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September 14, 1979 Strictly Confidential (FR) Class I FOMC MONETARY AGGREGATES AND MONEY MARKET CONDITIONS Prepared for the Federal Open Market Committee By the staff Board of Governors of the Federal Reserve System STRICTLY CONFIDENTIAL CLASS I - FOMC (FR) September 14, 1979 MONETARY AGGREGATES AND MONEY MARKET CONDITIONS Recent developments (1) Over the August-September period growth of M-1 is projected to be above the upper end of the Committee's 4 to 8 percent range, while M-2 growth is expected to be close to the upper bound of its 7 to 11 percent FOMC range. M-1 growth slowed to a 6¾ percent annual rate in available data suggest a more rapid expansion in September. August, but Savings deposits at banks increased in August for the third consecutive month, though not as rapidly as in July, and the rate of expansion appears to be slowing further in September. Small time deposits posted another strong gain last month; large time deposits included in M-2 advanced at about the same pace in August as in July, after the outstanding level had declined sharply over the second quarter. Deposit inflows to thrift institutions are estimated to have picked up a bit in August on a month-end basis. Comparison of FOMC Policy Ranges for August-September to Latest Staff Estimates Ranges Latest Estimates M-1 4 to 8 8.4 M-2 7 to 11 10.9 Federal funds rate (percent per annum) 1/10¾ to 11½ Avg. for statement week ending 1/ Aug. 15 10.80 22 29 Sept. 5 12 11.04 11.16 11.02 11.30 On August 30, the FOMC voted to raise the upper limit of the intermeeting range for the Federal funds rate from 11¼ percent to 11½ percent. (2) Bank credit expansion slowed to about a 10 percent annual rate in August, as holdings of Treasury securities were reduced and growth in total loans dropped off somewhat. Growth in business loans was down from July but in line with that for the second quarter, while expansion in real estate loans picked up for the third consecutive month. To help finance their credit expansion, banks sold $2¼ billion of large time deposits and raised about $4 They also raised about $3 billion from domestic nondeposit sources. billion net through their foreign affiliates, a significant part of which likely reflected recycling of U.S. resident deposits in offshore banks. (3) Following the August 14 FOMC meeting, the Account Manager began aiming for a Federal funds rate of 11 percent, up from the 10-5/8 to 10 percent area, and on August 17 the discount rate was raised point to 10 percent. percentage In the latter part of August, with projections for the monetary aggregates suggesting that M-1 growth would be above the upper end of its range and M-2 growth just below the upper bound of its range, the Account Manager began to seek an 11¼ percent funds rate, the top of the range specified by the Committee. On August 30, as projections for the aggregates strengthened, the FOMC moved the upper end of the intermeeting range to 11 percent with the understanding that the Account Manager would not raise the objective for the weekly average funds rate to the new upper limit immediately but would be guided by the subsequent behavior of the monetary aggregates and by developments in foreign exchange markets. The Desk has since been aiming for a funds rate in the 11-3/8 percent area. (4) Over the August-September period, total member bank reserves are expected to grow at about an 8¾ percent annual rate. September will be -3the third straight month in which total reserves have expanded, after having declined over the first half of the year. The monetary base--reflecting the rapid growth of currency--is projected to expand at about a 13 percent annual rate over the two-month policy period. Member bank borrowing has been fairly stable in the neighborhood of $11/4 billion since the August Committee meeting. (5) In response to the System's tightening actions, short-term interest rates have generally advanced about 3/4 to 1 1/2 percentage points over the intermeeting period, and long-term bond yields have moved up 25 to 45 basis points. The relatively sharp response of market interest rates appeared to reflect anticipations of further tightening by the System in the face of continued rapid inflation and monetary growth. Strong credit demands by businesses contributed to pressures in short-term markets with nonfinancial firms issuing a near record volume of commercial paper as well as borrowing heavily at banks. Over the intermeeting period, the Treasury sold $2 billion of cash management bills and added $200 million to each weekly bill auction; it also offered $2.5 billion 4-year 8-month notes. Conventional mortgage rates have also risen in recent weeks, reflecting the continued slow growth of deposits at thrift institutions and rising costs of funds. (6) The dollar's weighted average exchange value has changed little since the August FOMC meeting, with a rise against the yen and sterling about offsetting declines against other major currencies. -4- (7) The table on the next page shows seasonally adjusted annual rates of change, in percent, for selected monetary and financial flows over various time periods. -5- 1977 & 1978 Average Past Twelve Months Aug. '79 over Aug. '78 Nonborrowed reserves 4.9 0.5 1.0 13.1 10.1 Total reserves 6.0 0.4 1.6 5.8 7.3 Monetary base 8.7 7.3 7.1 9.8 12.1 (Currency plus demand deposits 1/) 7.6 4.9 8.7 10.6 6.8 (M-1 plus savings deposits at commercial banks, NOW accounts at banks and thrift institutions, credit union share draft accounts, and demand deposits at mutual savings banks) 7.4 2.5 6.2 9.7 6.5 Past Six Months Aug. '79 over Feb. '7 9 Past Three Months Aug. '79 over May '79 Past Month Aug. '79 over July '79 Concepts of Money M-1 M-1+ M-2 (M-I plus time deposits at commercial banks other than large CD's) 9.1 7.7 10.4 12.8 10.9 M-3 (M-2 plus deposits at thrift institutions) 10.5 S.3 9.2 11.1 9.6 M-4 (M-2 plus CD's) 10.3 6.8 6.0 9.8 11.7 M-5 (M-3 plus CD's) 11.1 7.8 6.7 9.3 10.1 12.3 13.5 11.3 12.2 10.1 Large CD's 1.4 -0.1 -2.7 -1.6 1.2 Nonbank commercial paper 0.2 0.7 1.2 1.2 1.4 Bank Credit Loans and investments of all commercial banks 2/ Short-term Market Paper (Monthly average change in billions) 1/ Other than interbank and U.S. Government. 2/ Includes loans sold to affiliates and branches. NOTE: All items are based on averages of daily figures, except for data on total loans and investments of commercial banks, commercial paper, and thrift institutions--which are derived from either end-of-month or Wednesday statement date figures. Growth rates for reserve measures in this and subsequent tables are adjusted to remove the effect of discontinuities from breaks in the series when reserve requirements are changed. Prospective developments (8) Three alternative specifications for the monetary aggregates and the Federal funds rate for the September-October period are shown below for Committee consideration. The Federal funds rate specifications of alternative B are centered on the currently prevailing 11¼ to 11½ percent range. Money market conditions would be respectively eased or tightened under alternatives A and C. (More detailed and longer-term data are contained in the tables on pages 7 and 8.) Alt. A Alt. B Alt. C M-1 5½ to 9½ 5 to 9 4½ to 8½ M-2 8 to 12 Ranges for Sept.-Oct. Federal funds rate (Intermeeting period) (9) 10½ to 11¼ 7½ to 11½ 11 to l1¾ 7 to 11 11½ to 12¼ Under alternative B, M-1 would be expected to expand in a 5 to 9 percent annual rate range over the September-October period, down from the 10 percent average pace of the preceding five months. Growth is expected to be slower in October than in September.and continued relatively moderate growth is projected over the balance of the year. The expected deceleration reflects the lagged effects of the tightening of money market conditions this summer and the reduction in transactions demand for money associated with the projected slowing of nominal GNP growth in the months ahead. (10) Under alternative B, M-1 in October would be considerably above the level implied by the upper end of the Committee's stated 1½ to 4½ percent growth range for the QIV '78 to QIV '79 period, as shown in the upper panel of the chart on page 10. However, as is indicated in the lower Alternative Levels and Growth Rates for Key Monetary Aggregates M-1 1/ M-2 Alt. A Alt. B Alt. C August September October 374.2 377.4 378.9 374.2 377.3 378,6 374.2 377.2 378.3 922.4 931.0 1978 QIV 361.0 361.0 1979 QI 359.1 365.9 380.1 359.1 365.9 374.5 380.1 10.3 4.8 9.9 4.1 -2.1 7.6 9.5 5.9 -2.1 1979 QII QIII QIV 374.6 Alt. A Alt. B Alt. C 937.5 922.4 930.7 936.8 922.4 930.4 936.1 361.0 873.2 873.2 873.2 359.1 365.9 374.5 380.1 877.1 896.0 922.5 943.2 877.1 896.0 922.4 942.9 877.1 896.0 922.3 942.5 11.2 8.4 10.8 7.9 10.4 7.4 1.8 8.6 11.8 9.0 1.8 8.6 11.8 8.9 1.8 8.6 11.7 8.8 5.2 10.5 5.2 10.4 Growth Rates Monthly: 1979 September October Quarterly Average: 1979 QI QII QIII QIV 7.6 9.4 6.0 -2.1 7.6 9.4 6.0 2.7 7.8 2.7 7.8 2.7 7.8 5.3 5.3 5.3 Semi-Annual: QIV '78-QII '7 9 QII '79-QIV '79 5.2 10.5 Annual: QIV '78-QIV '79 _ 8.0 _1 1/ The staff has assumed that over the longer-run policy period from QIV '78 to QIV '79 M-1 growth will be reduced by about 1½ percentage points by ATS. -8Alternative Levels and Growth Rates for Key Monetary Aggregates (cont'd) M-3 Bank Credit Alt. A Alt. B Alt. C Alt. A Alt. B Alt. C August September October 1579.5 1592.5 1603.2 1579.5 1592.1 1602.1 1579.5 1591.6 1601.2 1104.7 1114.0 1122.3 1104.7 1113.7 1121.8 1104.7 1113.4 1121.3 1978 QIV 1492.7 1492.7 1492.7 1009.2 1009.2 1009.2 1979 QI QII QIII QIV 1510.3 1540.0 1579.6 1612.8 1510.3 1540.0 1579.5 1612.0 1510.3 1540.0 1579.3 1611.3 1044.2 1073.4 1104.7 1129.9 1044.2 1073.4 1104.6 1128.9 1044.2 1073.4 1104.5 1127.8 1979 Growth Rates Monthly: 1979 September October 9.2 7.2 10.1 8.9 4.7 7.9 10,2 8.1 13.6 11.2 11.7 9.1 13.6 11.2 11.6 8.8 13.6 6.3 9.3 12.6 10.5 12.6 10.3 12.6 10.1 7.9 12.0 11,9 11.8 Quarterly Average: 1979 QI QII QIII QIV 4.7 7.9 10.3 8.4 4.7 7.9 10.3 8.2 11.2 11.6 8.4 Semi-Annual: QIV '78-QII '79 QII '79-QIV '79 Annual: QIV '78-QIV '79 8.0 8.0 panel of the chart, when the Committee's longer-run range is adjusted to reflect the downward revision in the staff's estimate of ATS/NOW effects on M-1, the projected October level of M-1 under alternative B is within, though in the upper half of, its adjusted 3 to 6 percent longer-run range. 1/ The same would be true for alternatives A and C. (11) M-1 growth is expected to remain within its adjusted longer-run range over the balance of the year. Expansion of M-1 in the fourth quarter is projected to be at about a 6 percent annual rate, even assuming some slight decline in interest rates later in the year. Growth in M-1 over the one year QIV '78-QIV '79 period would then be about 5¼ percent, in the upper half 2/ of the adjusted range.(12) M-2 growth also is projected to decelerate under alternative B, expanding at a 7 to 11 percent annual rate during the September-October period. Most of the slowdown reflects the moderation of M-1 growth, but, in light of the current higher level of market interest rates, the rate of expansion of savings and small time deposits subject to fixed rate ceilings is expected to moderate. However, commercial banks should continue to capture a relatively large proportion of flows into 6-month MMCs. With loan demands likely to moderate only slightly in the near term, banks are also expected to continue to issue large time deposits and borrow from 1/ The FOMC's long-run M-1 growth range of 1½ to 4½ percent for 1979 assumed, when originally set in February, that ATS effects would reduce M-1 growth by 3 percentage points. In July, when the range was readopted, it was estimated that ATS effects for the year would be about At present, we estimate that such ATS effects will half as large. reduce measured M-1 growth by a little less than 1½ percentage points. On this basis, an adjusted range of 3 to 6 percent, or even a little higher, would be comparable with 1½ to 4¼ percent. 2/ If M-1 expanded at an 8¾ percent annual rate in the fourth quarter, the growth in this aggregate in 1979 would be at the upper end of its adjusted longer-run range. 10 Growth Ranges and Actual M-1 LONGER-RUN RANGE REFLECTING 3 PERCENTAGE POINT IMPACT FROM ATS ASSUMED IN FEB. '79 Billions of dollars 385 Alt. B Short-Run Range -- Q4 '78-Q4 '79 9% - 380 - 375 - 370 - 365 - 360 4/t% 5% 355 I , I I I I .ONGER-RUN RANGE REFLECTING 1 1 1 i 1 350 PERCENTAGE POINT IMPACT FROM ATS AS CURRENTLY ASSUMED 385 Q4 '78-Q4 '79 Alt. B Short-Run Range-- . 6% 9% - 380 ~- 5% , -375 __3% """ - 370 -365 -360 -355 I O i I N 1978 D I 3 F M i A i M I J I A 1979 1 I S O N 350 D 11 Growth Ranges and Actual M-2 and M-3 M-2 Current Longer-Run Range --Alt. B Short-Run Range - Q4 Billions of dollars 950 '78-Q4 '79 8% 11MA%,. 940 -930 -920 5% - - - 910 -900 -890 -880 -870 I I I II 1 I I Current Longer-Run Range ----Ait. B Short-Run Range I L 860 1640 Q4 '78-Q4 '79 1620 10'% 1600 6 A% ;1580 1560 1540 1520 1500 I I O i i N 1978 D F M A M J J 1979 I I 1 II I J A S O I I N 1480 D -12abroad. S&L and MSB deposit inflows are projected to continue sluggish, despite their likely further use of large time deposits. (13) As shown in the upper panel of the chart on page 11, growth in M-2 under alternative B would place that aggregate in October around the upper end of its 5 to 8 percent longer-run range for the QIV '78 to QIV '7 9 period. And for the one-year period, staff projections indicate that M-2 will grow at a rate about equal to the upper limit. Largely reflecting the slow deposit growth at thrifts because of the absence of the MMC interinstitutional ceiling rate differential at current and projected rates of interest, M-3 growth is expected to remain within its longer-run range, though in the upper half. (14) There may still be some expectation in the market that the Federal funds rate will rise over the near term. Thus, if funds continue to trade around the prevailing 11-3/8 percent--the midpoint of the alternative B range--both short- and long-term market rates could decline. However, any such movement is likely to be limited since aggregate credit demands are expected to remain strong in the weeks ahead, before edging off later in the year as economic activity weakens. Business credit demands are likely to continue to be substantial in the very near term, mainly in short-term markets. In addition, the amount of cash raised by the Treasury in the market over the next month is expected to remain near recent levels, with the sale of $1 to $2 billion of 15-year bonds and $200 million add-ons to weekly bill auctions. In the near term, new issues of municipal bonds are likely to continue sizable, given the large volume of mortgage revenue bonds still in the pipeline. With the Federal funds rate unchanged and no significant decline expected in other money market rates, adoption of -13Alternative B should in itself have no substantial impact on the value of the dollar in exchange markets. (15) Alternative A calls for a decline in the Federal funds rate to the midpoint of a 10 to 11 ranges for M-1 and M-2 of 5 percent range, and would be associated with to 9 and 8 to 12 percent, respectively. In the current environment, an easing in policy would take the market by surprise, and the initial reaction to such a development would likely be a rather sharp drop in both short- and long-term interest rates, particularly if market participants were to interpret the easing as the cyclical turning point in interest rates. In foreign exchange markets, the dollar would very probably come under strong downward pressure. The rally in bond markets might be constrained by a buildup of the corporate bond calendar, as firms accelerated offerings, and by continuing investor concern about the outlook for inflation. The anticipated decline in interest rates under alternative A is likely to be associated with only a slight easing of mortgage markets, especially since short-term interest rates would not be expected to decline sufficiently to restore the differential on MMC's favoring thrift institutions. (16) Alternative C involves an increase in the Federal funds rate to the midpoint of an 11½ to 12¼ percent range and would tend to exert more restraint on the monetary aggregates over the months ahead than alternative B. While some tightening in the System's funds rate objective may still be built into the current level of rates, a rise in the funds rate of the dimensions contemplated by alternative C would be expected to trigger further increasesin market rates. Such interest rate adjustments would likely be associated with a modest strengthening of the dollar in foreign exchange markets. Domestically, a further rise in the funds rate might -14- prompt thrift institutions to make vigorous efforts to reduce outstanding mortgage commitments, which are now high relative to cash flows. Pressures on banks would be increased not only as their cost of funds rose but also as businesses shifted even more borrowing to short-term maturities in anticipation that a cyclical peak in rates was being approached. -15Directive language (17) Given below are suggested operational paragraphs for the directive in the customary form, with alternative language related to the short-run specifications presented in the preceding section. Alternative language is also provided for placing main emphasis either on monetary aggregates or on money market conditions. The specifications adopted last month are shown in strike-through form. In the short run, the Committee seeks to achieve bank reserve and money market conditions that are broadly consistent with the longer-run ranges for monetary aggregates cited above, while giving due regard to developing conditions in foreign exchange and domestic financial markets. Early in the period before the next regular meeting, System open market operations are to be directed at attaining a (OR MAINTAINING THE) weekly average Federal funds rate (A) (B) (C) SLIGHTLY BELOW THE CURRENT LEVEL. AT ABOUT THE CURRENT LEVEL. slightly above the current level. Subsequently, operations shall be directed at maintaining the 10¾ to weekly average Federal funds rate within the range of [DEL: 11½] ____ TO ____ percent. In deciding on the specific objective for the Federal funds rate the Manager shall be guided mainly by the relationship between the latest estimates of annual rates of August-September]SEPTEMBER-OCTOBER period of Mgrowth in the [DEL: 4-to-8]____ TO and M-2 and the following ranges of tolerance: [DEL: percent for M-1 and [DEL: 7 to ____ 1/ ____ TO ____ 11] percent for M-2. On August 30, the Committee voted to raise the upper limit of the range from 11¼ percent to 11½percent. -16- If rates of growth of M-1 and M-2, given approximately equal weight, appear to be Monetary aggregates emphasis SIGNIFICANTLY ABOVE OR BELOW THE MIDPOINTS Money market emphasis close to or beyond the upper or lower limits of the indicated ranges, the objective for the funds rate is to be raised or lowered in an orderly fashion within its range. If the rates of growth in the aggregates appear to be beyond the upper or lower limits of the indicated ranges at a time when the objective for the funds rate has already been moved to the corresponding limit of its range, the Manager shall promptly notify the Chairman, who will then decide whether the situation calls for supplementary instructions from the Committee. Appendix I Implied Velocity Growth Rates Alt. A Alt. B Alt. C V-1 (GNP/M-1) 1979 QI QII 12.3 ( 9.7) -1.1 (-2.4) 12.3 ( 9.7) -1.1 (-2.4) 12.3 ( 9.7) -1.1 (-2.4) QIII QIV -0.3 (-1.1) 1.2 ( 0.6) -0.3 (-1.0) 1.1 ( 0.5) -0.3 (-1.0) 1.1 ( 0.5) V-2 (GNP/M-2) 1979 Note: 8.3 8.3 8.3 QII QIII -2.0 -2.6 -2.0 -2.6 -2.0 -2.6 QIV -1.9 -1.7 -1.5 QI Figures in parentheses reflect V-1 without ATS. SEPT. Table 1 1979 14, Money and Credit Aggregate Measures Money Stock Measures Bank ReservesCredit Period Tot a l Nonborrowed Monetary Base 2 3 1 Total Loans and Investments 4 M-1 5 PER CENI - M 1+ M-2 M-3 M-4 M-5 M-6 M- 6 7 8 9 10 11 12 ANNUAL tATES OF GROWTH) ANNUALLY: 1976 1977 1978 0.6 5.3 6.6 0.8 3.0 6.7 6.7 8.3 9.1 7.5 11.1 13.5 5.8 7.9 7.2 7.6 5.5 7.6 5.6 8.8 9.0 12.5 13.6 8.0 6.1 -6.0 4.9 12.6 2.7 -0.6 6.7 2.4 9.8 7.3 13.3 12.7 9.3 0.6 -5.7 4.2 -8.2 4.7 13.2 11.9 -2.4 11.1 6.6 4.6 9.3 8.4 12.9 13.9 -2.9 -4.9 -3.3 -8.8 5.7 4.0 -5.0 8.6 5.1 -3.6 -0.1 0.2 11.3 -1.2 13.4 6.0 -21.0 1.8 -4.9 -4.9 12.6 9.3 5.4 10.9 9.8 8.4 12.7 11.7 9.3 7.1 10.1 10.4 1 0.2 1 1.7 1 0.5 9.9 11.5 10.2 9.9 11.6 11.4 7.7 8.8 8.3 9.9 10.6 9.7 10.0 10.4 10.0 9.8 11.3 10.6 5.2 6.3 4.0 5.5 6.9 9.5 7.5 -1.6 10.9 4.7 11.4 7.1 10.7 7.7 11.3 8.7 10.9 8.4 11.0 10.9 -5.2 7.2 1.7 11.3 4.6 9.2 2.5 4.4 5.0 5.1 6.2 6.8 8,6 9.1 7.9 4.1 6.1 2.7 9.8 7.6 9.9 9.3 10.4 10.2 9.7 9.7 10.2 11,1 13.6 11.2 -2.1 7.6 -5.0 3.7 1.8 8.6 4.7 7.9 4.5 3.5 6.2 4.8 7.1 6.7 9.7 9.9 16.1 14.1 15.4 8.3 7.8 13.5 1.7 -2.0 2.0 7.2 12.1 0.8 -4.3 -1.2 11.2 12.8 6.4 4.8 -4.9 5.2 13.5 8.0 5.7 7.9 11.2 13.3 8.7 6.7 5.6 9.6 12.7 5.9 12.9 4.1 10.3 13.2 8.3 11.6 6.1 9.8 14.1 7.2 10.0 7.9 2.2 -20.6 1.3 -2.9 -30.6 8.9 20.0 10.1 8.6 -0.5 4.6 4.9 3.1 6.1 11.0 12.1 18.7 13.1 7.3 14.1 8.3 13.0 13.2 10.1 -5.0 -3.7 1.3 17.7 0.7 14.8 10.1 6.8 -7,8 -6.8 -1.0 11.4 -2.1 12.3 10.0 6.5 2.9 4.8 6.2 10.5 4.9 11.9 11.3 9.6 QA 3.8 4.1 -0.4 7.7 -0.5 6.0 11.4 5.6 5.7 3.5 7.0 1.3 7.1 10.6 6.5 6.1 6.0 9.1 3.2 8.0 9.7 11.7 10 Q9 7 SEMI-ANNUALLY: 1ST HALF 1978 2ND HALF 1978 1ST HALF 1979 QUARTERLY: 3RD QTR. 1978 4TH QTR. 1978 IST QTR. 1979 2ND QTR. 1979 QUARTERLY-AV: 3RD QTR. 1978 4TH QTR. 1978 1ST QTR. 1979 2ND QTR. 1979 -3.9 6.2 0.5 -4.4 -3.9 8.6 2.3 6.2 4.4 10.3 9.3 9.0 MONTHLY: 1978--AUG. SEPT. OCT. NOV. DEC. 1979--JAN. FEB. MAR. APR. MAY JUNE JULY AUG. P -1.8 12.0 7.3 1/ BASED ON DATA ADJUSTED FOR CHANGES 2/ BASED ON QUARTERLY AVERAGE DATA. P - PRELIMINARY IN RESERVE REQUIREMENTS. 2.9 -1.1 2.3 3.8 14.1 5.4 14.2 12.9 m n- io9 i?9 1 9.7 13.9 8.5 12.7 11.2 9.0 8.4 8.2 11.4 5.5 10.2 11.9 L1.9 I 7 Table 2 SEPT. 14, 1979 Money and Credit Aggregate Measures Seasonally Adjusted, Billions of Dollars Bank Reserves Period NonTota borrowed Bank Credit Monetary Base Total Loans and Invest- Money Stock Measures M-1 M-1 M-2 M-3 M 4 M-5 M-6 M7 7 8 9 10 11 12 ments 1 2 37,013 38,923 41,271 36,960 38,354 40,403 120,572 130,640 142,381 808.1 895.9 1018.1 313.8 338.7 361.2 517.2 560.6 587.2 740.6 809.4 875.8 1235.6 1374.3 1500.1 803.0 883.1 972.4 1298.0 1448.0 1596.7 1436.1 1601.8 1762.6 1483.8 1658.1 1848.0 40,928 41,223 39,788 40,163 138,290 139,841 973.6 986.7 356.7 360.7 583.6 589.5 856.5 865.6 1458.0 1474.1 944.1 954.1 L545.6 1562.6 1706.4 1726.4 1778.5 1799.1 OCT. NOV. OEC. 41,399 41,274 41,271 40,122 40,570 40,403 140,777 141,450 142,381 998.3 1011.1 1018.1 361.2 360.6 361.2 589.9 587.8 587.2 870.2 873.7 875.8 1484.8 1493.1 1500.1 958.8 969.1 972.4 1573.4 1588,6 1596.7 1736.7 1751.1 1762.6 1811.8 1830.9 1844.0 1979--JAN. FEB. MAR. 41,479 40,754 40,815 40,476 39,781 39,825 143,400 143,345 143,893 1034.5 1045.8 1052.2 359.7 358.6 359.0 583.4 580.1 579.6 875.0 876.7 879.5 1503.7 1509.7 1517.5 975.5 978.8 978.5 1604.2 1611.8 1616.5 1772.1 1781.L 1790.0 1861.8 1874.8 1887.6 APR. MAY JUNE 40,647 40,481 40,421 39,730 38,716 39,004 144,48 144,862 145,601 12064.6 1072.0 1083.6 364.3 364.5 369.0 585.1 584.1 590.1 889.8 893.8 904.4 1530.8 1537.0 1552.3 984.8 984.4 989.3 1625.9 1627.6 1637.2 1803.6 1808.4 1820.5 1905.5 1914.3 1930.5 JULY AUG. P 40,824 41t072 39,653 39,987 146,936 148,421 1095.5 1104.7 372.1 374.2 595.0 598.2 914.1 922.4 1566.9 1579.5 998.7 1008.4 1651.6 1665.5 1835.2 1850.1 1949.6 1969.0 18 25 41,081 41,005 39,899 39,713 147,071 147,296 372.4 371.2 595.4 594.3 914.6 914.0 998.5 998.6 AUG. 1 8 15 22 29P 41,080 40,691 41,013 41,039 41,433 40,134 39,929 39,990 39,653 40,317 147,848 147,707 148,307 148,543 149,107 372.2 373.5 375.4 374.2 374.2 595.3 597.3 599.5 598.2 598.3 916.6 920.1 923.2 922.7 923.8 1001.9 1005.5 1008.8 1008.7 1010.4 SEPT. SP 12P 41455 40,920 40,115 39,690 150,061 149,232 376.9 601.6 928.5 1015.2 3 4 5 6 ANNUALLY: 1976 1977 1978 MONTHLY: 1978--AUG. SEPT. WEEKLYI 1979-JULY NOTES. WEEKLY DATA ARE DAILY AVERAGES FOR STATEMENT WEEKS. MONTHLY DATA ARE DAILY AVERAGES. WEEKLY DATA ARE NOT AVAILABLE FOR m M3, h, M6, NT, TOTAL LOANS AND INVESTMENTS AND THRIFT INSTITUTION DEPOSITS. 1/ BASED ON DATA ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS. DATA SHOWN IN MILLIONS OF DOLLARS. P - PRELIMINARY SEPT. Table 3 14, 1979 COMPONENTS OF MONEY STOCK AND RELATED MEASURES Mutual Savings Bank & & SDtCD's S&L Time and Savings Deposits d Currency Period Demand Deposits Total OtherS'ssBa Than CD's T Total 1 Savings Other Other Private Short Term U.S.Gov't Short-term Securities Assets 1 1. Credit Union Ui Shares/ Savings Bondsl Bonds 9 10 11 Shares-I 2 3 4 9.5 9.3 10.0 4.6 7.4 6.1 8.1 11.4 12.4 15.0 11.2 9.4 25.0 11.1 2.2 7.5 11.4 15.6 -23.3 12.8 32.8 15.4 14.0 10.2 17.8 19.5 15.0 6.9 6.6 5.4 7.1 12.6 8.9 12.1 13.5 46.7 9.3 10.2 7.6 4.5 12.2 12.0 7.6 10.7 2.9 1.5 11.7 18.4 42.6 19.0 8.5 11.5 17.0 12.0 6.3 4.3 12.5 4.9 50.9 33.9 1979 8.7 0.6 4.8 6.9 -6.3 17.4 -7.1 8.2 4.5 0.7 39.5 64.4 3RD QTR. 4TH QTR. 1978 1978 11.7 9.7 8.5 -2.7 11.6 11.9 12.1 7.7 4.5 -5.3 18.5 18.1 8.3 36.6 12.1 10.7 13.5 7.7 4.6 4.0 9.3 6.2 13.7 69.3 1ST QTR. 2ND QTR. 1979 1979 7.8 8.5 -6.4 12.3 5.4 0.5 4.6 11.5 -9.5 0.2 15.6 19.4 9.9 -57.0 9.5 5.9 1.5 9.8 0.0 0.0 35.2 43.1 58.1 49.9 2.9 0.2 17.9 18.2 12.2 25.0 10.9 11.8 13.7 10.1 4.6 4.0 2.5 7.3 21.0 44.4 2/ ANNUALLY: 1976 1977 1978 5 6 7 8 (Per cent annual rates of growth) 12 2/ SEMI-ANNUALLY: 1ST HALF 1978 2ND HALF 1978 1ST HALF QUARTERLY: QUARTERLY-AV 3RD QTR. 4TH QTR. 1978 1978 9.6 10.6 7.3 1.7 11.3 12.3 11.0 10.2 1ST QTR. 2ND QTR. 1979 1979 9.1 8.1 -6.2 7.5 8.4 1.2 4.5 9.3 -9.6 -3.1 15.6 18.5 29.9 -41.0 9.6 6.7 0.8 8.3 1.5 0.0 28.7 46.9 67.9 52.1 9.0 16.6 7.6 10.0 11.2 7.4 12.3 -0.9 -5.9 -1.4 10.9 12.5 8.5 21.7 5.3 13.8 12.2 10.0 9.4 3.5 6.5 10.2 -0.5 -8.5 -7.0 19.9 13.9 18.5 23.7 11.2 -5.5 12.3 1.4 92.1 15.1 11.2 13.5 12.5 9.8 9.5 11.8 16.3 9.2 4.6 9.1 3.0 4.5 4.5 3.0 4.5 5.9 39.9 -11.4 -14.4 45.3 6.7 11.7 41.3 75.0 81.1 9.7 -4.5 1.5 28.1 9.6 -6.8 -1.5 19.2 8.9 16.0 0.0 55.5 5.5 6.8 0.0 56.9 3.9 4.5 0.0 38.3 8.1 17.8 0.0 29.9 7.9 24.2 0.0 1.2 6.6 (9. i,5 ., O~NH AND EN5 OF"" END OF CARENT 61.9 53.5 51.2 51.6 47.1 45.3 49.1 0t7 MONTHLY: 1978--AUG. SEPT. OCT. NOV. DEC. 1979--JAN. 8.6 -10.0 9.0 FEB. 8.6 -8.3 8.6 MAR. 6.1 -0.9 -1.4 APR. 9.7 21.3 2.1 MAY 6.0 -1.4 -1.4 JUNE 9.5 16.8 0.8 JULY 10.6 10.3 12.2 AUG., P 1.4l 3.6 4146 N 6EST1HATED 1/ G TH RA ES ARE BA E PREVIOUS MONTH REPORTED DATA. 2/ BASED ON QUARTERLY AVERAGE OATA. P - PRELIMINARY. 1.6 -11.8 12.8 6.5 -12.0 20.0 5.6 -4.9 13.6 11.8 0.0 19.8 8.7 -7.2 19.9 13.6 7.8 17.6 14.6 9.4 18.1 14.0 6.6 19.0 NiHLY AVERAE LEVELS DERIVED B 48.4 19.1 -36.4 -48.5 -55.6 -75.5 -2.8 17.0 AVERAGIN! SEPT. Table 4 14, 1979 COMPONENTS OF MONEY STOCK AND RELATED MEASURES - -I Time and Savings Deposits Currency Demand Deposits Period I - 1 -wc * p I Total Other Than CD's Savisi-tal ToTotal Other Savings Othr Total - I - 4 I - 0 -I CD's 0 ShortTerm U.S Govt Sec Sec y, Mutual Savings Credit Union Savings Bank Bonds & S&L Shares Shares 11 Shares 1/ a a IA * ii * Other I Total NonPrivate Govt Short- Deposit funds Demand term 3/ Deposits Assets 1As 19 12 r l 12 13 2 3 80.8 88.6 97.5 233.0 250.1 263.7 489.2 544.4 611.2 426.7 470.7 514.6 202.1 219.7 223.0 224.7 25L.0 291.5 62.4 73.7 96.6 456.1 518.3 571.2 38.9 46.6 53.1 71.9 76.6 80.6 bb.2 77.2 85.3 47.7 56.3 85.3 55.4 62.7 84.9 11.4 11,7 93.9 95.2 262.8 265.5 587.4 593.5 499.8 504.9 224.1 226.0 275.7 278.9 87.6 88.5 550.1 556.3 51.4 52.1 79.5 79.8 81.3 84.0 72.0 72.7 77.9 78.3 16.8 16.7 OCT. NOV. DEC. 95.8 96.6 97.5 265.3 264.0 263.7 597.7 608.5 611.2 509.1 513.1 225.9 224.3 223.0 283.2 288.8 291.5 88.6 95.4 96.6 562.1 566.7 571.2 52.5 52.7 53.1 80.1 80.4 80.6 83.2 82.2 85.3 75.2 79.9 85.3 85.0 82.5 84.9 21.0 514.6 1979--JAN. FEB. MAR. 98.2 98.9 99.4 261.5 259.7 259.5 615.8 620.2 619.5 515.3 518.1 520.5 220.8 218.6 217.7 294.6 299.5 302.9 100.5 102.1 99.0 575.8 580.4 584.7 52.9 52.6 53.3 80.7 80.6 80.6 87.3 88.7 92.8 89.7 93.7 97.7 83.1 95.8 100.7 14.7 10.2 9.4 APR. MAY JUNE 100.2 100.7 101.5 264.1 263.8 267.5 620.6 619.9 620.3 525.6 S529.4 535.4 217.7 216.4 217.8 307.9 313.0 317.6 95.0 90.6 84.9 587.4 589.3 593.3 53.6 53.8 54.6 80.6 80.6 80.6 97.2 100.3 102.8 101.9 105.9 109.9 104.6 111.2 115.8 8.1 9.3 13.8 JULY AUG. P 102.4 103.6 269.8 270.6 626.6 634.2 541.9 548.2 219.5 220.7 322.4 327.5 84.7 85.9 597.2 600.5 55.7 56.6 80.6 80.7 102.9 104.0 114.4 118.9 119.4 127.7 16.0 16.0 11 18 25 102.0 102.3 102.6 271.3 270,2 268.6 625.1 626.1 627.3 540.4 542.2 542.8 219.5 219.6 219.7 320.9 322.6 323.1 83.9 84.6 14.3 15.3 17.7 1 8 15 22 29P 103.0 103.3 103.5 629.7 632.0 633.4 634.6 636.3 544.4 546.6 547.9 548.5 103.9 269.3 270.2 271.9 270.4 270.3 549.6 219.7 220.5 220.8 220.7 220.8 324.7 326.1 327.1 327.8 328.8 85.3 85.4 85.5 86.1 86.7 178, 18.4 15.4 15,7 14.8 5P 104.8 272.1 638.2 551.6 221.3 330.2 86.6 13,0 ANNUALLY: 1976 1977 1978 MONTHLY: 1978--AUG. SEPT. 15,4 20.L 15.4 WEEKLY: 1979-JULY AUG. SEPT. 103.8 i I I 1 1 1 84.7 1 1 .I I - . -- ESTIMATED MONTHLY AVERAGE LEVELS DERIVED BY AVERAGING END OF CURRENT MONTH AND END OF PREVIOUS MONTH REPORTED DATA. INCLUDES PRIVATE DOMESTIC NDNFINANCIAL INVESTORS' HOLDINGS OF COMMERCIAL PAPER, BANKERS ACCEPTANCES, SECURITY RP'S ANO MONEY MARKET MUTUAL FUND SHARES. 3/ BORROWINGS BY BANKS FROM OTHER THAN COMMERCIAL BANKS IN THE FORM OF FEDERAL FUNDS PURCHASED, SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE, AND OTHER LIABILITIES FOR BORROWED MONEY. PLUS NET LIABILITIES TO RELATEP FOREIGN INSTITUTIONS, INET EURODOLLAR BORROWINGS), LOANS SOLD TO AFFILIATES, LOAN RPS, AND OTHER MINOR ITEMS. 4/ INCLUDES TREASURY DEMAND DEPOSITS AT COMMERCIAL BANKS AND FEDERAL RESERVE BANKS AND TREASURY NOTE BALANCES. P - PRELIMINARY 1/ 2/ TABLE 5 SELECTED INTEREST RATES (percent) STRICTLY CONFIDENTIAL (FR) CLASS II - FOMC SEPTEMBER 14, 1979 Long-Term Short-Term yB Federal Funds (1) 10.25 6.58 1978--High Low CDs New Paper TreuryIssue- Market 3-mo 1-yr (2) (3) 9.62 9.30 6.55 6.16 Comm. Auction 6-mo (4) 9.58 6.42 NYC 90-day (5) 10.65 6.65 U.S. Govt. Constant Bank Yields aMaturity Corp.-Aaa Muni- Utility cipal Homn Mortgages Secondary Market Recently Offered (12) bond Buyer (13) rmaro C" . (14) FNMA Auc. (15) GNMA Sec. (16) (8) (9) (10) New Issue (11) 7.75 9.59 7.40 9,22 7.72 9.00 8.01 9.30 8.61 9.54 8.48 6,67 5.58 10.38 8.98 10,60 9.13 9.68 8,43 90-119 day (6) 10.52 e (7) 11.57 6.68 11.30 9.93 10.43 8.85 9.95 8.64 10,29 8.87 11.35 9.46 11.59 12.68 9.69 9.38 9.30 9.87 9.66 11.50 8.78 8.74 8.79 9.40 9.93 9.39 6.58 6.08 11.20 10.38 10.92 10.42 10.36 9.51 8.04 8.45 7.08 7.85 7.73 8.01 7.36 7.95 7.86 8.34 7,83 8.39 9.01 9.41 8.33 8.41 8.38 8.42 8.45 8.47 8,82 8.86 8.9L 8.86 - 6.12 6.09 9.79 9.76 9.81 9.79 8,97 9.04 8.96 9.76 10.03 7.99 8.64 9.08 8,45 9.20 9.44 8.49 9.20 9.40 9.12 10.15 10.44 8.98 10,14 10.37 9.94 8.62 8.64 8.69 9.17 9.13 6.13 9.86 Nov. Dec. 10.94 11,55 9.04 9.33 8.80 9.03 8.75 8.90 9.27 9.28 9.27 9.41 6.19 6.51 10.11 10.35 10.03 10.30 10.50 9.25 9.39 9.38 1979--Jan. Feb. Mar. 10.07 10.06 10,09 9.35 9.32 9.48 9.54 9.39 9.38 9.50 9.35 9.46 10.20 9.81 9.86 10.25 9.95 9.90 11.75 11.75 11.75 9.50 9.29 9.38 9.14 9.11 9.15 8.98 9.03 9.08 9.54 9.53 9.62 9.51 9.56 9.62 6.47 6.31 6.33 10.39 10.41 10.43 10.70 10.54 10.43 9.67 9.67 9.70 Apr. May June 10.01 10,24 10.29 9.46 9.61 9.06 9,28 9.27 8.81 9.50 9.53 9.06 9.76 9.80 9.58 9.85 9.95 9.76 11.75 11.75 11.65 9,43 9.42 8.95 9.21 9.23 8.86 9.12 9.21 8.91 9.70 9.83 9.50 9.74 9.84 9.50 6.29 6.25 6.13 10.50 10.69 11.04 10.59 10.84 10.77 9.7 9.89 9.75 July Aug. 10.47 10.94 9.24 9.52 8.87 9.16 9.19 9.45 9.70 10.25 9.87 10.43 11.54 11.91 8.94 9.14 8.92 9.05 8.92 8.97 9.58 9.48 9.53 9.49 6.13 6.20 11.09 11.09 10.66 10:67 9.77 9.90 10.42 10.28 10.35 10.63 8.96 9.25 9.29 9.34 8.64 8.78 8.84 9.01 8.87 9.16 9.26 9.47 9.60 9.63 9.68 9.87 9.66 9.75 9.87 9.96 11.50 11.50 11.50 11.50 8.78 8.88 8.96 9,05 8.74 6.87 8.97 9.00 8.79 8.88 8.97 8.98 --9.57 9.63 9.41 9.50 9.58 9.59 6,08 6.11 6,15 6.19 11.13 11.08 11,08 11.08 10.75 10.67 10.80 11.04 11.16 11.02 11.30 9.16 9.37 9.47 9.54 9.67 8.94 8,91 9.08 9.22 9.36 9.30 9.32 9.48 9.50 9.65 9.89 9.91 10.15 10.48 10.83 9.98 10.04 10.24 10.53 10.76 11.71 11.75 11.75 12.00 12.07 9.01 8.98 9.06 9,20 9.40 8.99 8.95 9.00 9.09 9.23 8.96 8.92 8.95 8.97 9.04 9.52c 9.40 9.42 9.47 9.62 9.57 9.44 9.45 9.47 9.54 6.14 6,13 6.16 6.23 6.36 11.08 9.91 10.43 9.62 9.95 9.78 10.29 11,04 11.35 11.03 11.59 12.25 12.68 9.68 9.66p 9.38 9.34p 9,18 9.20p -9.84p 9.70 9.8 7p 6.47 6.49 11.31 11.38p 10.27 10.50 9.86 9.97 -- --- 11.25 11.74 12.25 12.75 9.65 9.70p * 9.40 9.36p 9.19 9.21p 1979--High Low 1978--Aug. Sept. Oct. 1979--July 4 11 18 25 Aug. 1 8 15 22 29 Sept. 5 12 19 26 Daily--Sept. 6 13 11.08 11.08 11.10 10.66 10.65 10.64 10.69 11.13 11.20 n.a. 10.92 9.69 9.69 9.78 9.80 9.88 9.82 9.88 9.90 10.03 10.14 10.36 NOTE: Weekly data for columns 1, 2, 3, 6, and 7 are statement week averages of daily data. weekly data in column 4 are average rates set in the auctions of 6-month bills that will be issued on the Thursday following the end of the statement week. Data in column 5 are 1-day Wednesday quotes. For columns 8 through 11, the weekly date is the mid-point of the calendar week over which data are averaged. Columns 12 and 13 are 1-day quotes for Friday and Thursday, respectively, following the end of the statement week. Column 14 is an average of contract interest rates on commitments for conventional first mortgages with 80 percent loan-to-value ratios made by a sample of insured savings and loan associations on the Friday following the end of the statement week. Column 15 gives FNMA auction data for Monday preceding the end of the statement week. Column 16 is a 1-day'quote for Monday preceding the end of the statement week, The FNMA auction yield is the average yield in bi-weekly auction for short-term forward commitments for government underwritten mortgages, GNMA yields are average net yields to investors on mortgage-backed securities for immediate delivery, assuming prepayment in 12 years on pools of 30-year FHA/VA mortgages carrying the coupon rate 50 basis points below the current FHA/VA ceiling. TABLE 6 NET CHANGES IN SYSTEM HOLDINGS OF SECURITIES 1/ (millions of dollars, not seasonally adjusted) Treasury Coupons Net Purchases 3/ 1 - 5 5 - 10 Over 10 Treasury Change 2/ 1 = chng 1/ -490 7,232 1,280 -468 863 4,361 870 789 579 797 3,284 3,025 2,833 4,188 87 207 320 337 472 517 1,184 167 129 196 1,070 642 553 1,063 539 500 434 1,510 1,048 758 1,526 5,444 3,152 -5,072 1,156 774 1,135 1979--Qtr. I Qtr. II -3,750 465 426 640 134 640 -- -- --- --- - S - 1,136 - I year 1,582 1,415 1,747 6,202 5,187 4,660 7,962 Total I din 5/ Total 592 400 1,665 824 469 792 45 1,059 864 3,082 1,613 891 1,433 127 1,631 9,273 6,303 7,267 6,227 10,035 8,724 -1,358 -46 -154 1,272 3,607 -2,892 -1,774 7,930 4,632 -3,283 1,224 266 -2,130 93 700 -170 - 682 110 - - - - 640 -- -- -42 ---110 -- (FR) Federal Agencies Net Purchases 4/ I- 5 5 - 10 Over 10 Net Change Outright 2,246 1,697 1,844 1978--Qtr. 11 Qtr. III Qtr. IV 1979--Mar. Total I year STRICTLY CONFIDENTIAL CLASS II - FOMC SEPTEMBER 14, 1979 --399 - 2 -8821/ Net _. 1 -6/ -1,795 680 2,542 3,713 4,290 -- 371 -- -- -- -258 -2 --- -371 -491 3 -- 482 3,427 -1,579i- -944 -2,353 5,840 Apr. May June 1,021 -451 -105 42 -- July Aug. 2,252 218 237 96 142 693 191 288 1,712 57 699 140 81 976 -- - -- -- -- 2,687 -1,665 -2,279 113 218 237 96 142 693 - -- -- -- -- 806 -4,853 --- --- -- -- --- --- --- --- 266 1,384 188 -3,554 8,063 -3,828 693 1,184 -5,466 2,721 1,346 4,368 1979--July Aug. 4 11 18 25 1 8 15 22 29 Sept. 5 12 19 26 LEVEL--Sept. 12 266 1,384 188 -S. --- 211 525 75 57 699 140 81 - --- -- -- 26.8 12.2 12.3 976 1,501' 75 1,001 1,001 107 -200 18.4 -- 69.7 275 ---- 1.7 -- -- -- --- 4.4 1.4 .7 8.2 107 -218 122.1 -5,531 -5,182 -8.1 (in billions) 1/ Change from end-of-period to end-of-period. 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. J/ In addition to net purchases of securities, also reflects changes in System holdings of bankers' acceptances, direct Treasury borrowings from the System and redemptions (-) of agency and Treasury coupon issues. 6/ Includes changes in both RPs (+) and matched sale-purchase transactions (-). 7/ The Treasury sold $2,600 million of special certificates to the Federal Reserve on March 31, 1979 and redeemed the last of them on April 4, 1979. 8/ $640 million of 2-year notes were exchanged for a like amount of cash management bills on April 3, 1979. On April 9, 1979 the bills were exchanged for new 2-year notes. 1/
@FedFRASER