bluebooks · March 8, 1971

Bluebook

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.

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).

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)

March

5, 1971

MONETARY AGGREGATES AND MONEY MARKET CONDITIONS Prepared for the Federal Open Market Committee

By the Staff BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

CONFIDENTIAL (FR)

March 5, 1971.

MONETARY AGGREGATES AND MONEY MARKET CONDITIONS Recent developments (1) Following shortfalls in January, the key monetary aggregates in February all appear to have exceeded their targeted growth paths, although deposit data in the week ending March 3 are still partly estimated.

The

change from January to February was particularly dramatic in the narrowly defined money supply which is now estimated to have grown in February at an annual rate of 14 per cent. September,M 1

As a result, over the longer period since

now appears to have grown at slightly more than a 5 per cent

annual rate, with the February acceleration recapturing much of the fourth quarter and January shortfall. Recent Rates of Growth in Key Monetary Aggregates (Per cent Annual Rates of Change) January Bluebook Path Actual

February Bluebook Latest Fstim;tes Path

2.8

1.1

9.0

14.0

12.6

11.5

20.0

21.8

Adjusted proxy

10.9

10.5

8.5

12.9

(2) Following the February 9 Committee meeting, a substantial downward revision for the week ending February 3 and preliminary estimates for the week ended February 10 and 17 indicated that both narrow and broad measures of the money supply were averaging well below the Blue Book path adopted by the Committee,

But data received in the past two weeks indicated that deposit

measures were climbing back to well above

path--as shown in the detailed table

below--with the bulk of the pick-up appearing in the revised data for the

-2statement week ending February 17.

Since not all of the bulge in that holiday

week has been reversed in subsequent weeks, it would appear that some of the stronger money supply performance recently has reflected the February acceleration of business loan activity at banks and other demands associated with the first quarter strengthening of economic activity. Recent Paths of the Key Monetary Aggregates (Seasonally adjusted, billions of dollars)

Bluebook Paths

Adjusted Credit Proxy

M1 Actual

Bluebook Paths

Actuals

Bluebook Paths

Actuals

Month January February

215.1 216.7

214.8 217.3

423.4 430.4

423.0 430.7

334.2 336.6

334.1 337.7

Week ending February 3 10 17 24

216.1 216.4 217.1 216.8

214.7 216.2 218.6 217.9

427.4 428.9 430.6 431.3

425.3 428.6 432.0 432.5

335.9 336.2 336.3 337.3

335.6 337.4 337.4 338.4

3e 216.9 Estimated.

217.3

432.5

432.8

336.5

339.0

March e --

(3)

In the week ending February 17, the Federal funds rate averaged

a relatively high 4.14 per cent, as banks and the System both tended to underestimate reserve needs over the novel four day Lincoln-Washington's Birthday weekend.

As the next statement week began, with available deposit data suggesting

that the monetary aggregates had fallen well below path, the Desk lowered the Federal funds target to 3-1/2 per cent as specified.

Thereafter, although

fluctuating rather widely from day-to-day, the funds rate averaged just under 3-1/2 per cent.

Except in the week immediately following the Committee meeting,

the net reserve position of banks has been only slightly negative on average, average borrowings have been minimal (after allowance for special emergency advances).

and

-3(4)

The further reduction of the Federal funds rate was accompanied

by sizable additional declines in other short-term market rates.

For example,

the 3-month Treasury bill was most recently quoted at 3.34 per cent, down 30 basis points from its level at the time of the last Committee meeting, and over the same period most other short-term rates have declined by 30 to 50 basis points.

Downward pressures on bill rates have also strongly reflected heavy

sustained volume of foreign official purchases.

Partly in an effort to

minimize downward pressures on bill rates, the Treasury offered a $1.2 billion "strip" of 3- to 6-month bills on February 18, and the Desk has met some of the foreign demand through direct bill sales from System account.

Also, in its

own reserve supplying operations, the Desk has minimized outright acquisitions of bills in the market, placing greater stress on repurchase agreements with dealers and on purchases of coupon issues. (5)

In contrast with the recent declines of short-term rates,

yields in corporate and municipal security markets have turned sharply upward since the last meeting of the Committee.

Rate advances have been largest in

the corporate bond market, where changed interest rate expectations have been accompanied by a very large volume of offerings and a rapid the new issue calendar.

build-up in

In the market for Treasury securities--where System

purchases of coupon issues have totaled nearly $620 million since the last

meeting--yields on intermediate maturities have declined significantly, while those on longer maturities have increased somewhat. (6) The table on the next page summarizes seasonally adjusted annual rates of change in major financial aggregates for selected periods.

Third Quarter (Sept. over

June)

Fourth Quarter (Dec. over

Last 2 months (Feb. over

Sept. )

Dec.)

Last 5 months (Feb. over Sept.)

Total Reserves

19.1

6.6

11.7

8.7

Nonborrowed Reserves

24.4

9.4

11.8

10.4

Concepts of Money M1 (Currency plus demand deposits 1/)

6. 1

7.5

5.1

M2 (M1 plus time deposits at commercial banks

other than large CD's)

12.4

11.0

16.8

10.3

14.2

10.9

(Bank credit proxy adj.)

17.2

11.8

9.8

Loans and investments of commercial banks 2/

13.9

14.2

9.4

M3 (M2 plus deposits at thrift institutions)

Bank Credit Total member bank deposits

Short-term market paper (actual $ change) Large CD's

$ 8.5

$ 4.3

Bank-related commercial paper N.S.A. Nonbank commercial paper

- 3.0 -1.2

-2.3 1.5

$ 5.7

$ 1.4

3/ -

0.3

-2.6

1.5-

Other than interbank and U.S. Government. 1/ 2/ Based on month-end figures. Includes loans sold to affiliate and branches. 3/ January 1971 over December 1970. 4/ January 1971 over September 1970. End-of-month not available, last Wednesday data seasonally adjusted. 5/ e--Estimated N.S.A.--Not seasonally adjusted. 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 either end-of-month or last Wednesday of month figures.

Prospective developments (7)

Assuming that existing money market conditions--typified by

a Federal funds rate around 3-1/2 per cent--are maintained, the staff would now expect the narrow money supply (M1) to grow at about a 6 per cent annual rate in March and a 7 per cent rate over the first quarter.

Although such a

first quarter growth rate would be more rapid than the 6 per cent path for M1 adopted at the previous FOMC meeting, it would, if realized, just about make up for shortfalls relative to Committee targets earlier in the winter. For the fourth and first quarters combined, the growth rate of M 1 would be at about a 5-1/4 per cent annual rate.

The table below shows the path of M 1 --and

also M 2 --now expected to be consistent with a 3-1/2 per cent Federal funds rate, compared with the path adopted at the February 9 meeting (seasonally adjusted figures in $ bill.): M1

Hat a of Feb. 9

Current Path

Path as ot Feb. 9

Current Path

January

215.1

214.8

423.4

423.0

February

216.7

217.3

430.4

430.7

March

217.9

218.4

435.2

435.5

First quarter growth rate (March over December)

15-1/2%

16%

(8) Growth in other time and savings deposits has been about as rapid as expected, while bank issuance of large negotiable CD's have been running ahead of expectations.

Offering rates on CD's have been dropping,

though in recent weeks not quite as rapidly as declines in Treasury bill rates.

-6The expansion in

likely that

large CD's since the first of the year makes it

bank credit may grow slightly more rapidly than earlier expected in the first quarter.

The following table shows the current estimate for the adjusted

credit proxy and total reserves, assuming a 3-1/2 per cent Federal funds rate, as compared with the February 9 paths (seasonally adjusted figures in $ bill.). Total Reserves Current Path as of Path Feb. 9

Adj. Credit Proxy Current Path as of Path Feb. 9 January

334.2

334.1

30.2

February

336.6

337.7

30.6

30.5

March

340.1

341.1

30.8

31.0

First quarter growth rate (March over December)

10-1/2%

(9)

Attainment

cf a 6 per cen

13-1/2%

11%

12%

rate for M1 over the first

growth

quarter would require growth to fall of to 3 per cent in March. projections of money demand are correct,

the staff

this would seem to necessitate a

marked tightening of the money market in the last three weeks of March.

Since

the Committee expressed itself as willing to accept an overshoot for M 1 in the first quarter,

the paths presented in the following paragraphs for FOMC con-

sideration do not include a 3 per cent M1 growth target for March. course, anticipations

the growth rate in M1 could well result a as either

because the behavior of banks

revisions of

and

the

differently from staff expectations.

Fairly firm deposit data ending February 24.

diverge fromcurrent bank

deposit

public over

March

data

works

out

quite

are available only through the statement week

-7(10)

The table on the next page shows three alternative monthly

paths extending throughout the second quarter for the major monetary aggregates. Alternative A assumes a Federal funds rate maintained at 3-1/2 per cent--that is,

it assumes current money market conditions.

Thus, it is an extension

through June of the current paths described in the preceding paragraphs. While it is particularly difficult at this juncture to judge the implications for succeeding months of the recent sharp rise in the monetary aggregates, it is our best current judgment that the extension of these paths would lead to annual rates of growth in the second quarter of 9 per cent for M1,

14-1/2 per

cent for M2, 11 per cent for the adjusted credit proxy, and 10 per cent for total reserves.

The other two sets of paths presented are designed to indicate

alternatives for the Committee that call for slower growth rates in the aggregates than now seem probable under unchanged money market conditions. Alternative B, for instance, shows a 7 per cent annual rate of growth for M1 A

over the second quarter and alternative C a 6 per cent rate of increase. fourth alternative designed to focus on an objective of achieving somewhat

easier over-all credit market conditions is presented in paragraphs (18) and

(19). (11)

Under all of the alternatives growth in money supply--whether

M1 or M 2 --would be expected to slow over coming months from the unusually rapid February rates of increase.

However, as indicated in the preceding paragraph,

under alternative A, M 1 would be expected to grow more rapidly in the second quarter than in the first.

With short-term interest rates persisting around

current levels, the willingness of the public to hold cash seems likely to

Alternative Monthly and Quarterly Paths of Key Monetary Aggregates (Seasonally Adjusted,

Billions of Dollars)

M1 Alt.

1971 February March April May June

217.3 218.4 219.9 221.8 223.3

M2 B

Alt.

217.3 218.3 219.5 221.1 222.2

Alt. C

Alt. A

Alt. B

217.3 218.2 219.2 220.5 221.4

430.7

435.6

435.4

435.3

440.7 446.1 451.3

439.8 444.4 448.9

439.2 443.0 447.0

Per Cent Annual Rates of Growth 6.0 8.0 10.5 8.0

March April May June 1st Q. 1971 2nd Q. 1971

5.5 6.5 8.5 6.0

5.0 5.5 7.0 5.0

13.5 14.0 14.5 14.0

13.5 12.0 12.5 12.0

13.0 11.0 10.5 11.0

7.0 7.0

6.5 6.0

16.0 14.5

15.5 12.5

15.5 11.0

Total Reserves

Adjusted Credit Proxy Alt. A

Alt. B

337.7 341.1 346.8 348.3 350.5

337.7 341.1 346.5 347.5 349.4

Alt.

Alt. A

Alt. B

Alt. C

1971 February March April May June

337.7 341.0

346.2 347.1 348.7

30.5 31.0 31.4 31.8 31.7

30.5 31.0 31.3 31.7 31.5

30.5 30.9 31.2 31.5 31.3

Per Cent Annual Rates of Growth

March April May June 1st Q.

1971

2nd Q. 1971

12.0 20.0 5.0 7.5

12.0 19 0 3.5 6.5

11.5 18.5 3.0 5.5

18.0 15.5

12.0 11.0

12.0 9.5

12.0

9.0

16.0 -2.0

17.5 13.5 14.0 -5.5

16.5 11.5 12.0 -8.0

13.5 10.0

13.5 7.5

13.0 5.0

increase, given transactions needs associated with staff GNP projections, an opportunity cost of holding money lower on average in the second quarter than in the first, and the probablity that expectations of rising interest rates (and falling capital values) would become more pervasive in an expanding economic situation.

Growth in M 2 would be expected to moderate from the first

quarter pace, even under alternative A, however, as the initial asset adjustment by the public to the sharp drop of late 1970 and early 1971 in market rates relative to time deposit offering rates runs it course. (12)

The demand for bank credit is expected to be fairly strong

over the coming months under any of the alternatives.

Growth in outstanding

business loans at banks may not be as rapid as in February, but it is likely to be fairly sizable, sustained as the second quarter progresses by some switching of borrowers from relatively high cost capital market financing to relatively low cost bank loans.

In consequence, banks may not be as active in the market

for State and local government securities as they had been in the latter part of 1970 and early 1971.

They are likely to continue seeking CD funds on a

modest scale under prevailing market conditions and to reduce Euro-dollar borrowings at about the recent pace.

If money market conditions tighten--as

may be required under alternatives B and C--expectations of rising shortterm interest rates will give banks an added incentive to issue CD's in the near-term, especially longer-term CD's, offsetting in part expected slower growth under these conditions in demand and other time deposits. (13)

An effort to move onto growth paths for aggregates in the

second quarter slower than shown for alternative A--given staff assumptions

-10as to the strength of economic recovery and attendent credit demands--seems likely to require a rise in the Federal funds rate from current levels during The money market conditions now estimated to be con-

the next four weeks.

sistent with alternative A through C are shown in

the table below, using the

second quarter annual rate of growth in M1 as a convenient index of the collection of monetary aggregates.

Difference in money market conditions of these

would be expected to have only relatively minor effects on growth

dimensions

rates for the aggregates in March. Federal Funds Rate

Member Bank Borrowings

Net Reserves

Alternative A

3-1/2

250-350

+ 50 to -150

Alternative B

3-3/4--4-1/4

400-500

-150

to -300

Alternative C

4-1/4--4-3/4

500-600

-250 to -400

(14)

Weekly paths for key monetary aggregates are shown in the

table on the next page. (15)

Treasury financing plans will be an influence on interest rates

over the next few weeks.

A total of around $5 billion of new securities could

be announced between now and the next meeting of the Committee,

but the exact

timing of announcements is quite uncertain. depending in part on the progress of debt ceiling legislation.

The cash is

likely to be raised through bills

and also possibly a short note, with the latter announced,

at all,

late

March or early April. (16)

This additional supply in

the short-term area may be no

more than a modest offset to downward pressure on short rates from maturing

-11Alternative Weekly Paths of Key Monetary Aggregates (Seasonally adjusted, in billions of dollars) M2

M1 Alt. A

Alt. B

Alt. C

Alt. A

Alt. B

Alt. C

1971 February

24p

217.9

432.5

March

217.3

432.8

217.8

433.9

218.5

218.4

435.5

435.4

218.9

218.8

218.6

436.7

436.5

436.3

218.9

218.7

218.4

437.6

437.2

436.8

219.3

219.0

218.6

438.4

437.8

437.2

April

Adjusted Credit Proxy

Total Reserves

Alt. A

Alt. B

Alt. C

1971 February

338.4

30.6

March

338.9

30.6

340.4

30.9

341.5

341.4

31.0

341.7

341.6

341.5

31.0

30.9

341.3

341.1

340.9

31.2

31.1

344.7

344.4

344.1

31.1

31.0

April p -e --

Preliminary. Estimated from partial data.

Alt. A

Alt. B

Alt. C

-12tax bills, from continued foreign demand for bills, from reinvestment of the proceeds of the extremely large volume of long-term corporate bond offerings, and from paydowns of Federal agency debt.

Thus, it is possible that bill

rates will decline somewhat further, though maintenance of a Federal funds rate around 3-1/2 per cent would dampen further rate declines. funds rate is moved up, bill rates are likely to rise.

If the Federal

How rapidly the bill

rate moves up would depend for the most part on the attitudes of market participants--how soon they come to believe a rise in the funds rate would stick and whether they come to think that it would presage a further rise. Under alternative B money market specifications, a 3-month bill rate in a 3-1/2--4-1/2 per cent range might be anticipated, and under alternative C a 4--4-3/4 per cent range. (17)

If short-term rates do not rise over the next few weeks, the

staff would expect long-term market yields to work down, given the present wide spread of long over short rates, once headway is made in absorbing the exceptionally large volume of corporate bonds in the immediate offing.

In the

corporate and municipal bond market the recent rise in yields has probably reflected some discounting of potential future rate increases.

Thus, a rise in

short-rates of about the magnitude indicated for alternative B might not be accompanied by any appreciable rise in long rates over the second quarter as a whole, although an initial market reaction would be likely; money market tightening of the degree contemplated under alternative C more lasting long-term rate advance.

might well bring a

-13(18)

recognized that the Committee could regard the second

quarter projections of the aggregatesasproblematical at this juncture and could be more concerned over the policy implications of the recent firming that has taken place in bond markets.

If in these circumstances the Committee would

wish to promote somewhat easier over-all credit conditions, including nearterm declines in long-term rates, it could consider a policy alternative-such as Alternative D--that would call for some further easing of money market conditions.

A Federal funds rate consistently around 3--3-1/4 per

cent would encourage lower dealer loan rates and would lead to a further drop in short-term market rates and perhaps the prime rate.

The 3-month bill rate

Such developments would tend in time to

might fluctuate around 3 per cent.

bring long-term rates down, as a widened spread of long- over short-term rates provided greater encouragement to private borrowers to take advantage of the lower short-term financing rates.

Indications of a continuing easing trend

in monetary policy would also make dealers more willing holders of, and underwriters more aggressive bidders for,

long-term debt.

-14(19)

As nearly as can be judged,

the expected effect on

monetary aggregates of a policy consistent with the money market specifications of alternative D would be as shown in the table below. Paths of Key Monetary Aggregates-Monthly and Quarterly (alternative D) (Seasonally adjusted, billions of dollars)

Concepts of Money M1 M2

Adj. Credit Proxy

Total Reserves

337.7 341.2 347.4 349.4 352.2

30.5 31.0 31.5 31.9 31.9

1971 217.3 218.4 220.0 222.1 223.9

February March April May June

430.7 435.6 441.2 447.1 453.1

Per Cent Annual Rates of Growth March April May June

6.0 9.0 11.5 9.5

13.5 15.5 16.0 16.0

12.5 22.0 7.0 9.5

19.5 17.0 17.5

1st Q. 1971 2nd Q. 1971

7.0 10.0

16.0 16.0

12.0 13.0

14.0 11.5

Paths of Key Monetary Aggregates-Weekly (Alternative D) February March

April

217.9

432.5

338.4

30.6

217.3 217.8 218.5 219.0 219.0

432.8 433.9 435.5 436.8 437.8

338.9 340.4 341.5 341.7 341.5

30.6

10 17 24 31

219.5

438.8

345.0

31.2

p--Preliminary. e--Estimated from partial data.

30.9 31.1 31.0 31.2

-15-

Possible directive language (20)

This section presents possible language for the second

paragraph of the directive for the four alternative policy courses discussed above. (21)

Alternative A.

This language is proposed for possible

use if the Committee decides to retain the structure of the present directive--involving a primary instruction concerned with money market conditions and long-term rates, and a proviso clause relating to the aggregates. "To implement this policy, System open market operations until the next meeting of the Committee shall be conducted with a view to maintaining prevailing money market conditions additional] downward movements in longwhile accommodating ANY[DEL: promptly] term rates; provided that money market conditions shall [DEL: further] somewhat eased be MODIFIED [DEL:

if it appears that the

monetary AND CREDIT aggregates are DEVIATING SIGNIFICANTLY FROM [DEL: of] short falling

the growth paths [DEL: desired] EXPECTED."

As will be noted, the primary instruction in alternative A is identical to that of the present directive, except that it is proposed--in view of the recent increases in long-term rates--to call for accommodating "any" rather than "additional" downward movements in changes are proposed in the proviso clause.

such rates.

These include:

Certain (a) making

it a two-way clause, on the assumption that, in light of the recent stronger performance of the aggregates, the Committee would wish the

-16-

Desk to react to sizable deviations in

either direction; and (b) referring

to "credit" as well as "monetary" aggregates, in order to explicitly include the bank credit proxy among the aggregates to be considered by the Manager. If the Committee adopts this alternative, it may wish to consider the money market conditions set forth in the first line of the table in paragraph (13) above as a description of "prevailing" conditions, and for purposes of the proviso clause, to adopt the aggregate growth paths discussed earlier in connection with alternative A as the "expected" paths. (22)

Alternative B.

This language is

proposed for possible

use if the Committee decides (a) to formulate its primary instruction in terms of desired growth rates for the aggregates, and (b) to adopt as targets the growth rates (including a 7 per cent second-quarter rise in M1) discussed earlier in connection with alternative B. "To implement this policy, THE COMMITTEE SEEKS TO PROMOTE SUSTAINED GROWTH IN MONETARY AND CREDIT AGGREGATES OVER THE MONTHS AHEAD.

System open market operations until the next

meeting of the Committee shall be conducted with a view to maintaining [DEL: prevailing] BANK RESERVES AND money market conditions CONSISTENT WITH THAT OBJECTIVE [DEL: accommodating while

provided rates, long-term in movements downward additional somewhat eased be promptly shall conditions market money that further if

appears that the monetary aggregates are falling

short desired]." path growth the of

The phrase "sustained growth" is suggested as a description of the Committee's objective for the aggregates because the second-quarter growth rate

for

-17M 1 shown for this alternative is the same as the rate now expected for the first

quarter. (23)

use if

Alternative C.

This language is

proposed for possible

the Committee decides to adopt as targets the growth rates for the

aggregates (including a 6 per cent second-quarter rise in M

) discussed

earlier in connection with alternative C. "To implement this policy, THE COMMITTEE SEEKS TO PROMOTE MODERATE GROWTH IN MONETARY AND CREDIT AGGREGATES OVER THE MONTHS AHEAD.

System open market operations until the next

meeting of the Committee shall be conducted with a view to maintaining [DEL: prevailing] BANK RESERVES AND money market conditions CONSISTENT WITH THAT OBJECTIVE[DEL: accommodating while provided rates, long-term in movements downard additional that money somewhat eased be promptly shall conditions market falling are aggregates monetary the that ifitappears further short desired]." path growth the of This language differs from alternative B only in that the word "moderate" rather than "sustained" is suggested to describe the lower target growth rates for the aggregates. (24) use if

Alternative D.

This language is proposed for possible

the Committee decides to place primary emphasis on achieving more

accommodative credit market conditions at this time. "To implement this policy, System open market operations until the next meeting of the Committee shall be conducted with market] money prevailing maintaining a view to [DEL:

ATTAINING SOMEWHAT

-18downward additional accommodating while EASIER conditions [DEL: movements rates] long-term in

IN MONEY AND CREDIT MARKETS;

be promptly shall conditions market money provided that [DEL: furhter] eased somewhat

OPERATIONS SHALL BE MODIFIED if

appears that the monetary AND CREDIT aggregates are [DEL: falling of] short

DEVIATING SIGNIFICANTLY FROM the growth paths

[DEL: desired] EXPECTED." If the Committee adopts this alternative, it may wish to consider the money market conditions described in paragraph (18) above as a description of the somewhat easier conditions to be attained.

Paragraph (18)

discusses the probable consequences of such money market conditions for credit market conditions generally, and paragraph (19) sets forth the staff expectations for growth rates in the aggregates under this alternative.

CHART 1

STRICTLY CONFIDENTIAL (FR)

3/5/71

MONETARY AGGREGATES NARROW MONEY SUPPLY M1

BILLIONS OF DOLLARS

1230 (3/3/71)

1220

BROADER MONEY SUPPLY M2

(3/3/71)-

-430

420

-1 1969

1970

1971

'70 --- Actual Currently Projected

--- Wkly Path, Indicated at FOMC Meeting (2/9/71)

F '71 Longer Run Path

(FR) 3/5/71

CHART 1A

STRICTLY CONFIDENTIAL

MONETARY AGGREGATES ADJUSTED CREDIT PROXY

BILLIONS OF DOLLARS

340

13/3/71)

330 10~/2%

-320

j310

I I

TOTAL RESERVES

1969

1970

1971

I N

i D

'70 -

Actual

Currently Projected

--- Wkly Path, Indicated at FOMC Meetng(2/9/71)

Z-

F 71

Longer Run Path

3/5/71

'CHART 2

INTEREST BEARING SOURCES OF BANK FUNDS BILLIONS OF DOLLARS

-230

TOTAL TIME AND SAVINGS DEPOSITS

-210

-190

TIME AND SAVINGS DEPOSITS OTHER THAN CD'S

-30

NONDEPOSIT SOURCES

1969

1970

1971

CHART 3

MONEY MARKET CONDITIONS AND INTEREST RATES IDITIONS

INTEREST RATES Short-term

INTEREST RATES Long-term

Table 1

STRICTLY CONFIDENTIAL (FR)

PATHS OF KEY MONETARY AGGREGATES Narrow Money Supply (M 1 ) 1/

Period

Path as of Feb. 9

Actuals & Current Prol

Broad Money Supply (M2 ) 2/

3 3

Path as of Feb. 9

March 5, 1971

Adjusted Credit Proxy

4Actuals & Current Prol.

Path as of Feb. 9

Total Reserves

Actuals & Current Prol.

Pathasof Feb. 9

Actuals & CurrentProj.

Monthly Pattern in Billions of Dollars 1970.

Oct.

213.0 213.5 214.6

Nov.

Dec. 1971

Jan. Feb. Mar.

1970:

1st 2nd 3rd 4th

215 1 216.7 217.9

412.1

324.8 326.7 331.2

414.5

419.0

214.8 217.3 (218.4)

423.0 430.7 (435.5)

423.4 430.4 435,2

334.2 336.6 340.1

29.4 29.5 29.9

334.1 337.7 (341.1)

30.2 30.6 30.8

30.2 30.5 (31.0)

Annual Percentage Rates of Change--Quarterly and Monthly 5.9 5.8 6.1 3.4

Qtr. Qtr. Qtr. Qtr.

1971-

1st Qtr.

1970:

Oct

6.0

(7.0)

15.5

2.8 9.0 6.5

Jan. Feb.

Mar.

10.5

(16.0)

1.1 2.8 6.2

Dec 1971:

3.4 8.4 11.0 9.2

10.9 8.5 12.5

11.5 21.8 (13.5)

12.6 20.0 13.5

-2.9 2.6

8.3

6.7

19.1

(12.0)

(14.0)

11.0

-1.9 3.6 18.4

1.1 7.0 16.5

7.3 7.0 13.0

1.1 14,0 ( 6.0)

0.5 6.5 17.2

10.5 12.9 (12.0)

12.2 11.0 (18.5)

12.2

14.5 6.5

Weekly Pattern in Billions of Dollars 1971-

NOTES

Jan.

6 13 20 27

Feb.

3 10 17 24

Mar.

3 10

214.7 216.2 218.6 217.9

427.4 428.9 430.6 431.3

216.9

217.3

217.8

(217.8)

432.5 434.0

216.1 216.4 217.1 216.8

III

425.3 428.6 432.0 432.5

30.5 29.8 30.4 30.2

333.3 332.5 334.1 335.3

422.2 422.1 423.2 423.4

215.4 215.2 214.9 213.8

432.8 (434.0) I

¢ n

335.9 336.2 336.3 337.3

335.6 337.4 337.4 338.4

336.5 338.2

339.0 (340.4)

Annual rates of change other than those for the past are rounded to the nearest half per cent. Data shown in parenthesis are current projections. 2/ Currency plus private demand deposits. M I/ plisstime deposits other than large CD's. 1

30.3 30.3 30.7 30.6

30.3 30.5 30.7 30.6

30.8 30.7

Partially estimated.

30.6 (30.9) -

FR712-D Rev2/16/71

Table 1-A

STRICTLY CONFIDENTIAL (FR) March 5, 1971

PATHS OF KEY MONETARY AGGREGATES

1970:

Oct. Nov Dec.

1971:

Jan. Feb. Mar.

1970:

1st 2nd 3rd 4th

5.2 6.0 6.2 6.7 6.9 6.8

1st (

1970:

Oct. Nov.

235.4 240.6 244.4

208.3 213.7 217.3

24.0

(25.0)

25.5 28.0 (20.0)

23.2 23.9 26.0

14.2 12.7 11.6

208.2 213.5 (217.2)

27.1 27.4 (27.6)

10.1

8.6 (7.5)

0.9

25.0

(25.0)

14.0 12.1 19.7

20.3 15.1 28.8

Jan. Feb. Mar.

199.1 201.1 204.4

11.3 16.5 15.4

21.8

Dec. 1971:

235.3 240.8 (244.8)

Annual Percentage Rates of Change--Quarterly and Monthl 1.4 14.1 32.2

( ( ( (

1971:

6.7 6.1 (5.7)

222.2 225.0 230.4

22.9 31.0 20.0

22.3 30-5 (21.0)

Weekly Pattern in Billions of Dollars 1971:

Jan.

Feb

6.0

8.1

10 17 24 Mar.

10 NOTES:

206.9 208.3 209.5

8.3 7.1 6.3 5.0

238.1 239.5 240.5 241.5

237.6 239.7 240.7 241.9

211.3 212.5 213.5 214.5

4.9

242,7 243.3

243.1 (243.6)

215.6 216.2

(6.2)

Annual rates of change other than those for the past

data shown in parenthesis are current projections. pe - Partially estimated.

206.8

233.6 234.2 235.7 236.6

5.3 5.3

6 13 20 27

210.6 212.3 213.4 214.5

215.5 (216.1)

are rounded to the nearest half per cent.

26.8 27.3 27.4 27.0

10.2 10.5 10.5 10.0

27.6 27.4 27.3 27.4

8.8 9.1 8.7 8.2

27.6 (27.5)

7.9 (7.6)

FR 712-K Rev2/16/71

Table 2

CONFIDENTIAL (FR)

AGGREGATE RESERVES AND MONETARY VARIABLES RETROSPECTIVE CHANGES. SEASONALLY ADJUSTED (Annual rates in percent)

_____________

Reserve Aggregates 1

Total

Private

Time

Demand Deposits

osd Deposits Adjusted

Member

Adjusted

Reserves

Bank Deposits

Credit Proxy

Total

n.a.

+ 7.8 + 3.1 + 5.4

+ 7.4 + 6.0 + 6.3

+ 7.9 + 2.4 + 5.1

+11.1

n.a. + 8.3

n.a. - 1.2

+ 5.1 + 1.2

+ 6.5 + 5.4

+ 4.7 + 0.1

- 3.5

-46 + 3.3 +20.0

+ 3.5 +12.9

+ 5.9 + 4.8

+ 7.8 + 4.6

+ 5.3 + 4.7

+ -

+ 6.4

+ 9.5

+11.8

Serti-afnualY 1st Half 1969 2hd Half 1969

+ 0.7

1st Half 1970 2nd Half 1970

- 0.2 +13.0

+ 1.9 +17.1

QuOarterly 3rd Qtr 1969 4th Qtr. 1969

+ 1.4

1st 2nd 3rd 4th

+ 2.6 +19.1 + 6.6

+ 4.1 +24.4 + 9.4

+ 6.3

+12.1

Month . 1969: Dec.

Nonborrowed

+7.8 -1.6

1970 1970 1970 1970

Total

Annvally 1968 1969 1970

Qtr. Qtr. Qtr. Qtr.

Monetary Variables Money Supply

Reserves

Pertod

3.9

9.3

2.9

6.0 3.0

3.7 2.4

March 5, 1971

+ -

9.0 4.0

3.5

Currency

- 5.0

+18.4

- 6.6 7.8

+27.9

Addenda 10 Nonbank Thrift

sit.

Comercial

+ 6.3 + 3.4 + 7.8

+ 5.3 + 1.6

+28.3

+ 4.7 +10.6

+12.8 +1.7

n.a.

- 0.1

+ 0.1

- 4.3 + 2.0

+ 0.8 + 1.6

+ 4.5 + 6.2

+ 0.3

- 0.4

+ 1.8 + 1.4

+31.6 +23.2

+ 0.6 + 6.0 +24.1 +15.1

+ 0.5 + 6.5 +17.2 + 8.3

+ + + +

+ 1.4 +14.1 +32.2 +21.8

+ 2.5 + 7.0 + 9.3 +11.5

+17.8 +7.5 -16.2 +20.4

+ 0.8

+ 0.6

+ 3.7

+ 1.3

+27.4

- 2.5 + 3.1 + 6.7

+12.6 +26.2

4.8

0.4

9.4

5.9 5.8 6.1 3.4

6.1 9.4 3.3 5.8

-12.7

5.3 5.3 6.7 2.7

+ 2.6

+ 0.8

3.5

+ 9.4

+ 5.2

+ 9.9

- 5.5 +10.7

- 4.1 +12.3

+ 7.8

+12.9

+ 1.2 +11.2

4,5

+13.7 - 1.2

+ 9.9 + 5.2

+ 5.8

+ 7.0

+ 2.3

+10.3 +15.3 + 2.5

+10.5 + 3.0 + 2.2

+19.7 +10.9 +11.4

+ 8.1 + 5.3 + 7.3

+34.4 +18.9 -30.0

+18.1 +23.2 + 9.7

+ 5.7 + 6.8 + 5.7

+ 7.5

+ 4.4

+ 2.5

+ 8.9

+35.6 +28.8 +29.8

+11.9 + 5.9

+40.1

+22.7 +29.2 +19.0

-87.5 -7.2 +49.6

+ 1.1 + 7.0 +16.5

+ 1.1 + 2.8 + 6.2

+ 7.5

- 0.7

+ 4.9 + 4.9

+ 2.2 + 6.6

+20.3 +15.1 +28.8

+10.6

+ 4.4 +22.8

+10.1 +13.1 +21.4

+14.2

+32.4 -28.7 +58.0

+ 8.8

+16.1

+10.5

+ 1.1

+ 7.4

- 1.4

+25.5

+25.3

- 9.0

- 8.0

+ 3.1 -12.0

April May June

+21.3 -13.9 + 0.5

+25.4 -19.0 + 6.2

+16.8

July Aug. Sept.

+ 6.0 +23.3 +27.5

-16.1

+48.8

Oct. Nov. Dec.

- 1.9 + 3.6 +18.4

1971:

Jan.

+12.2

NOTE.

Aggregate reserve series have been adjusted to elitinate changes in percentage reserve requiremfents against deposits, but reserve requireebts FA Z on Eurodollar borrowings are included beginning October 16, 1969, and requirements on bank-related cofamercial paper are inclu4ed beginning October 1,

1970

Jan. Feb. March

7.2

-15.6 + 7.5

4.2 8.0

+14.0 -

5.2

6.8

+6.6

+10.0 + 9.4

+13.8

1970.

CONFIDENTIAL(FR) March 5, 1971

Table 3

AGGREGATE RESERVES AND MONETARY VARIABLES SEASONALLY ADJUSTED

(In billions of dollars)

(In millions of dollars) 1969-

July Aug Sept.

27,530 27,401 27 402

20,275 26,214 26 383

27,334 27,161 27,144

288.0 285.3 285.7

2.4 2.9 4.4

203.1 202.6 202.8

45.0 45.2 45.3

158.1 157.4 157.6

198.1 195.4 194.8

14.1 12.5 12.0

184.0 182.9 182.8

305.7 303.8 304.2

Oct.

26.210 26 538 26,806

27,129 27.548 27,707

283.5 285.8 285.8

3.1 5.6 4.9

203.2 203.5 203.6

45.6 45.9 46.0

157.6 157.6 157.7

194.2

Dec.

27 354 27 783 27,928

194.6

11.5 11.1 11.2

182.6 182.9 183.4

302.2 305.5 305.7

Jan. Feb. March

28,001 27,722 27.723

26.966 26,615 26,782

27,823 27,523 27,536

284.8 282.9 286.2

5.3 5.6 5.9

205.2 204.5 206.6

46.2 46.4 46.7

159.0 158.1 159.8

193.3 193.5 195.3

10.6 10.6 11.5

182.7 182.9 183.8

304.8 303.4 306.1

April May June

28.216 27.890 27,902

27,350 26,916 27,056

28,046 27,692 27,713

290.2 289.1 290.5

5.2 3.0 4.8

208.3 209.2 209.6

47.1 47.7 47.8

161.2 161.6 161.9

198.5 200.3 202.2

12.9 13.2 13.2

185.6 187.1 189.0

309.6 309.3 311.1

July Aug. Sept.

28,041 28 585 29,240

26.694 27,780 28,708

27,896 28,408 29,024

296.0 303.2

210.6 211.8 212.8

48.1 48.2 48.2

162.5 163.7 164.6

208.2 213.2 218.5

16.9 19.0 21.7

191.3 194.2

308.6

4.4 6.4 6.2

315.8 321.9 324.5

Oct. NOv. Dec.

29,385 29,474 29.925

28,928 29,033 29.584

29,134 29,233 29.703

310.6 314.0 319.6

5.2 6.0 6.2

213.0 213.5 214.6

48.5

222.2 225.0 230.4

23.2 23.9 26.6

199.1 201.1

48.9

164.5 164.8 165.7

204.4

324.8 326.7 331.2

Jan.

30,229

29,801

30,029

323.9

6.7

214.8

49.2

165.5

235.3

27.1

208.2

334.1

Nov.

1970-

1971*

1971:

N6TES

48.7

194,0

196.8

Jan.

6 13 20 27

30,524 29,812 30,402 30,206

30,052 29,610 29,830 29,702

29,939 30,005 30,306 29,874

323.1 322.0 323.5 325.3

215.4 215.2 214.9 213.8

49.2 49.1 49.2 49.3

166.2 166.1 165.7 164.6

233.6 234.2 235.7 236.6

206.8 206.9 208.3 209.5

333.3 332.5 334.1 335.3

Feb.

3 10 17 p 24 p

30,250 30,293 30,658 30 616

29,880 30,096 30,044 30 457

29,990 30,080 30,369 30,384

326.8 328.3 328.7 330.2

214.7 216.2 218.6 217.9

49.5 49.5 49.9 49.5

165.3 166.8 168.7 168.5

237.6 239.7 240.7 241.9

210.6 212.3 213.4 214.5

335.6 337.4 337.4 338.4

Aggregate reserve series have been adjusted to eliminate changes in percentage reserve requirements against deposits, but reserve requirements on Eurodollar borrowings are included beginning October 16, 1969, and requirements on bank-related cofmercial paper are included beginning October 1 1970. Adjusted credit proxy includes mainly total member bank deposits subject to reserve requirements, bank-related cominercial paper, and Euro-dollar Weekly data are daily averages for statement weeks. Monthly data are daily averages except for flonbank commercial borrowings of U.S. banks. FR712-F paper figures which are for last day of month.

Table 4 MARGINAL RESERVE MEASURES (Dollar amounts in millions, based on period averages of daily figures)

Member Period

Free reserves

Excess reserves

Banks

Borrowi

Total

8 N.Y.

nRs

C I t y Other

Reserve R e Maaor banks

Country

Outside N.Y.

Monthly (reserves weeks ending in): 1969--July August September October November December

-1,045 997 744 995 975 - 849

266 214 282 195 238 278

1,311 1,211 1,026 1,190 1,213 1,127

89 81 83 106 120 268

250 253 236 327 387 310

364 256 222 293 250 220

608 621 465 464 456 329

1970--January February March April May June July August September October November December

759 916 751 - 687 - 765 736 -1,134 - 706 374 - 274 199 84

169 210 129 178 159 171 183 175 235 193 210 264

928 1,126 880 865 924 907 1,317 881 609 467 409 348

148 106 90 227 165 140 218 143 101 12 42 36

287 317 225 331 241 269 460 278 115 40 17 16

232 289 287 119 228 217 348 273 274 313 294 265

261 414 278 188 290 261 291 187 119 102 57 30

1971--January February p

140 75

238 261

378 336

45 29

36 30

262 248

35 29

2 9 16 23 30

482 348 144 507 389

178 415 356 -47 272

660 763 500 460 661

79 160 89 75 103

181 143 93 77 79

221 343 224 258 325

179 117 94 50 154

Oct.

7 14 21 28

46 409 397 242

352 41 189 191

398 450 586 433

-71 16 11

4 46 97 13

304 312 342 292

90 71 131 117

Nov.

4 11 18 25

105 163 166 360

318 282 164 76

423 445 330 436

11 69 -86

15 29 1 22

311 282 295 287

86 65 34 41

Dec.

417

455

300

154

136

290

263

16 23 30

279 114 164

120 211 434

399 325 270

55 39 --

48 11 --

268 250 245

28 25 £5

138 245 380 72

545 32 92 282

407 277 472 354

71 -82 26

60 -63 20

250 249 284 266

26 28 43 42

1970--Sept.

1971--Jan.

6 13 20 27

Feb.

3 10 17 p 24 p

46 42 285 73

237 205 279 322

283 247 564 249

--114 --

--121 --

253 229 281 228

30 18 48 21

Mar.

3 p

146

114

260

£42

p - prel4mlnary.

Table 5 SOURCE OF FEDERAL RESERVE CREDIT

Retrospective Changes (Dollar amounts in millions of dollars, based on weekly averages of daily figures)

PerTod

Total Federal Reserve credit (Excl. float)

U.S. Government securities Total holdings

Bills I/

Other

+4,279 ( -) 43,220 (- 143)

+ 707 +1,180

Repurchase agreements

Year-

1969 (12/25/68 - 12/31/69) 1970 (12/31/69 - 12/30/70)

45,530 +3,351

+5,192 +4,276

2 9 16 23 30

189

473

248 982 689

+ +

7 14 21 28

Federal Agency Securities

Bankers' . acceptances

206

124

+ -

35 28

+ + +

133 123 250

506

196

+ + +

13 37 12 38 49

+ + + +

12 17 13 40 21

S 18 56

25 4

Member banks borrowings +

245

834

103

263

Weekly 9

1 70--Sept.

Oct.

Nov.

Dec.

1971--Jan

Feb.

193

( --

320 372

((-

210 (+ 346)

183

238

+ -

S 56 + 67 268

692

610

11 18 25

671

141

S 75 711 93

986

303

+ -

697 122 143

6 13 20

938

534

204

236

171

2 9 16 23 30

3 P

+ +

(

)

90) 256)

(-( -(-( --

) ) ) )

241 ( --

+ +

(509 (+ 273 (-

) 214) 214) 150)

853 145 586

+ +

475 (+ 82 (328 (+

150) 244) 244)

35 3

) 134 ( -95 (- 143)

4 152 + 137

722 - 308

+ + -

(1- 97) (+ 46) (- 159) (+ 85)

+ 109

-153 81

16 63

428 19 236 - 65

205

369

+ 134

+ -

41 -114

+1,525

+1,082

932

518

282

286

120

(+ 367)

~-_--

Figures in parenthesis reflect reserve effect of match sale-purchase agreement.

-1

201

263

+ +

52 136 -153

202 500

6 + 62 - 107

+ -

10 22 115

106

337

177

258

321 45

30 24 - 7 64

165 109 - 74 S 55

+ -

185 327

137

130

195

+ +

51 59 13

S 16

S 26

(+ 74) S 61 (- 412) + 333 (+ 412) 218 (- 367)

482 5 224 479

10 17 p 24 p Mar.

164 316 14 864 418

118

110

+ 106 + 209

643

509

+ -

36 317 315

+ 207

Table 6

(Dollar F a c t o r Federal Reserve credit (excl. credit (excl. 1 float)

Period

Gold Gold

MAJOR SOURCES AND USES OF RESERVES Retrospective and Prospective Changes amounts in millions, based on weekly averages of daily figures) r e s e r v es s a f f e c t i n g sU p p 1 y of Other nonmember Foreign y Currency deposits and er Float deposits pera n outside

( Year 1969 (12/25/68 - 12/31/69 1970 (12/11/69 - 12/30/70

+5,539 43,351

+1,150

i g n

icat

-2,676 -3,122

effect

813

773

Change in i total

= Bank use of reserves

reserves

F.R. accounts

and gold loans

perations

banks

stock

Required

Excess

reserves

r e s e r v e s)

+ 241 + 667

+ +

54 1

- 217 + 379

+ + + + +

20 4 6 21 4

898

+1,448

-1,655

+1,363

+1,340 +1,257

108

+ + + +

153 324 49 124 321

+ 80 - 311

Weekly 1970--Sept

Oct.

Nov.

2 9

+ +

189 473

16 23 30

248 982 689

7 14 21 28

+ -

+ 4

11 18 25 Dec.

1971--Jan.

Feb.

Mar.

78 + 154 - 124 + 35 + 214 - 163 63 71

692 48 671 141

+ 46 - 353 - 545 - 298

146

+ +

88 153

986

303 697

122 143

6 13 20 27

+ +

938 534 64

204

3 10 17 p 24 p

236

260 S329 S549 + 432

36 -214

196 -170 205 -124 861

482 5 224 479

2 9 16 23 30

13 - 85 - 263 - 688 - 264

+ 34 + 103 - 107 + 1 - 376

319 601 450 544 3 237 577 108 209

- 385

f +

932

+ -

282

+1,526

I I For retrospective details, see Table 5. 1/ Includes $400 million in special drawing account. 2/ p - Preliminary.

+ 183 + 552 -

833

+ 20 + 174 + 576 - 311

10 4

+ 100 + 169 + 95

193 561 10 527 640

+ 271 + 1 + 230 + 1

+ -

248 322 426 443

+ -

328 11 278 445

271 86 16

205 73

+ + + -

78 109 156 302

+ 127

+ + + + +

161 124 336 169 322

+ 341

657

144

+ 111 - 513

+ 237 -

59 - 403

+ 319

+ 148 + 2

382

+ 482 - 210 + 275

+ +

1 17 18

- 397

38 390

- 187 39

502

157

+ 75 + 206

+ + +

320 260 545

+ +

768 369 787 857

+ + +

-1,047

+ 60 + 190

168

167

358

- 515

213 199 432 - 297

340

- 378

170

- 208

349

174

873

+ -

+ 188

250

673

+ 191

- 275

+ 289 - 256 - 50

- 402 + 542 - 553

+ 418

+ 839

16 S4 10 + 2

- 745

889

+ 305

+ 108

I-

+ +

+ 843

14 45

26 34

130

7 97

727

36 - 118

-88 - 281 16

+ 223

Cite this document

APA

Federal Reserve (1971, March 8). Bluebook. Bluebooks, Federal Reserve. https://whenthefedspeaks.com/doc/bluebook_19710309

BibTeX

@misc{wtfs_bluebook_19710309,
  author = {Federal Reserve},
  title = {Bluebook},
  year = {1971},
  month = {Mar},
  howpublished = {Bluebooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/bluebook_19710309},
  note = {Retrieved via When the Fed Speaks corpus}
}