
271
- 350
+
90
- 20
-+ 235
250
145
- 125
+
+
30
- 110
+
I
--- I
+ 19s I
+ 550.
- 150 \
r
- 215
---
.. 150 !
... 225 i
---
Member
bank
borrowings
28
92
- 120
-----
---
30
+
8
I
Open
market
operations
- 300
+ 190
. i
- 778
- 923
- 798
- 863
-1,068
6.5
+
+
205
+
+
280
140
60
-1.,348
-1,488
-1,263
-1,323
- 120
- 85
- 570
-1.,118
- 548
- 225
+
- 245
+
70
-1,203
I
I
- 303
- 373
. of Research a~d Statistics
Banking Section, Division
October 9, 1959
-·
~---.,-,.
Authorized for public release by the FOMC Secretariat on 2/25/2020
I~
---~-=---- --- -
l §nfidenti 1 (F. R.)
;~
~
@s
Table 2
0,
ESTIMATED CHANGES IN BANK RESERVES, WITH RELEVANT FACTORS
~
(Based on weekly averages for last week in each month; in millions of dollars)
c-,}
--
Member Bank Reserves
~ (.)
fPe iod
2E(fi~res in paren~ theses ndicate
· number
. a:
1959:
Required
Excess
Total
f weeks)
Januny (4)-:lFebn. .ary (4)-il(.5)-:l1"1arch
(4)-iiApril
(5)-llhay
(4)-i:June
(4' , _
July
(5)-:.August
SelJtember ( 4)-::October (4)
1~ovember (5)
December (4)
;
(5)
I\
-87
-445
-124
+328
-162
+48
+284
-188
-263
+17
+58
-100
-350
Currency Treasury
in
operacircutions
lation
+l,306
+39
-114
-19
+100
-45
-61
-19
+27
+311
-1
-18
Other
Open
nonmember Gold stock
market
and
F. H.
deposits
operaforeign
float
and F. h.
tions
accounts deposits
·-+J7
-242
+10
+224
-126
+52
+66
-116
+23
-51
-89
-19
-168
-475
-68
-6
-81
-98
-47
+179
-34
-162
+262
-22
-43
+460
---
-428
-6b
+228
-227
+62
+316
-136
-172
+442
-180
+46o
-385
--
-385
+1,195
--
+70
--
+1,323
-527
-52
-1,241
+22
+135
+10
-63
-231
-33
-265
-1,036
-476
+l, 231
-633
+49
-1,054
-6
+319
-114
+186
-195
+150
-25
+208
-180
-65
+14
+J2
+52
-14~,
+234
1960:
January
1958~
Jan.-"'Iar.-il...o.tJr. -June~:July-Sept.-::Oct. -Dec • -i:-
-1,212
+374
-430
+737
+31
-41
-195
+196
-1,181
Jan. -f1a r. ~Apr.-June.-i:July-Sept. -lt
Oct.-Dec.
-656
+214
+71
+488
-188
-151
-63
+234
-844
1959:
Factors affecting reserves 1/ - - - - -
+333
-625
+933
+63
+8
+722
-397
-217
-32
-42
-100
-544
-24
-52
-971
-71
+83
+115
+293
+140
+4J.4
+227
-130
l•1ember
bank
borrow-
ints
-301
-33
+156
+44
+19J
+72
-Jl
I
+123
-114
+186
+135
-355
--
-120
+45
-60
-80
+595
+540
+255
-100
-950
-585
{}--Actual.
Y Sign indicates effect on reserves.
Banking Section, Division of Researeh ~nd Statistics
October 9, 1959
-95
--
--
+12
-56
+60
~
+45
-774
--
+75
-244
+JOO
I
-745
-395
+39
+89
+714
+1,803
-499
+l,514
-117
-662
-249
-162
-620
+34
+66
+597
-959
+548
+511
--
-512
-47
+303
+390
-178
+309
-200
+1.,095
@FedFRASER