The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
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 this document may contain occasional gaps in the text. These gaps are the result of a redaction process that removed information obtained on a confidential basis. 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 optimal 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. CONFIDENTIAL (FR) CLASS III - FOMC September 29, 1989 SUPPLEMENT CURRENT ECONOMIC AND FINANCIAL CONDITIONS Prepared for the Federal Open Market Committee By the Staff Board of Governors of the Federal Reserve System TABLE OF CONTENTS Page THE FINANCIAL ECONOMY Monetary Aggregates . . . . . . . . . . . . . . . . . . . . Tables Monetary aggregates . . . . . . . . . . . . . . . . . . . . Commercial bank credit and short- and intermediate-term business credit . . . . . . . . . . . . Selected financial market quotations . . . . . . . . . . . . THE FINANCIAL ECONOMY Monetary Aggregates Continuing at the pace of August, M2 and M3 are estimated to have grown at around 7 and 2 percent annual rates, respectively, in September. Preliminary data indicate that M1 expanded at about a 5 percent rate, up from the 3/4 percent pace of August. The impact of the thrift crisis on the composition of growth in the broader aggregates persisted into September. As in August, retail deposit inflows were skewed toward commercial banks, with little growth in retail balances at thrifts. Money market mutual funds continued to expand rapidly. As thrift institutions have worked toward complying with the industry's new capital standards, they have been running off assets and the accompanying managed liabilities. In September, the decline in large time deposits at thrifts reached about a 26 percent annual rate, and their term RPs also dropped sharply. Commercial bank issuance of managed liabilities remained subdued, in light of the strength of their M2 deposits. MONETARY AGGREGATES (based on seasonally adjusted data unless otherwise noted) 19881 -----------1. 2. 3. 1989 Q2 1989 Q3pe 1989 Aug Growth 1989 Q4 88Sep pe Sep 89pe Percent change at annual rates---------------------5.6 1.2 2.9 Ml M2 M3 1989 Jul 5 7 2 10.7 11.5 9.0 ------------ Percent change at annual rates-------- - -1 4 3 Levels bil. $ Aug 89 Selected components 4. 5. 6. 2.5 M1-A Currency Demand deposits 7. Other checkable deposits 8. M2 minus H12 9. 10. 11. 12. 13. 14. 15. I. 8.1 -1.2 Overnight RPs and Eurodollars, NSA General purpose and broker/dealer money market mutual fund shares, NSA Commercial banks Savings deposits, SA, plus MMDAs, NSA'3 Small time deposits Thrift institutions 3 Savings deposits, SA, plus MMDAs, NSA " Small time deposits Large time deposits 5 At commercial banks, net At thrift institutions Institution-only money market mutual fund shares, NSA Term RPs, NSA Term Eurodollars, NSA ----MEMORANDA: 503.2 5 -2 218.4 277.6 11.1 11 274.5 9A 11.6 8 2358.6 0 22.1 -40.3 -45 74.8 43.0 7.5 7.5 7.4 4.8 -3.1 9.1 47.6 11.1 14.0 7.8 3.0 1.4 4.1 39 7 10 4 0 4 -2 1 10.6 -1.9 4.1 -8.7 34 - 3.3 17.0 2.2 -5.6 -9.8 2 5.5 3.5 -5.7 -23.7 7.4 6.9 1.4 14.7 4.6 -4.3 11.7 20.8 5.4 -14.9 29.0 -1.1 -24.6 14.0 10.2 M3 minus M24 1 -3.3 9.1 11.0 12.2 8.8 14.0 17.8 5.8 -0.8 14.5 11.2 12.2 2.5 -6.7 -4h -2 1 -94 34h -26 -134 0.3 0.0 3.9 -8.2 39.1 -39.0 6.0 285.5 1027.2 518.8 508.3 972.3 348.9 623.4 -17.1 -19 873.1 -9.0 -3.3 -22.6 -12 -6 -26 568.7 396.6 172.1 29.3 -52.8 -31.3 -16 -23 -38 100.6 119.6 97.2 Average monthly change in billions of dollars---- 6 24. Managed liabilities at commercial banks (25+26) 25. Large time deposits, gross 26. Nondeposit funds Net due to related foreign 27. institutions, SA 7 Other 28. 29. U.S. government deposits at commercial a banks 5.0 3.3 1.7 9.0 t2 4.0 - 5.0 2z -0.4 2.1 -0.1 5.1 0.0 2.4 -h 4.1 2.8 1.3 0.2 -1.1 1.3 690.1 460.5 229.6 24 3.2 -2.0 -1.8 3.2 -3 7 9.3 220.3 -14 -4.7 0.2 1 22.9 Amounts shown are from fourth quarter to fourth quarter. Nontransactions M2 is seasonally adjusted as a whole. Commercial bank savings deposits excluding HMDAs grew during August and September at rates of 7.9 percent and 7 percent, respectively. At thrift institutions, savings deposits excluding MMDAs grew during August and September at rates of -2.2 percent and 4 percent, respectively. 4. The non-HZ component of M3 is seasonally adjusted as a whole. 5. Net of large denomination time deposits held by money market mutual funds and thrift institutions. 6 Dollar amounts shown under memoranda are calculated on an end-month-of-quarter basis. Consists of borrowing from other than commercial banks in the form of federal funds purchased, securities sold under agreements to repurchase, and other liabilities for borrowed money (including borrowing from the Federal Reserve and unaffiliated foreign banks, loan RPs and other minor items). Data are partially estimated. ,. Consists of Treasury demand deposits and note balances at commercial banks. pe - preliminary estimate 1. 2. 3. -3COMMERCIAL BANK CREDIT AND SHORT- AND INTERMEDIATE-TERM BUSINESS CREDIT (Percentage changes at annual rates, based on seasonally adjusted data) 1987:Q4 to 1988:Q4 1989 Q1 Q2 June July Aug Levels bil.$ Aug ----------------------- Commercial Bank Credit -------------------1. 2. Total loans and securities at banks Securities 3. U.S. government securities 4. Other securities 5. Total loans 7.8 2534.4 -1.1 1.1 559.5 1.0 1.9 7.1 376.6 -8.2 -3.9 -7.8 -11.7 182.8 9.6 6.5 6.7 13.1 9.7 1974.9 9.9 637.3 7.6 7.9 5.2 5.0 4.8 2.2 .7 -. 9 7.3 8.2 5.4 .5 8.9 8.5 9.9 Business loans 6.8 1.0.6 4.6 -2.7 14.6 Security loans -5.7 53.0 -22.9 97.9 -23.4 8. Real estate loans 14.0 1.1.8 11.7 11.2 12.6 9. Consumer loans 8.5 5.6 6.1 2.0 1.6 7.5 369.3 Other loans -. 4 2.7 1.2 12.5 45.9 -6.0 199.7 6. 10. --------- 11. Business loans net of bankers acceptances 12 Loans at foreign branches 2 li Sum of lines 11 & 12 14. Commercial paper issued by nonfinancial firms 15. Sum of lines 13 & 14 16. Bankers acqe tances: U.S. trade related "' Line 15 plus bankers acceptances: U.S. trade related 17. 11.0 4.6 -2.7 30.3 51.9 32.8 32.7 5.6 38.2 8.6 16.0 10.5 -6.8 17.9 7.8 16 0 10.5 8.0 14.7 18. Finance company loans to business 3 12.3 19. Total short- and intermediateterm business credit (sum of lines 17 & 18) 12.4 37.5 15.5 8.9 15.0 39.6 729.0 Sh irt- and Intermediate-Term Business Credit 6.9 7.6 -20.8 14.1 8.0 11.5 -1.3 27.7 3.3 17.0 4.0 10.8 5.6 14.5 4.5 14.1 0.0 11.8 0.0 9.2 -72.5 634.1 24.9 5.9 659.0 -9.7 123.0 3.5 782.1 -3.4 35.6 11.1 3.1 815.65 12.6 n.a. 250.25 11.6 n.a. 1065.85 1. Average of Wednesdays. 2. Loans at foreign branches are loans made to U.S. firms by foreign branches of domestically chartered banks. 3. Based on average of data for current and preceding ends of month. 4. Consists of acceptances that finance U.S. imports, U.S. exports, and domestic shipment and storage of goods. 5. July data. p--preliminary. n.a.--not available SELECTED QUOTATIONS MARKET FINANCIAL 1/ (percent) 1987 1989 2/ Oct 16 Change frm: March Jul-Aug ME1C Mar 89 Jul-Aug FOC Higs lows Aug 22 Sept 28 His lows Aug 22 Short-term rates Federal funds 3/ 7.59 9.85 8.97 8.99 9.04 -0.81 0.07 0.05 Treasury bills 4/ 3-onth &-nth 1-year 6.93 9.09 9.11 9.05 7.34 7.10 7.63 8.05 7.87 7.85 7.80 -1.22 -1.26 -1.25 0.24 0.51 0.70 -0.18 Cmnercial paper 1-linth 3-nnth 7.94 10.05 8.65 10.15 8.52 8.24 8.85 8.66 8.92 8.78 -1.13 -1.37 0.40 0.54 0.07 0.12 8.45 8.26 8.12 8.86 8.80 8.77 8.8 8.86 -1.17 9.12 10.07 10.32 10.08 8.84 -1.46 -1.24 0.45 0.60 0.72 0.04 0.06 0.07 8.00 9.06 10.19 10.50 8.44 8.31 8.88 8.88 8.94 9.00 -1.25 -1.50 0.50 0.69 0.06 0.12 9.25 11.50 10.50 10.50 10.50 -1.00 0.00 0.00 9.88 9.53 9.31 7.51 7.74 7.83 8.39 8.29 8.25 8.42 8.30 8.25 0.91 0.56 0.42 0.03 0.01 0.00 7.74 Large negotiable CD's 4/ 3-wnth th 6 urodollar deposits 5/ 1-mlnth 3-eonth Bank prime rate 8.00 7.86 -0.15 -0.06 Intermdiate- and long-term rates U.S. r-easury (constant maturity) 9.52 3-year 10-year 10.23 10.24 30-year Hmicipal revenue 6/ (Bond Byer index) 9.59 7.95 7.17 7.39 7.59 -0.36 0.42 0.20 Corporate-A utility Recently offered 11.50 10.47 9.45 9.64 9.59 -0.88 0.14 -0.05 Hctoe nort3ge6 rates 7/ Fixed1-yearate ARA, 1-year 11.58 8.45 11.22 9.31 9.68 8.60 10.09 8.69 10.03 8.70 -1.19 -0.61 0.35 0.10 -0.06 0.01 1989 1987 Higs Lows Percent change from: FOC 1987 Aug 22 Sept 28 Higs 1987 FOC Lows Aug 22 Stock prices Dow-Jones Industrial NYSE Conposite AMEK Conposite NASDAQ (OTC) 2722.42 187.99 35.01 45.26 1738.74 2650.99 2694.91 125.91 190.11 193.55 231.90 375.86 .75 291.88 458.36 71 -1.01 2.96 5.68 3.49 1/ One-day qgotes except as noted. 4/ 2/ Last business day prior to stock market decline on Mxnday 5/ Oct. 19, 1987. 3/ Averae for two-week reserve maintenance period closest to 6/ date xown except Feb. low Wiich is the average to the statement week ended Feb. 10, 1988. Last observation is average to date 7/ for maintenarce period ending October 4, 1989. 54.99 . 66. 61.42 1.66 1.81 2.63 2.79 Secondary market. Bid rates for Brodollar deposits at 11 a.m. London time. Based on one-day hursday quotes and futures-market index changes. Quotes for week ending Friday closest to date shown.
@FedFRASER