bluebooks · July 26, 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) July 23,

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

July 23,

CONFIDENTIAL (FR)

1971.

MONETARY AGGREGATES AND MONEY MARKET CONDITIONS Recent Developments (1)

Growth of the narrowly-defined money supply in July appears

to be somewhat faster than projected in the last blue book, as best can be judged by information available through the week of the 21st, with data for the latter week partly estimated.

The broader money supply (M2) appears to

be increasing less rapidly than projected, however, as a substantial shortfall below path in time deposits other than CD's more than offset the overshoot in private demand deposits.

And with U.S. Government deposits much

weaker than expected and nondeposit sources of funds continuing to decline on balance, the bank credit proxy appears to be falling very considerably short of expectations in July. Growth Rates in Key Monetary Aggregates 1/ (Per cent annual rates of change)

Bluebook

Current

Bluebook Path 2/

Current Estimate

Adjusted Proxy Bluebook Path 2/

Current Estimate

Bluebook Path2 /

Current Estimate

12.5

11.0

7.5

6.6

June

9.5

July

10.0

12.0

10.0

8.0

15.5

6.5

Qtr 2

11.5

11.3

13.0

12.6

7.0

6.5

1/ 2/

9.1

Tables 7 and 7A in the back of the bluebook show the reconciliation the various aggregates. Alternative B path of the last bluebook.

(2)

among

The actual course of the monetary aggregates in recent weeks is

compared with the alternative B paths of the previous bluebook in-the following rable.

Recent Paths of the Key Monetary Aggregates (Seasonally adjusted, billions of dollars) SM 1 Bluebook Path

_M2

Actual

Bluebook Path

Actual

Adjusted Credit Proxy Bluebook Path Actual

Month June July

225.7 227.6

225.6 227.91/

451.8 455.6

451.4 454.51/

346.0 350.4

345.7 347.6~/

226.1 226.8 227.3 227.4

225.3 228.5 227.3 228.2

452.9 453.9 455.1 455.6

451.9 455.0 453.9 454.2

346.3 349.9 351.0 350.0

345.1 347.3 347.4 347.5

Week ending June July July July

30 7 14 21 pe

1/ Estimated on the basis of partial data. pe -- Partially estimated. (3)

the first

half of July,

following the relatively weak

end-of-June behavior of the aggregates, the Desk aimed at a Federal funds rate generally in

the lower half of the 5--5-1/2

per cent range; and during

those weeks the effective Federal funds rate averaged just slightly over 5-1/8 per cent.

As early indications of the strength in M

July were

confirmed, however, and with the increase in the discount rate to 5 per cent, the Desk has most recently moved to promote a Federal funds rate at about the upper end of the range. (4)

During the first three statement weeks of July member bank

borrowings averaged about $930 million, about $415 million above the June average.

Apparently in recent weeks many banks that had borrowed relatively

little at the discount window have become more willing borrowers, given the spread of the Federal funds rate above the discount rate.

Excess reserves

have been volatile over the past three weeks, and net borrowed reserves of member banks have ranged from $350 to $950 million, with the average level considerably deeper than in June.

Reserve Aggregates (Daily averages in

millions of dollars,

seasonally adjusted)

Nonborrowed

Total

Required

Bluebook Path 1/

Actual

Bluebook Path 1/

Actual

Bluebook Path 1/

Actual

31,307 31,794

31,257 31,339

30,932 31,416

30,801 30,443

31,087 31,585

31,046 31,127

18.5

3.1

19.0

-14.0

19.0

3.1

31,224 31,359 32,212

31,071 30,867 31,583

30,915 31,069 31,727

30,495 29,984 30,376

31,013 31,334 31,852

30,769 31,026 31,133

Month

June July pe Annual Rate of Increase (July over June) Week ending

July 7 July 14 July 21 pe --

Partly estimated.

Alternative B. (5)

Although M1 in July has turned out to be somewhat

stronger than previously projected, the need for reserves in the first three weeks of the month was considerably less than expected (as shown by the difference between "path" and "actual" required reserves in the table above). The lower level of required reserves relative to path was mainly the result of large downward adjustments in preliminary estimates of private demand deposits during the last two weeks of June, and much lower than expected U.S. Government deposits in early July.

Thus, with the need for reserves reduced,

growth of member bank total reserves in July is

falling substantially short

of what was implied by the alternative B path at the time of the last Committee meeting, as shown in the table above, despite the sharp rise in member bank borrowings.

Nonborrowed reserves were even further below

path than total reserves--and showed an actual decline from June to July --as the Desk provided fewer reserves given the increased demand for borrowings by banks. (6)

Market interest rate adjustments to the increase in the

Federal funds and discount rates have been relatively modest. initial

After an

upward adjustment of from 10 to nearly 30 basis points to the

discount rate announcement, the bill market strengthened, partly in reflection of large foreign demands and expectations of some re-investment demand from holders of "rights" who may not wish to opt for the longerterm offerings in

the exchange position of the financing.

faded most recently,

This strength

and the 3-month bill closed on Friday at 5.45 per

cent, a little above its level just prior to the discount rate hike,

and

well above its 5.19 per cent level at the time of the June 29 FOMC meeting. Reflecting the discount rate action and also the Treasury financing, yields on Treasury coupon-bearing securities rose by about 10 to 20 basis points after mid-month.

Other short- and long-term yields showed very little

reaction to the System's firmer policy stance. (7)

On July 21, the Treasury announced that holders of the $5.1

billion of securities maturing on August 16, $4.1 billion of which are publicly held, would be able to exchange those issues for either a 4-1/4

year note yielding 7.06 per cent or a 10-year bond at a yield of 7.11 per cent.

It was also announced that, in the case of the 10-year bond, cash

subscriptions by individuals up to $10,000 would also be accepted. Although a good deal of individual interest seems to be developing, this latter feature is not expected to raise much new cash according to Treasury comments.

A cash auction of an 18-month note in early

August is expected to cover attrition in the exchange and to raise around $1 billion in new money, and an additional cash offering of $2 billion or so--probably in tax bills--is anticipated for late August. (8)

The table on the following page summarizes seasonally

adjusted annual rates of change in major financial aggregates for selected periods.

4th and 1st Qtrs. combined

(March over Sept.)

Total Reserves Nonborrowed Reserves

Second Quarter (June over March)

July over

June 3.1

8.9 10.3

5.3

-14.0

6.2

11.3

12.2

13.7

12.6

8.2

14.6

14.7

n. a.

9.7

6.5

6.6

Concepts of Money M 1 (Currency plus demand deposits 1/) M 2 (M1 plus time deposits at commercial banks other than large CD's) M 3 (M2 plus deposits at

thrift institutions)

Bank Credit Total member bank deposits (Bank credit proxy adj.) Loans and investments of commercial banks 2/

n.a.

10.5

Short-term market paper

(Actual $ change in billions) Large CD's

$6.1

Bank-related commercial paper N.S.A.

-2.9

0.0

Nonbank commercial paper

-0.4

- 1.0

$ 1.6

n.a. n. a.

Other than interbank and U.S. Government. Based on month-end figures. Includes loans sold to affiliates and branches. N.S.A. Not seasonally adjusted. 1/ 2/

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 (9)

The table on the next page shows two paths for monetary aggregates

between now and year-end.

Money market specifications thought to be consistent

with these paths are summarized in the table below.1 /

Alternative A 5-1/2%

Federal funds rate Member bank borrowings rate

3-month bill

Alternative B 5-1/2--6%

$.8--$1 billion

$.9--$1.2 billion

5-3/8--5-5/8%

5-1/2--6-1/8%

Growth in M1 (SAAR) 5-1/2%

August September

8-1/2%

3rd Quarter

8-1/2%

4th Quarter

2-1/2%

(10)

The money market specifications for alternative A represent

a continuation of conditions recently prevailing, as would be consistent with a strict interpretation of "even keel".

The current Treasury refunding will be

settled on August 16, only about a week before the next FOMC meeting.

It is

possible also that conditions following the settlement date will present more than the usual constraint on open market operations in view of the greater price risk in the distribution process of a long-term offering.

Specifications for

alternative B, on the other hand, would envisage a gradual firming of the

money market, to the extent permitted by the Treasury financing, to a Federal funds rate of 6 per cent by late in the inter-meeting period; a funds rate fluctuating around 6 per cent has been assumed for the alternative B paths for the monetary aggregates. 1/

Weekly paths are appended on p. 16.

Alternative Monthly and Quarterly Paths of Key Monetary Aggregates (Seasonally adjusted, billions of dollars) M1 Alt.

M2 Alt. B

Alt. A

Alt. B

227.9 228.9 230.3 231.8

454.5 457.0 460.3 466.2

454.5 456.7 459.6 463.9

1971 July August September December

227.9 229.0 230.6 232.9

Per Cent Annual Rates of Growth July August September 3rd Q. 1971 4th Q. 1971

12.0 6.0 8.5

12.0 5.5 7.5

8.0 6.5 8.5

8.0 6.0 7.5

8.0 5.0

9.0 4.0 Adjusted Credit Proxy

Total Reserves

Alt. A

Alt. B

Alt. A

347.6 350.8 353.5 359.9

347.6 350.7 353.0 358.4

31.3 31.7 31.9 32.8

Alt.

1971 July August September December

31.3 31.7 31.8 32.6

Per Cent Annual Rates of Growth July August September 3rd Q. 1971 4th Q. 1971

6.5 11.0 9.0

6.5 10.5 8.0

3.0 13.5 7.5

9.0 7.0

8.5 6.0

7.5 11.0

3.0 12.5 6.0 6.0 9.5

-9(11)

Growth in narrowly defined money (M1 ), given current money

market conditions, is expected to slow between now and year-end.

a number of reasons for this.

There are

First, the apparent broad build-up in pre-

cautionary demand balances over the past few months is likely to abate as liquidity demands are sated and as gradual economic recovery helps to restore

consumer confidence.

Second, the cumulative impact of the higher short-term

interest rates of the past several months will be making the high cost of holding cash more and more evident.

Third, the recent tendency for credit

markets to stabilize may attract funds of small or medium-size investors who had temporarily permitted cash balances to rise in anticipation of higher interest rates. (12)

While there are reasons to expect slower growth in M1 , it

is difficult to pinpoint the timing.

Experience makes it clear that interest

rates affect money demand with a lag, but the exact timing of this effect is uncertain.

Moreover, shifts in demand for financial assets, given interest

rates, are notoriously hard to predict, since they depend to a great extent on the mysterious elements that work on consumer and investor confidence. At the present time, the staff expects M 1 growth to average a little over 7 per cent in August and September together, which would lead to a 9 per cent growth rate for the third quarter.

In the fourth quarter, we would

expect a drop in the growth rate to around 4 per cent, despite the increase in purely transactions balances required to finance the accelerated growth in nominal GNP expected in the fall.

Under alternative B, growth is expected

to be only about 1/2 percentage point lower than under alternative A in the third quarter, but about 1-1/2 percentage points lower in the fourth quarter.

-10-

Time and savings deposits other than large CD's are

(13)

expected to grow much less rapidly over coming months than in the second quarter, given the recent weakening in

such deposits and continued

relatively attractive market interest rates.

Thus, under alternative A,

growth in M 2 is expected to drop to a 6-1/2 per cent annual rate in August, and to 8 per cent in

the third quarter; growth would be a little

slower

under alternative B. (14)

Growth in

and September is

the adjusted bank credit proxy during August

expected to be more rapid than in

recent months, and the

growth rate for the third quarter may be around 9 per cent.

Business loan

demands are expected to remain fairly weak until around the fourth quarter, but banks are likely to be substantial net buyers of forthcoming Treasury offerings, including the bills to be announced toward the end of August.

Banks have obtained a sizable amount of large CD funds in recent weeks, reflecting in

part investment by AT&T of the proceeds of its

ferred stock offering. late July.

recent pre-

The last payment on the offering will be made in

Apart from this and any investment of foreign funds in CD's,

only a modest net growth in large CD's is expected until business loan demands pick up. (15)

The deposit patterns described above for alternative A

imply a 7-1/2 per cent annual rate of increase in total reserves, seasonally adjusted, from June to September, assuming excess reserves average about $225 million. per cent,

In August total reserves are expected to rise by about 13-1/2

reflecting

part the increase in

resulting from the expected expansion in

U.S.

required reserves

Government demand deposits in

-11the latter half of July and early August and from the lagged effects of the anticipated July money supply expansion.

On the assumption that the

average level of borrowings is about unchanged from July and August, nonborrowed reserves would grow at about the same rate as total reserves in August; for the third quarter as a whole, however, nonborrowed would be expected to grow at a slower rate of about 3 per cent in view of the sharp drop in such reserves in July.

Reserve growth would be somewhat

less under alternative B, particularly for nonborrowed reserves, with part of the drop-off in nonborrowed offset by increased borrowing.

The

following table shows monthly average levels of total and nonborrowed reserves (in millions of dollars)--both seasonally adjusted and unadjusted --believed to be consistent with alternatives A and B. Alt. A Seasonall y Adjusted 1/

Alt. B

Not Seasonally Adjusted

Not Seasonally Seasonally Adjusted 1/ Adjusted

Total Reserves July August September

31,339 31,693 31,888

30,602 30,416 30,531

31,339 31,669 31,824

30,602 30,384 30,469

Nonborrowed Reserves July

30,443

29,683

30,438

August

30,825

29,516

30,675

29,358

September

31,050

29,631

30,836

29,419

The level of this

29,679

series also reflects step adjustments made in the past

to avoid discontinuities because of reserve requirement changes. (16)

The slowing of growth in M1 and accompanying reserve

developments under alternative A would not be expected to lead to higher

interest rates in either short- or long-term markets, at least in the

-12-

immediate future. to be abating.

For one thing, growth in

the demand for money is

likely

Also the credit demands of corporations and State and local

governments in bond markets are expected to continue around the somewhat more moderate dimensions of the past month or two, and thereby take some rate pressure off long-term markets.

In addition, Treasury cash borrowing

demands during the third quarter are turning out to be somewhat less than expected in view of the low level at which the Treasury is running its cash balance.

In the fourth quarter, however, Treasury cash borrowing is expected

to be substantial. (17)

The tighter money market conditions assumed under alterna-

tive B could lead to a fairly substantial upward interest rate adjustment over the near term.

The market at present appears to be uncertain as to

how far the System intends to go in

combatting high monetary growth rates,

and in that respect would be very sensitive to upward movements in the Federal funds rate.

With further tightening in

the money market, market

expectations of another rise in the discount rate--and possibly the prime rate--at a time when a Treasury refunding is in process could lead to strong protective measures by dealers and other active participants.

Higher short-

and long-term interest rates could also begin to impinge more substantially on savings inflows to nonbank thrift institutions. however,

long sustained,

At the same time,

not clear that the upward interest rate pressures would be particularly in long-term markets, in view of the likelihood

that credit demands will be moderate and the possibility that a further move toward achieving lower monetary growth rates would over time have a constructive influence on market psychology.

-13Possible directive language (18)

This section presents possible language for the second

paragraph of the directive corresponding to the two alternative policy courses discussed above. (19)

Alternative A.

This language is proposed for possible use

if the Committee decides to call for maintaining about the money market conditions that have recently been attained, subject to a proviso clause. "To implement this policy,

to seeks Committee the [DEL:

over aggregates monetary in growth moderate more achieve capital in developments of account taking ahead, months the markets.] System open market operations until the next meeting of the Committee shall be conducted with a view

and] reserve bank achieving to MAINTAINING PREVAILING [DEL: money market conditions; consistent objectives] these with [DEL: PROVIDED THAT SOMEWHAT FIRMER CONDITIONS SHALL BE SOUGHT, TAKING ACCOUNT OF THE CURRENT TREASURY FINANCING AND OF DEVELOPMENTS IN CAPITAL MARKETS,

IF IT APPEARS THAT THE

MONETARY AND CREDIT AGGREGATES ARE SIGNIFICANTLY EXCEEDING THE GROWTH PATHS EXPECTED." If

the Committee adopts this alternative, it may wish to consider the money

market conditions noted for alternative A in paragraph (9) of "prevailing" conditions,

as a description

and for purposes of the proviso clause to adopt

the aggregate growth paths discussed earlier in connection with alternative A been as the "expected" paths. The proviso clause has/formulated in one-way terms, guarding against excesses but not shortfalls, on the assumption that the

-14Committee would not want money market conditions to be eased in the coming

period if the aggregates should fall short of the indicated paths.

The

proposed language contemplates that in making operating decisions under the proviso clause the Manager would take account of both the current Treasury financing and developments in capital markets. (20)

Alternative B. This language is proposed for possible use

if the Committee decides to hold to the course of continued orderly firming of bank reserve and money market conditions, insofar as that might be necessary to maintain downward pressure on the growth rates of the aggregates and insofar as such firming proves to be feasible in light of the current Treasury financing.

As will be noted, the language is identical to that

adopted at the June 29 meeting except for the inclusion of the Treasury financing, as a factor to be taken into account, along with developments in capital markets. "To implement this policy, the Committee seeks to achieve more moderate growth in monetary aggregates over the months ahead, taking account of THE CURRENT TREASURY FINANCING AND OF developments in capital markets.

System

open market operations until the next meeting of the Committee shall be conducted with a view to achieving bank reserve and money market conditions consistent with those objectives." If the Committee adopts this alternative it may wish to instruct the Manager to seek to firm money market conditions within the ranges mentioned earlier in connection with this alternative--including the proposed 5-1/2 to 6 per cent range for the Federal funds rate--to the extent feasible in light of the Treasury financing and capital market conditions. unless the monetary

-15aggregates appear to be increasing at rates well below those discussed earlier under alternative B.

On the other hand, the formulation of this

alternative--with its greater emphasis on monetary aggregates--would also be consistent with the specifications of alternative A (or some modification thereof) since a more moderate growth in M 1 in particular is indicated in the paths associated with alternative A.

-16-

Alternative Weekly Paths of Key Monetary Aggregates (Seasonally adjusted, billions of dollars) M1

Alt. A

Alt. B

Alt. A

Alt. B

1971

July

227.6

454.2

August

4 11 18 25

228.2 229.1 228.9 229.3

228.2 229.0 228.8 229.1

455.2 456.5 456.7 457.8

455.2 456.3 456.4 457.4

Total Reserves

Adjusted Credit Proxy

Alt. A

Alt.

Alt. A

Alt.

1971 July

347.7

31.7

August

4 11 18 25

348.9 349.8 350.8 351.9

348.9 349.7 350.6 351.6

31.6 31.6 31.8 31.7

31.6 31.6 31.8 31.6

CHART 1

STRICTLY 7/23/71CONFIDENTIAL

MONETARY AGGREGATES MONEY SUPPLY M1

BILLIONS OF DOLI PF

90%PATH

111111 q .

I I.

. I .

I. i i.

I I

41 1 1

II1 1

BROADER MONEY SUPPLY M f-2

90% PATH

1430

Actual --

Currently Projected

1971

--- Wkly. Path, indicated at ,FOMC Meeting r4/2Q/71)

_Z2

1 I 1970

Longer Run Path

CONFIDENTIAL (FR) STRICTLY

CHART 1A

7/23/71

MONETARY AGGREGATES ADJUSTED CREDIT PROXY

BILLIONS OF DOLLARS

]360

1355

10 0% PATH

(7/21/71)

}340 IL

A I

-Io

TOTAL RESERVES 12 0% PATH

I/ I

i A

'71 -

Actual

--- Currently Projected

--- Wky Path, Indicated at FOMC Meeting

/29/71)

..-

Longer Run Path

CHART 2

7/23/71

INTEREST BEARING SOURCES OF BANK FUNDS BILLIONS OF DOLLARS

-280

260

TOTAL TIME AND SAVINGS DEPOSITS

240

-220

200

TIME AND SAVINGS DEPOSITS OTHER THAN CD'S

CD'S

1970

1971

CHART 3

MONEY MARKET CONDITIONS AND INTEREST RATES MONEY MARKET CONDITIONS

INTEREST RATE Short-term

INTEREST RATES Long-term PER CENT

WEEKLY AVERAGES

PER CENT

WEEKLY

PRIME COMMERCIAL PAPER 4 6 MONTH

NEW CORPORATE Aaa WEDNESDAY

FHA MORTGAGES X

-1 9

CD CEILING

MUNICIPAL Aaa

3 MONTH

WEDNESDAY

TREASURY

GOVERNMENT BONDS

3 MONTH

1970

1971

FNMA MONDAY AUCTION

¢ ] I I I.1 I I I I 1970

20 YEAR AVERAGES

I II I

I I I I I 1971

~I I. I I I~ 1970

I I I . I I I 1.1.1 1971

Table 1

STRICTLY CONFIDENTIAL (FR)

PATHS OF KEY MONETARY AGGREGATES Narrow Money Supply (M1 ) 1/ Period

Path as of

Current Proj

June 29

1971:

July

Path as of June 29

Actuals & Current Prol

Monthly Pattern in Billions of Dollars 214.8 217.3 219.4

Jan. Feb. Mar. Apr. May June

Actuals &

Broad Money Supply (M 2 ) 2/ 3

July 23,1971

Adjusted Credit Proxy 5

Path as of June 29

Actuals & Current Proj.

Total Reserves 7

Path as of June 29

Actuals & Current Proj.

123.0 430.8 437.6

334.1 337.7 340.2

30.2 30.5 30.7

30.8

346.0

341.7 343.8 345. 7

350.4

(347.6)

(31.3)

17.2 8.3

19.1

10.9 6.5

11.0 6.6 (8.5)

225.7

221.1 223.9 225.

451.8

142.0 447.3 151.4

227.6

227.9

455.6

( 454.5)

31.3 31.3

Annual Percentage Rates of Change--Quarterly and Monthly 1970:

1971:

3rd Qtr. 4th Qtr. 1st Qtr. 2nd Qtr. 3rd Qtr.

6.1 3.4

11.0 9.2

8.9 11.3 ( 9.0)

11.5 9.0

13.0 9.0

17.8 12.6 ( 8.0)

7.0 10.0

(9.0)

Jan. Feb. Mar.

1.1 14.0 11.6

11.5 22.1 18.9

10.5 12.9 8.9

Apr. May June

9.5

9.3 15.2 9.1

12.5

12.1 14.4 11.0

7.5

5.3 7.4 6.6

July

10.0

(12.0)

10.0

(8.0)

15.5

(6.5)

6.6

12.2 11.4

9.2 2.7 17.0

0.2

(3.5)

Weekly Pattern in Billions of Dollars 1971:

June

July

2 9 16 23 30 7 14 21pe 28

226.1

225.6 224.2 226.2 225.6 225.3

452.9

450.6 449.5 452.0 451.4 451.9

226.8 227.3 227.4 228.2

228.5 227. 228.2 (227.6)

453.9 455.1 455.6 456.6

455.0 453.9 454.5 (454.2)

IJ I

NOTES:

346.3 349.9 351.0

350.0 349.8

345.8 345.9 346.5 344.3 345.1 347.3 347.4 347.5 (347.7)

31.5 31.3 31.5

31.0 31.3 31.1

30.9 31.6 (31.7)

Annual rates of change other than those fdr the past are rounded to the nearest half per cent.

Data shown in parenthesis are current projections. 1/ Currency plus private demand deposits. 2/ M, plus time deposits other than large CD's.

pe -- Partially estimated.

FR712-D Rev 2/16/71

STRICTLY CONFIDENTIAL(FR)

Table 1-A

PATHS OF KEY MONETARY AGGREGATES Total Time &

U.S. Gov't Deposits

Period

Path as of June 29

2 Actuals &

Current Prol

Savings Deposits Path as of 4 Actuals & June 29

Current Prol

arge NegotiableCD's

Time Deposits other

than large CD's Path asof 6 ctuals & June 29

July 23,1971

Large Negotiable

Nondeposit Sources

of Funds

Path as of

8Actuals &

Path as of

June 29

Current Prol

June 29

Current Prol

Actuals &

Current Proj

Monthly Pattern in Billions of Dollars 1971-

Jan Feb Mar

6 7 62 4.8

235.3 240 9 246.1

208.2 213.5 218.3

27.1 27.4 27.8

10.1 8.6 7.0

Apr. May June

4.1

5.4 4.2 3.9

254.5

248.3 251.4 254.4

226.1

221.0 223.4 225.8

27.3 27.9 28.6

5.1 4.1 4.4

July

5.4

(3.3)

256.5

(256.8)

728.0

(226.6)

(30.2)

(4.2)

Annual Percentage Rates of Change--Quarterly and Monthly 1970:

3rd C

4th ( 1971.

1971:

16.5 15.4

21.8

1st Q 2hd C 3rd C

27.3 13.5 (10.0)

13.5 8.5

14.5 9.0

27.2 13.7 ( 7.0)

Jan. Feb. Mar.

25.5 28.6 25.9

22.3 30.5 27.0

Apr. May June July

10.7 15.0 14.3 (11.5)

14.5 10.0

14.8 13.0 12.9 (4.5)

226.8

225.1 225.2 225.8 225.8 226.6

28.2 28.5 28.2 28.9 28.8

4.2 4.5 4.4 4.4 4.7

227.1 227.8 228.2 228.5

226.5 226.6 226.3 (226.6)

29.6 30.2 30.4 (30.5)

4.2 4.1 4.3 (4.3)

15.0 9.5

Weekly Pattern in Billions of Dollars 1971-

June

July

2 9 16 23 30 7 14 21 pe 28

4.5 4.2 5.0 3.2 2.7

255.3

253.3 253.8 254.0 254.8 255.4

2.5 2.9 3.7 (3.7)

255.6 256.3 256.7 257.1

256.1 256.7 256.7 (257.1)

a a~ NOTES:

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. pe - Partially estimated.

iam

FR 712-K Rev2/16/71

Table 2

CONFIDENTIAL (F)

AGGREGATE RESERVES AND MONETARY VARIABLES __

Period

RETROSPECTIVE CHANGES, SEASONALLY ADJUSTED (Annual rates in percent) Reserve Aggregates' Monetary Variables 1 2 3 Total 4 Money Supply 6 Adjusted Member Nonborrowed Total e e Rev Reserves Reserves Bank Credit Proxy Total Currency Deposits

Annually 1968 1969 1970

+ 7.8 - 1.6 + 6.4

+ 6.0 - 3.0 4 9.5

PrivTime

Private

Demand Deposits

July 23,

Deposits

Adlusted

1971

Addenda 10 Nonbank Thrift

Instit.

Deposits

Commercial Paper

+ 7.8 -- 3.1 + 5.4

+ 7.4 + 6.0 + 6.3

+ 7.9 + 2.4 + 5.1

+11.1 - 5.0 +18.4

+ 6.3 + 3.4

+11.8

n.a. n.a. + 8.3

+ 7.8

n.a. + 7.3

+ 9.0 -

4.0

n.a.

Semi-annually 1st Half 1970 2nd Half 1970

+13.0

+ 1.9 +17.1

+ 3.3 +20.0

+ 3.5 +12.9

+ 5.9 + 4.8

+ 7.8 + 4.6

+ 5.3 + 4.7

+ 7.8 +27.9

+ 4.7 +10.6

+12.8 + 1.7

1st Half 1971

+ 8.9

+ 8.2

+13.5

+ 8.8

+10.3

+ 9.4

+10.5

+20.8

+20.7

-18.6

+ + + +

+ 1.4 +14.1 +32.2 + 21.8

+ 2.5 + 7.0 + 9.3 +11.6

+17.8 + 7.5

-0.2

Quarterly 1st Qtr. 1970 2nd Qtr. 1970 3rd Qtr. 1970 4th Qtr. 1970

+ 2.6 +19.1 + 6.6

+ 4.1 +24.4 + 9.4

+ 0.6 + 6.0 +24.1 +15.1

+ 0.5 + 6.5 +17.2 + 8.3

+ + + +

Ist Qtr. 1971 2nd Qtr. 1971

+11.0 + 6. 6

+11.0 + 5.3

+17.0 + 9.6

+10.9 + 6.5

+ 8.9 +11.3

+ 9.0 + 9.6

+ 8.9 +11.8

+27.3 +13.5

+23.3 +17.1

-24.7 -13.4

+21.3 -13.9 + 0.5

+25.4 -19.0 + 6.2

+16.8

+ 9.9 + 5.2 + 2.3

+10.3 +15.3 + 2.5

+10.5 + 3.0 + 2.2

+19.7 +10.9

+ 5.8

+13.7 - 1.2 + 7.0

+ 8.1 + 5.3 + 7.3

+34.4 +18.9 -30.0

-16.1 +48.8 +40.1

+22.7 +29.2 +19.0

+18.1 +23.2 + 9.7

+ 5.7 + 6.8 + 5.7

+ 7.5

+35.6

+ 2.5

+ 4.4 + 8.9 + 6.6

+11.9 + 5.9 +10.0

-87.5 - 7.2

+10.1 +13.1 +21.4

+ 1.1 + 7.0 +16.5

+ 1.1 + 2.8 + 6.2

+ 7.5 + 4.9 + 4.9

- 0.7 + 2.2 + 6.6

+20.3

+16.1 +19.3 +14.9 +12.2 +11.1 + 5.3

+10.5 +12.9 + 8.9 + 5.3 + 7.4

+ 1.1 +14.0 +11.6 + 9.3 +15.2

+ 7.4 + 9.8 + 9.7 +12.0 + 9.5

- 1.4 +16.0 +12.2 + 7.8 +17.6

+25.5 +28.6

+25.9

+ 6.6

+ 9.1

+ 7.1

+ 9.7

+14.3

1970:

Apr. May June

+ 6.0 +23.3 +27.5

July Aug. Sept.

- 1.9 + 3.6 +18.4

Oct. Nov. Dec.

1971:

+12.2 +11.4 + 9.2 + 2. 7 +17.0 +0.2

Jan. Feb. Mar. Apr. May June

_________

2.9

_________

_____

0.4

+ 4.4 +22.8 + 8.8 +15.1 + 8.8 + 9.7 +12.4 -

6.2

4.5

__________-j-_____________--_____________1

5.9 5.8 6.1 3.4

6.1 9.4 3.3 5.8

5.3 5.3 6.7 2.7

+11.4 +28.8 +29.8 +15.1 +28.8

+10.7

+15.0

-16.2 +20.4

+49.6

+10.6 + 9.4 +14.5

+32.4 -28.7

+25.1 +18.5 +24.9 +21.8 +14.2 +14.6

- 9.0

+58.1

-10.9 -55.2 + 4.4

-15.8 -29.1

-_____________-I_____________---

FR 712 -E

NOTE:

reserve requirementsF Aggregate reserve series have been adjusted to eliminate changes in percentage reserve requirements against deposits, but on Eurodollar borrowings are included beginhing October 16, 1969, and requirements on bank-related commercial paper are included beginning October 1, 1970.

Table 3

AGGREGATE RESERVES AND MONETARY VARIABLES

CONFIDENTIAL (FR) July 23, 1971

SEASONALLY ADJUSTED

(In millions of dollars) 1969-

Oct. Dee.

26,210 I 26,538 26,806

27,129 I 27,548 27,707

283.5 285.8 285.8

203.2 203.5 203.6

157.6 157.6 157.7

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

205.2 204.5 206.6

159.0 158.1 159.8

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

208.3 209.2 209.6

161.2 161.6 161.9

July Aug. Sept.

28,041 28,585 29,240

26,694 27,780 28,708

27,896 28,408 29,024

296.0 303.2 308.0

210.6 211.8 212.8

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

Jan. Feb. March

30,229 30,515 30,748

29,801 30,176 30,398

30,029 30,255 30,534

April May June

30,816 31,253 31,257

30,644 30,961 30,801

2 9 16 23 30

31,467 31,278 31,455 30957 31,279

30,860

7 p 14 p

31,071 30,867

Nov.

1970:

1971:

(In billions of dollars)

27,354 27,783 27,928

194.2 194.0 194.6

11.5 11.1 11.2

182.6 182.9 183.4

302.2 305.5 305.7

28.0 28.4 29.1

10.6 10.6 11.5

182.7 182.9 183.8

304.8 303.4 306.1

29.4 30.0 30.4

198.5 200.3 202.2

12.9 13.2 13.2

185.6 187.1 189.0

309.6 309.3 311.1

31.2 31.7 30.9

162.5 163.7 164.6

208.2 213.2 218.5

16.9 19.0 21.7

191.3 194.2 196.8

315.8 321.9 324.5

28.7 28.5 29.7

213.0 213.5 214.6

164.5 164.8 165.7

222.2 225.0 230.4

23.2 23.9 26.0

199.1 201.1 204.4

324.8 326.7 331.2

30.5

323.9 329.1 333.2

214.8 217.3 219.4

165.5 167.7 169.4

235.3 240.9 246.1

27.1 27.4 27.8

208.2 213.5 218.3

334.1 337.7 340.2

31.0 30.7 29.3

30,611 30,998 31,046

336.6 339.7 341.2

221.1 223.9 225.6

170.5 173.0 174.4

248.3 251.4 254.4

27.3 27.9 28.6

221.0 223.4 225.8

341.7 343.8 345.7

29.4 29.0 28.3

31,093 31,152 30,412 30,529

31,132 31,135 31,211 30,777 31,037

341.7 341.4 342.1 339.9 340.5

225.6 224.2 226.2 225.6 225.3

50.9 51.2 51.2 51.1 51.4

174.6 173.1 175.0 174.5 174.0

253.3 253.8 254.0 254.8 255.4

28.2 28.5 28.2 28.9 28.8

225.1 225.2 225.8 225,8 226.6

345.8 345.9 346.5 344.3 345.1

29.3 29.9 28.6 28.7 27.7

30,495 29,984

30,769 31,026

343.1 343.3

228.5 227.3

51.7 51.8

176.7 175.6

256.1 256.7

29.6 30.2

226.5 226.6

347.3 347.4

28.1 28.3

193.3 193.5 195.3

29.7

31.2

Week eodion: 1971:

June

July

NOTES: Aggregate reserve series have been adjusted to eliminate changes in percentage reserve requirements against deposits, but reserve requirements on Euro-dollar borrowings are included beginning October 16, 1969, and requirements on bank-related commercial paper are included beginning October 1, paper, and Euro1970. Adjusted credit proxy includes mainly, total member bank deposits subject to reserve requirements, bank-related commercial dollar borrowings of U. S. banks. Weekly data are daily averages for statement weeks. Monthly data are daily averages except for nonbahk commercial FR 712- F paper figures which are for last day of month. p - Preliminary.

T.ble 4

(Dollar amounts in

MARGINAL RESERVE MEASURES based on period averages of daily 11 millions, Member

Period

Free reserves

Excess reserves

Total

Banks Reserve Major banks 8 N.Y. Outsice

borrowin C 1 ty

a Other

Country

N.Y.

Monthly (reserves weeks ending in)' -

759 916 751 687 765 736

169 210 129 178 159 171

928 1,126 880 865 924 907

148 106 90 227 165 140

287 317 225 331 241 n 28

232 289 287 119 228 217

261 414 278 188 290 261

July August

-1,134 - 706

183 175

1,317 881

218 143

460 278

38 273

291 187

September October November December

374 274 199 84

235 193 210 264

609 467 409 348

101 12 42 36

115 40 17 16

274 313 294 265

119 102 57 30

140 71 120

238 264 192

378 335 312

45 29 41

36 30 17

262 248 238

35 29 16

2 6

154 218

152 212

15 78

9 36

119 60

9 38

303

211

514

103

159

167

138

545

407

258

13 20 27

245 380 72

32 92 282

277 472 354

82 26

-63 20

249 284 266

28 43 42

3 10

46 42

237 205

283 247

253 229

264

297

561

114

121

280

317

250

228

170 82 265

258 421 290

-108

1 51 --

241 249 231

16 13 13

1970--January February March April May June

1971--January February March April May

June

1971--Jan.

Feb.

24 Mar.

Apr.

May

June

July

3 10 17

88 339 25

265

333

251

119

376

257

217

277

197

184

208

150

127

13 6

128

176

5 12 19 26

191 131 204 93

365 230 102 174

174 99 306 267

46 39 134 91

40 20 47 36

61 22 74 84

27 18 51 56

2 9 16 23

361 80 149 409

285 73 254 210

646 153 403 619

171 46 86 103

100 27 4 161

217 25 152 202

158 55 161 153

518

212

750

107

112

201

7 D

351

316

667

149

262

256

14 p

952

993

252

306

194

241

21 p

793

329

1,122

344

395

336

p - Preliminary.

Table 5 SOURCE OF FEDERAL RESERVE CREDIT Retrospective Changes (Dollar amounts in millions of dollars, based on weekly averages of daily figures)

Period

U.S.

Total Federal Reserve credit (Excl.

Government securities

_Federal

Total holdings

float)

Bills

Other

Repurchase

Agency

agreements

Securities

Bankers' acceptances

Member bank borrowings

Year:

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

+5,539 +3,351

+5,192 +4,276

) +4,279 ( -+3,220 (- 143)

1971--Jan.

6 13 20 27

938

722

534

308 153 - 81

+ +

428 (+ 19 (+

256 (-

+ -

26 61 333 218

(+ ((+ (-

74) 412) 412) 367)

+ + + +

120 407 64 60 5

(+ ((+ ((+

367) 204) 204) 107) 107)

+ + + +

4 128 360 30

(- 82) (+ 12) (+ 70) ()

Feb.

Mar.

Apr.

May

June

July

204

3 10 17 24

+ -

8 236

+ -

61 171

97) 46)

+1,082

928

518

3 10 17 24 31

+ + +

279 275 761 516 502

286

414

736

432

530

7 14 21 28

+ -

155 255

145

948

423

5 12 19 26

+ + + +

771 201 503 115

+ + + +

712 272 304 144

384 (-

173

+ +

400 ( ) 256(--)

2 9 16 23 30

+ -

305 974 . 202 + 160 +1,156

57 418 2/ 7 2/ 106 2/

13 (-

)

439 (-

)

7 p 14 p 21 p

+ + +

373

562

206 124

+ -

67 63

+ -

+ 109

+ + -

185 327 83 16

+ +

51 59 13

110 643

509

41 104 604

554

+ 153

372

+ +

9 7 90 90 36

+ 124

298 50 73

+ + -

328 99 167 168

50 6

4 6

70 73

+ -

162 119

+ -

23 9

+ +

207 134 537

+ +

47 20 47

159)

368 360 742

+ -

65 (+ 85)

+1,523

+1,059

+ 707 +1,180

+ 207 + + +

97 68 62

+ 113

) )

- 463 (- 39) + 348 (+ 39) +1,151 ( -) + + +

+ 106 + 209

131 (- 57) 208 (- 87) 25 (+ 144)

+ +

71 56

+ +

47 -68 7

- 8 -27

1/ 2/

Figures in parenthesis reflect reserve effect of match sale-purchase agreement. Includes effect of changes in special certificates of $ +94 million of the week of June 9, $ +416 million of the week of June 16, and $ -616 million of the week of June 23. p - Preliminary

35 28

245

884

Table 6 MAJOR SOURCES ANDUSES OF RESERVES Retrospective and Prospective Changes (Dollar amounts in millions, based on weekly averages of daily figures) re se r v of supply a.,ff e c t i n g. F-actors Other nonmember Foreign Treasur Currency Federal Reserve credit (excl. Gold outside Float deposits deposits and

Period

float)

banks

stock

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

+5,539-

+3,351

1971--Jan.

6 13 20 27

938

534

3 10 17 24

+ -

Feb.

Mar.

Apr.

May

June

July

operations e t

I I c a t e

(S -2,676 -3,122

F.R. accounts and gold loans on r e. s e r v e s t c t - 898

+ 773

+ 241 + 667

+ +

54 1

+ 188

250

673

+ 305

- 813

-1,655

Change in total

=Bank use oreserves

reserves

+1,448 +1,163

Excess res

Required serves

+1,340 +1,257

+ 108

+ 657 + 144 + 727 -1,047

+ 111

11"I

385

+ 108

+ 191

204

- 275

+ 289

236

+ 542

+1,523

- 256 50

928

+ 418

3 10 17 24 31 7 14 21 28

+ + +

279 275 761 516 506

99 - 105

+ 508

- 186 60

+ 304

279

275

- 249

+ +

348 54

- 131 - 384

+ 235 + 241 + 301

5 12 19 26

+ + + +

771 201 503 115

2 9 16 23 30

305

7 p 14 p 21 p

171 229

243

889

402

50 26 34

168 167 350

40 37

45 32

306

+ +

92 20

227 50

- 147 - 88

+ 280 + 85

368

+ 183

276

- 197

+ + + +

150 171 24 440 252

+ 308

+ +

306 561 406

+ 317

533

16 4 10

+ 844

- 752

+ 185

+ -

2 5

+ -

20 41

- 173

+ 217 + 187

357 371

7 + 97 - 515 -

+ +

21 1

+ 307

497

- 248

- 211 + 421 - 177

+ 83 + 218

+ -

-23

45 315 33 28 228

974 202

+ 169 + 522 + 398

- 327 + 291 122

+ +

36 1

+ 160 +1,156

- 648 - 776

+ 291

334

+ + +

54 - 244

+ 384 + 259

4 8 4

+ 176

+ -

368 360 742

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

+ 190 -

- 130

+ -

- 513 + 60

+ 82 + 110

99 69 - 127 33 - 135 - 128

-188

81 178

+ 111

146

+ 181

250

351

S 36

+ +

246 370

- 212

- 275

+ 288

Table 7 Reconciliation--Money supply and Credit Proxy Adjusted (Billions of dollars, not seasonally adjusted)

Levels,

Item

March

May

1971

May to June,

226.1

7.2

1.6

44-.3 449.6

13.3

5.3

217.4 219.7

Plus: Time deposits other than large CD's

218.9

224.5

Equals:

436.3

2nd Qtr.,

3.8

Money supply--M 1

Money supply--M

June

6.1

Dollar Change

1971

223.5

Plus:

U.S. Gov't. deposits at member banks

4.5

6.7

4.4

-0.1

Net domestic commercial bank deposits at member banks

4.3

4.0

-0.3

28.0

27.6

28.4

Large CD's

Nondeposit funds 1/

7.0

4.1

4.4

Time deposit of U.S. Gov't. and commercial banks

1.9

F.R. Float

2.7

Demand deposits at nonmember banks

38.3

39.0

39.9

Time deposits at nonmember banks

56.5

58.2

58.8

Currency component of the money supply

49.5

50.5

51.1

Deposits at Edge Act Corps., agencies and foreign branches

0.8

0.7

Foreign deposits at F.R.

0.4

-2.3

0.4 -2.6

Less:

10.

11.

12.

13.

14.

-0.1

Equals: 15.

Credit Proxy Adjusted

339.2 342.5

344.7

p - Preliminary. 1/ Includes borrowings from banks own foreign branches,commercial minor item. NOTE: Sums of levels and changes may not add because of rounding.

paper and other

1971

Table 7A Reconciliation--Money Supply and Credit Proxy Adjusted (Billions of dollars, seasonally adjusted)

Levels,

1971

May to June, 1971 2nd Qtr. 1971 Dollar Percentage Dollar Percentage Change Change Change Change

May

June

1. Money supply--M 1

219.4 223.9

225.6

6.2

11.3

9.1

2. Plus: Time deposits other than large CD's

218.3 223.4

225.8

7.5

13.7

12.9

437.6 447.3

451.4

13.8

12.6

11.0

Item

3. Equals:

March

Money supply--

Plus: 4.

U.S. Gov't. deposits at member banks

4.8

4.2

3.9

-0.9

-0.3

Net domestic commercial bank deposits at member banks

4.7

5.1

4.3

-0.4

-0.8

27.8

27.9

28.6

0.8

7.0

4.1

4.4

50.0

50.9

51.2

1.2

91.8

93.9

95.7

3.9

Large CD's

Nondeposit funds 1/

0.7 0.3

-2.6

Less:

8. Currency component of the money supply

0.3

9. Deposits at nonmember banks, and other items 2/ Equals: 10.

Adjusted Credit Proxy

340.2 343.8

345.7

6.5

Includes borrowings from banks own foreign branches, commercial paper and other minor items. 2/ Other items include money supply type deposits at Edge Act corporations and domestic branches of foreign banks. NOTE: Sums of levels and changes may not add because of rounding. p - Preliminary. 1/

Table 8 Reserve Absorbtion by Type of Deposit--Selected Periods (Millions of dollars, seasonally adjusted)

Dec. 1970May 1971 Change in total reserves Reserves absorbed by: Demand deposits adjusted Interbank deposits U.S. Government deposits Time and Savings deposits Eurodollars and Commercial paper 1/ Excess reserves Adjustment due to lagged accounting Per cent of total reserve change absorbed by: Demand deposits adjusted Interbank deposits U.S. Government deposits Time and Savings deposits Eurodollars and Commercial paper 1/ Excess reserves Adjustment due to lagged accounting

Dec. 1970March 1971

March 1971June 1971

1,328

823

509

704 308 -311 654

289 213 -219 495

449 39 -132 241

-103 33

-85 -9

-21 - 3

139

-64

53.0 23.2 -23.4 49.3

35.1 25.9 -26.6 60.2

88.2 7.7 -25.9 47.4

-7.8 2.5

-10.3 -1.1

- 4.1 - 0.6

3.2

16.9

12.6

Member bank borrowings from own foreign branches subject to Regulation M reserve requirements and commercial paper subject to Regulation D.

Cite this document

APA

Federal Reserve (1971, July 26). Bluebook. Bluebooks, Federal Reserve. https://whenthefedspeaks.com/doc/bluebook_19710727

BibTeX

@misc{wtfs_bluebook_19710727,
  author = {Federal Reserve},
  title = {Bluebook},
  year = {1971},
  month = {Jul},
  howpublished = {Bluebooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/bluebook_19710727},
  note = {Retrieved via When the Fed Speaks corpus}
}