bluebooks · September 20, 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)

September 17,

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

September 17, 1971.

CONFIDENTIAL (FR)

MONETARY AGGREGATES AND MONEY MARKET CONDITIONS Recent developments (1)

Growth in M 1 slowed sharply in August, both in

relation

relation to

to the rapid expansion actually experienced in July and in

the increase projected for August at the time of the last Committee meeting.

Growth of M2 and the adjusted credit proxy also fell short of

projections in August.

Data for the first two weeks in September--with

the second week still partly estimated--indicate that rates of expansion for the two money supply aggregates have continued to fall substantially short of expectations, whereas the proxy has moved somewhat above path.

Recent Paths of the Key Monetary Aggregates (Seasonally adjusted, billions of dollars) M 2

M 1 Aug. 24 Path

Actuals

Aug. 24 Path

Adjusted Proxy Actuals

Aug. 24 Path

Actuals

Annual Rates of Growth, per cent July August

7.5

10. 1 3.2

7.2

7.0

4.8

12.0

8.0 10.7

Levels, billions

of $ August

229.0

228.1

456.9

455.9

351.3

351.1

230.2 229.3 229.0 228.8

228.1 227.4 227.1 226.6

459.0 458.1 458.0 458. u

456.3

354.5

455.8

353.4 353.3

353.8 353.9 353.7 353.4

Week ending Aug. 25 Sept. 1 Sept. 8 Sept. 15p p/

Partly estimated.

456.1 456.0

352.6

-2(2) The slower August growth in M 1 and M 2 largely reflected a substantial weakness in private demand deposits at reserve city banks which may well have been associated in part with dollar outflows through foreign exchange transactions.

(This conclusion is supported by the demand

deposit ownership survey for August, which showed a sharp drop in that With a major portion of the resultant

month in business demand balances.)

dollar accumulations by foreign central banks being invested in special

U.S. Treasury securities (which increased by $5.3 billion in August), U.S. Government deposits expanded, offsetting much of the slowdown in private demand deposits.

(3) Immediately following the last FOMC meeting, Desk operations were directed toward attaining money market conditions that included a Federal funds rate in the neighborhood of 5-1/2--5-5/8 per cent.

In early

September, incoming deposit data showed that actual growth in key aggregates was falling short of projections, and the Desk became somewhat more accommodative in reserve provision.

Unusual pressures developed in the

money market during the Labor Day week, however, resulting from cautious bank reserve management over the 3-day week-end and possibly related to augmented Federal fund demands related to interest arbitrage between the domestic and Euro-dollar markets.

Despite sizable reserve supplying

operations on the part of the Desk, the average Federal funds rate was about 5-3/4 per cent in the Labor Day week.

Most recently, with the

aggregates showing further weakness, the Federal funds rate has dropped, and the Desk is now aiming at a rate in a 5-1/4--5-1/2 per cent range. (4) Over the past three statement weeks, the Desk has supplied more nonborrowed reserves than were indicated by the reserve paths

consistent with the monetary aggregate targets adopted at the last meeting, as shown in

the table on the next page.

This occurred despite a slight

reduction in required reserves on balance.

With the greater provision in

nonborrowed reserves, member banks' net borrowed reserve position was less taut than projected--with excess reserves somewhat higher than projected and borrowings at the discount window considerably lower.

Total reserves

turned out to be somewhat above path on balance.

Compared to a reserve

path adjusted for the unanticipated reductions in

reserves required against

U.S. Government deposits (as shown by the numbers in parentheses in the table), the attained levels of total and nonborrowed reserves are even higher relative to path. (5)

In securities markets, the initial exuberance following

announcement of the new economic program faded somewhat in early September.

Treasury bill rates, wnich had previously declined sharply as

a result of neavy foreign official demands,

reversed course in

early

September as foreign demands abated and as earlier market expectations of an easing in

tne Federal funds rate failed to materialize.

Most recently,

as the money market has turned more comfortable, bill rates have stabilized with the latest bid on the 3-month bill

a little

and bond yields rose after early September,

under 4-3/4 per cent.

partly reflecting the develop-

ment of a wait-and-see attitude among investors regarding phase II President's economic program. bond sector where a build-up in

Note

of the

The adjustment was largest in the corporate the forward calendar of new issues and an

overhang of dealer inventories created by over-aggressive pricing of earlier

Reserve Aggregates: August 24 Paths vs. Actual (Seasonally unadjusted, in millions of dollars)

Statement Week ending

Actual minus Aug. 24 path

Actual

August 24 Path

30,531 29,823 30,186 345 708

30,466 (30,504) 29,666 (29,704) 30,216 (30,254) 250 800

65 (27) 157 (119) - 30 (-68) 95 - 92

30,869 30,104 30,645 224 765

30,915 (30,807) 30,115 (30,007) 30,690 (30,502) 225 800

30,881 30,424 30,615 266 457

30,792 (30,781) 29,992 (29,981) 30,567 (30,556) 225 800

89 (100) 432 (443) 48 (59) 41 -343

September 1 Total reserves Nonborrowed reserves Required reserves Excess Borrowings September 8 Total reserves Nonborrowed reserves Required reserves Excess Borrowings

46 (62) 11 (97) 45 (63) 1 35

September 15 Total reserves Nonborrowed reserves Required reserves Excess Borrowings

NOTE:

Figures in parenthesis reflect adjustment of the path for unanticipated changes in U.S. Government deposits.

offerings had market.

substantially weakened the technical position of the

The market atmosphere improved following comments by the

President at his press conference on Thursday which were taken to presage a relatively tough phase II wage-price program.

Recent Interest Rates on Market Securities

Series

Rate August 13

Levels (Per cent per annum) September Subsequent Low 17

Short-term 3-mo. Tres. Bill 3-6 mo. Finance Paper 60-89 Day CD's

5.15 5.50 5.63

4.44 (8/31)

6.68 7.97 6.03

6.07 (9/8) 7.21 (9/10)

5.38 (8/31) 5.13 (8/25)

4.72 5.38 5.50

Long-term 10-yr. U.S. Treasury New Issue Corps (Aaa basis) Municipals (Bond Buyer)

5.36 (9/10)

6.12 7.56 5.38

(6)

The following table summarizes developments in the major

financial aggregates for selected recent periods: 4th and 1st Qtrs. combined (March over Sept.)

Second Quarter (June over March)

8.9

6.6

7.6

10.3

5.3

1.5

6.2

11.3

6.6

M2 (M1 plus time deposits at commercial banks other than large CD's)

13.7

12.6

6.0

M 3 (M2 plus deposits at thrift institutions)

14.6

14.8

8.7

9.7

6.5

9.4

10.5

7.4

10.3

Large CD's

$ 6.1

$ 0.7

$ 1.8

Bank-related commercial paper N.S.A.

- 2.9

0.0

n.a.

Nonbank commercial paper

- 0.4

- 0.9

n.a.

Total Reserves Nonborrowed Reserves

August over June

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

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

paper

(Actual $ change in billions)

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. NOTE: All items are based on averages of daily figures, except for data on total loans and investments of commercial banks, commercial 1/ 2/

paper and thrift institutions--which are either end-of-month or last Wednesday of month figures.

Prospective developments Financial relationships are still bedevilled by uncertainties

(7)

related to how the new economic program will evolve;

in particular, concern

focuses on phase II of wage-price policies and the outcome of international negotiations on foreign exchange rates and related matters.

A disappointing

follow-through for phase II would probably reverse the recent improvement in market and public psychology and lead to substantial upward pressures on interest rates. through.

We have assumed, however, a generally effective follow-

In the international sphere the timing of the return-flow of the

sizable speculative outflow of dollar funds is a major uncertainty.

We have

assumed no significant return at least between now and year-end. (8)

Two alternative sets of operating specifications for Committee

consideration are summarized in the text table below.

The specifications in

the first column can be drawn upon for the policy directives A or B, as explained in the section on possible directive language beginning on page

12.

The table on the next page shows monthly paths for the spectrum of monetary aggregates, while two tables attached at the end of the text contain weekly paths for the monetary aggregates and more detail on aggregate reserves thought to be consistent with the two paths.

Federal funds rate Member bank borrowings 3-month bill

rate

Growth in

(SAAR)

September October 3rd Qtr. 4th Qtr. 2nd Half

Alt. A (or B)

Alt. C

5--5-5/8%

4-1/2--5%

$400-$700 million 4-5/8--5-1/4%

1-1/2% 4-1/2 5 3-1/2 4

$200-$400 million 4-1/4--4-5/8%

1-1/2% 5-1/2 5 4-1/2 4-1/2

Alternative Monthly and Quarterly Paths of Key Monetary Aggregates M1

Alt. A(B)

Alt. C

Alt. A(B)

Alt.

228.4 229.3 229.9 230.3

228.4 229.5 230.4 231.0

458.0 460.5 462.4 464.4

458.0 460.8 463.4 465.9

1971 September October November December

Per Cent Annual Rates of Growth September October November December

1.5 4.5 3.0 2.0

1.5 5.5 5.0 3.0

5.5 6.5 5.0 5.0

5.5 7.5 7.0 6.5

3rd Q. 1971 4th Q. 1971

5.0 3.5

5.0 4.5

6.0 5.5

6.0 7.0

Adjusted Credit Proxy Alt. A(B) Alt. C September October November December

353.4 355.2 358.0 357.3

Total Reserve Alt. A(B) Alt.

353.4 355.6 359.2 359.1

32.1 32.1 33.3 32.2

32.1 32.2 32.4 32.4

Per Cent Annual Rates of Growth September

8.0

October

6.0

7.5

November

9.5

December

2.5

17.0 -

17.5

1.0

12.0

6.5

8.5

0.5

- 2.5

3rd Q. 1971

9.0

11.0

4th Q.

4.5

6.5

1.0

3.0

1971

-9(9)

As compared with the first seven months of the year, the

growth in M1 is expected to continue at a sharply reduced rate between now and year-end--particularly if money market conditions do not ease significantly from around prevailing levels--as the lagged effects on domestic cash demands of earlier higher short-term interest rates take hold and as precautionary demands for cash are reduced further in the wake of the President's program.

Under alternative A--which contemplates

a Federal funds rate in a 5--5-5/8 per cent range--the annual rate of growth in M1 is likely to be only about one or two per cent in September and around 3-1/2 per cent for the fourth quarter.

A somewhat more rapid growth rate is

currently anticipated from September to October mainly in consequence of an expected drop in U.S. Government deposits from their unusually high midSeptember level.

Under alternative C, money supply growth would be expected

to be a little more rapid in the fourth quarter than under alternative A. In the first quarter of next year, growth in M1 would be expected to be more rapid under either alternative, as transactions demands for cash--which

would rise along with projected nominal GNP growth in the fourth quarter -- strengthen further.

The pick-up could be quite modest under alternative

A, however, while under alternative C the cumulative impact of lower interest rates could lead to a return to growth rates of around 6 per cent or so. (10)

With respect to interest rates, if the Federal funds rate range

stays in a 5-1/4--5-1/2 per cent

bill rates might back up somewhat further

over the next several weeks and exert upward pressure on other short-term

-10-

rates.

This would be especially likely if the Treasury decides--as we have

assumed it will--to anticipate some of its later cash needs by adding about $3--$4 billion to the bill supply in October.

On the other hand some partly

offsetting downward pressure on bill rates might be generated if the Treasury were to contemplate, as an alternative or a supplement, a financing strategy which involved considerable debt lengthening.

Long-term interest rates are

likely to be very sensitive to the trend of market expectations as to the effectiveness of phase II policies.

Over the near-term, the heavy volume

of new corporate issues, particularly if accompanied by sizable Treasury debt lengthening operations, could exert some upward rate pressures. (11)

An appreciable decline in the Federal funds rates--for

example, consistently into a 5--5-1/4 per cent range or lower--would confirm market hopes that the recent weakness in money supply will be followed by an easing in money market conditions.

Both long- and short-term rates

would be expected to decline under those circumstances, with declines quite marked if and as the Federal funds rate moves down to trade consistently below 5 per cent. (12)

Growth in time and savings deposits other than large CD's

is expected to accelerate from recent low rates to about a 9-1/2 per cent annual rate in September, given experience in the first two weeks of the month, but, under alternative A, to drop back to a 7-1/2 per cent rate in the fourth quarter.

The lower growth rate is anticipated in view of

strengthened consumer spending and the liklihood that market interest

- 11-

rates will not drop enough to provide much in the way of incentive for savers to add sharply to time deposit funds.

A somewhat more rapid growth

in such deposits would be anticipated under alternative C, given the marked decline in market interest rates that would be expected. (13)

Under any of the alternatives presented, funds available to

banks from U.S. Government deposits, private demand deposits, and time deposits other than large CD's taken together are likely to grow much less rapidly on balance in September and the fourth quarter than they had in the spring and summer.

As a result, banks may be led to bid actively for large

CD's should business and other loan demands be strong, as would be expected if economic recovery proceeds at the accelerated rate indicated in the staff GNP projection.

Under alternative A, the adjusted bank credit proxy is

expected to grow at an 8 per cent annual rate in September and 4-1/2 per cent in the fourth quarter.

Under alternative C, the growth rate in the

bank credit proxy in the fourth quarter is expected to be around 6-1/2 per cent, as banks in a period of declining interest rates add to investments for purposes of obtaining high yields or capital gains.

-12-

Possible directive language (14)

Alternative A.

This language is proposed for possible use

if the Committee decides to seek, or permit, the growth rates for the aggregates over the months ahead discussed earlier in connection with alternative A, including rates for M 1 of 1-1/2 and 3-1/2 per cent in September and the fourth quarter, respectively.

The money market and

reserve conditions believed likely to be consistent with such growth rates are noted in paragraph (8). "To implement this policy, the Committee seeks to achieve [DEL: more] 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 achieving bank reserve and money market conditions consistent with that objective." This language differs from that of the directive adopted at the August 24 meeting only in

the

deletion of the word "more" from the phrase "to It is

assumed that the Committee would

achieve more moderate growth . .

not want to continue to call for

'more moderate growth" in light of the

August experience, when M 1 and M 2 grew at rates of about 3 and 5 per cent, respectively. (15) in two respects.

Alternative B.

The language of B differs from that of A

First, the words "over the months ahead" are omitted

following the reference to growth in the aggregates.

This modification

-13is proposed for consideration if the Committee does not wish to accept as aggregate targets the comparatively low growth rates of alternative A for a period longer than the weeks immediately ahead.

Secondly, a clause

reading "taking account of developments in capital markets" is added at the end of the first sentence.

This change is suggested for consideration

if the Committee decides to instruct the Manager to give considerable weight to the objective of avoiding excessive pressures in capital markets, recognizing that this might require some adaptation in reserve supplying operations.

Either of these modifications might, of course, be made without

the other. "To implement this policy, the Committee seeks to achieve [DEL: more] moderate growth in monetary and credit ahead], months the over aggregates [DEL:

TAKING ACCOUNT 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 that objective." (16)

Alternative C. This language is proposed for possible

use if the Committee decides to seek somewhat more rapid growth rates in the aggregates than called for under alternative A.

The money market

and reserve conditions believed likely to prove consistent with those growth rates are noted in paragraph (8). "To implement this policy, the Committee seeks to growth in monetary and credit more] PROMOTE [DEL: achieve moderate

-14-

aggregates over the months ahead.

System open market opera-

tions until the next meeting of the Committee shall be conducted with a view to achieving bank reserve and money market conditions consistent with that objective." This directive does not include the phrase "taking account of developments in capital markets" since the prompt and substantial easing of the money market contemplated is likely to minimize the risk of adverse capital market developments, particularly in a period when the monetary aggregates are weak.

-15-

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

M1 Alt. A(B)

M2 Alt. C

Alt.

A(B)

Alt.

September

229.0 230.6

458.7 460.9

October

229.2 228.8 229.4

229.2 228.9 229.6

459.8 459.7 460.8

459.8 459.8 461.0

Credit Proxy Alt. A(B) Alt.

Total Reserves C

Alt. A(B)

Alt.

September 22 29

353.1 353.1

31.8 32.1

October

354.4 353.6 356.0

354.5

32.0 32.1 32.1

32.1 32.2 32.1

6 13 20

353.9 356.4

-16-

Total and Nonborrowed Reserve Paths (Daily averages in millions of dollars, seasonally adjusted)

Total Reserves

September October November December

Nonborrowed Reserves

Alt. A(B)

Alt. C

Alt. A(B)

Alt. C

32,116 32,089 32,259 32,191

32,123 32,151 32,383 32,382

31,474 31,545 31,686 31,642

31,537 31,857 32,059 32,083

Per Cent Annual Rates of Growth 17.5

September October November December

17.5 1.0 8.5

1.0

6.5 - 2.5

3rd Q. 1971 4th Q. 1971

11.0 1.0

11.0 3.0

23.0 - 2.5 5.5 - 1.5

25.5 12.0 7.5 1.0

8.5 2.0

Weekly Paths--Seasonally Adjusted

Total Reserves

September

October

6 13 20

Nonborrowed Reserves

Alt. A(B)

Alt. C

Alt. A(B)

Alt.

31,831 32,087

31,831 32,112

31,156 31,282

31,156 31,532

32,041 32,124 32,060

32,091

31,551

32,174 32,120

31,613 31,576

31,851 31,913 31,886

Weekly Paths--Not Seasonally Adjusted Total Reserves

September

October

6 13 20

Nonborrowed Reserves

Alt. A(B)

Alt. C

Alt. A(B)

Alt. C.

30,634 30,924

30,634 30,974

29,834 3u,124

29,834 30,374

31,249 31,188 31,485

31,299 31,238 31,535

30,699 30,638 30,935

30,999

30,938 31,235

CHART 1

STRICTLY CONFIDENTIAL (FR)

9/17/71

MONETARY AGGREGATES NARROW MONEY SUPPLY M 1

BILLIONS OF DOLLARS

230

-220

-1210

I I I I I1

II I I II I

BROADER MONEY SUPPLY -J460

S440

-410

1970

1971

'71 -

Actual Currently Projected

--- Wkly. Path, Indicated at FOMC Meetmg (8E24j71)

_Z Longer Run Path

STRICTLY CONFIDENTIAL (FR)

CHART 1A

9/17/71

MONETARY AGGREGATES ADJUSTED CREDIT PROXY

BILLIONS OF DOLLARS

360

-355

356

352

8.0% PATH

-348 -315 344 305

-340 1

TOTAL RESERVES

115% PATH

1971

1970 -

Actua

Currently Projected

--- Wkly. Path, Indicated at FOMC Meeting (~/24/71)

JA A

J J

i J

A I A

'Longer

S S

Run Path

CHART 2

9/17/71

INTEREST BEARING SOURCES OF BANK FUNDS BILLIONS OF DOLLARS

-20

-4260

TOTAL TIME AND SAVINGS DEPOSITS

-i200

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

NEW CORPORATE Aaa WEDNESDAY

FHA MORTGAGES FNMA MONDAY AUCTION

WEDNESDAY

GOVERNMENT BO 26-YEAR AVERAGES

L I 1970

1971

1970I 1970

197 1 1971

STRICTLY CONFIDENTIAL (FR)

Table 1

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

Path as of Aug. 24

Broad Money Supply (M 2 ) 2/

Actuals &

Path as of

Current Prol.

Actuals &

Adjusted Credit Proxy 5

Current Prol

Aug. 24

September 17, 1971

Path as of Aug. 24

Actuals & Current Proj

Total Reserves 7

Path as of Aug. 24

Actuals & Current Prol.

Monthly Pattern in Billions of Dollars 1971:

Apr. May

2442.0 447.3 451.4

221.1 223.9 225.6

June July Aug. Sept.

229.0 230.0

227.5 228.1 (228.4)

341.7 343.8 345.7

1454.1 455.9 458.0)

456.9 459.3

351.3 352.4

348.0 351.1 (353.4)

30.8 31.3 31.3

31.7 32.2

31.3 31.7 (32.1)

Annual Percentage Rates of Change-Quarterly and Monthly 1971:

1971:

Ist Qtr. 2nd Qtr. 3rd Qtr.

8.9 11.3

8.0

Apr. May June

17.8 12.6

( 5.0)

7.0

9.3 15.2

12.1 14.4 11.0

9.1 10.1

July Aug. Sept.

7.5 5.0

8.0

(6.0)

3.2 ( 1.5)

11.0 6.6 11.5

12.0 4.0

8.0 10.7

( 8.0)

(11.0) 2.7

5.3 7.4 6.6

7.2 4.8 S5.5)

7.0 6.5

10.9 6.5 (9.0)

17.0

0.2 0.3 17.6 17.0

t4.9

(17.0)

Weekly Pattern in Billions of Dollars 1971:

July

226.9

4 53.9

348.7

31.4

Aug.

4 11 18 25

226.7 228.6 228.7 228.1

454.1

348.1

4i56.3 4i56.3 4i56.3

348.7 31.6

31 .8 31.5 31.8 31.4

31.9 32.5 32.2 31.9

31.9 32.3 32.2 (31.8)

230.2

459.0

354.5

350.5 353.8

ii Sept.

1 8 15 pe 22

229.3 229.0 228.8 231.4 U

NOTES:

227.4 227.1 226.6 (229.0)

458.1 458.0 458.0 460.8 -

353.4 353.3 352.6 352.7

4i55.8 4i56.1 456.0 (1458.7) -

353.9 353.7 353.4

(353.1)

aaII

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. 1/ Currently 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

September 17, 1971

PATHS OF KEY MONETARY AGGREGATES

Monthly Pattern in Billions of Dollars 1971:

Apr. May June

5.4 4.2 3.9

July Aug.

3.7 6.1

( 6.2)

Sept.

248.3 251.4 254.4 256.8 258. 2 (261.2)

258.2 259.8

227.9 229.3

221.0 223.4 225.8

27.3 27.9 28.6

5.1 4.1 4.5

226.6 227.8 (229.6)

30.1 30.3 (31.6)

4.3 3.9 (3.7)

Annual Percentage Rates of Change--Quarterly and Monthly 1971:

1971:

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

27.3 13.5 (10.5)

8.5

Apr. May

10.7

June

1A.3

6.0

14.8 13.0 12.9

15.0

4.3

11.3

July

6.5 7.5

Aug. Sept.

6.5 (14.0)

27.2 13.7 (6.5)

7.0 7.5

6.4 ( 9.5)

Weekly Pattern in Billions of Dollars 1971:

July

4.1

257.5

227.0

30.5

4.3

Aug.

4 11

4.3 4.3 5.9 8.2

257.5 257.4 257.9 258.7

30.1 29.7

3.9

30.3

3.7

228.8

227.4 227 7 227.6 228.2

30.5

3.7

228.8 229.0 229.2 229.4

228.4 229.0 229.3 (229.7)

30.8 31.6

4.0 3.8 3.7

(31.8)

(3.7)

18 25

Sept.

8.8

8.0

7.5 8.1 (5.7)

15 pe 22

25i 8.9 259.0 259.3 259.6 259.9

NOTES:

pe - Parially estimated. Annual rates of change other thah those for the past Data shown in parenthesis are current projections.

259.1

260.3 260.9 (261.5)

31.3

4.2

are rounded

to the nearest half

per cent.

FR 712-K Rev2/16/71

CONFIDENTIAL (FR)

Table 2

AGGREGATE RESERVES AND MONETARY VARIABLES RETROSPECTIVE CHANGES, SEASONALLY ADJUSTED rates in percent) - Monetary Variables Total 4 Money Supply

_(Annual

Reserve Aggregates 1 2

Period

Nonborrowed Reserves

Total Reserves

Annually 1968 1969 1970

Member Bank Deposits

+ 7.8 - 1.6 + 6.4

+ 6.0 + 9.5

+11.8

0.2

3.0

+ 9.0 - 4.0

Adlusted 5 Credit Proxy

n.a.

n.a. + 8.3

6 Total

Currency

+ 7.8 - 3.1 + 5.4

Private Demand Deposits

September 17, 1971

Addenda 10

9 Dests Adjusted

T tt. Deposits

CNonbeal Paper

+11.1 - 5.0 +18.4

+ 6.3 + 3.4

n.a.

+ 6.3

+ 7.9 + 2.4 + 5.1

+ 7.8

+ 7.3

7.4 6.0

n.a.

Semi-anniallv Ist Half 1970 2nd Half 1970

+ 1.9 +17.1

+20.0

+ 3.5 +12.9

+13.0

+ 4.8

+ 7.8 4 4.6

+ 5.3 + 4.7

+ 7.8 +27.9

+ 4.7 +10.6

+12.8 - 1.7

1it Half 1971

+ 8.9

+82

+13.5

+ 8.8

+10.3

+ 9.4

+10.5

+20.8

+20. 8

-18.2

+ + + +

+ 1.4 +14.1 +32.2 + 21.8

+ 2.5 + 7.0 + 9.3 +11.6

+17.8 + 7.5 -16.2 +20.4 -24

Qurterly Ist Qtr. 1 2nd Qtr. 1 3rd Qtr. 1 4th Qtr. I

+ 0.6 + 6.0 +24.1 +15.1

4 0.5 + 6.5 +17.2 + 8.3

+ + + +

+11.0 + 6.6

+11.0 + 5.3

117.0 + 9.6

+10.9 + 6.5

+ 8.9 +11. 9

Apr. May June

+21.3 -13.9 + 0,5

+25.4 -19.0 + 6.2

+16.8

+13.7

+ 5.8

- 1.2 + 7.0

+ 5.2 + 2.3

Julv Aug.

+ 6.0 +23.3 +27.5

-16.1 +48.8 +40.1

+22.7 +29.2 +19.0

+18.1 +23.2 + 9.7

4.4

+10.1 +11.1 +21.4 +16.1 +19.3 +14.9

Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June Jullv Aug. p,

2.9

0.4

1.9

+ 3.6

+18.4

+22.8

+12.2 +11.4

+ 8.8

+ 9.2

+ 8.8 + 9.7 +12.4

+15,1

2.7

+17.0

+ 0.2

+0.3 +14.9

-13.1 +16.2

_______

NOTE:

5.9

+ 4.1 +24.4 + 9.4

Sept.

1971:

- 3.3

+ 2.6 +19.1 + 6.6

1st Qtr. 1 ?nd Qtr. 1

1970.

6.2

________

4.5

-112.2 411.1

4 '.3 - 8.8

+17.2 .I...I____________

5.9 5.8 6.1 3.4

6.1 9.4 3.3 5.8

5.3 5.3 6.7 2.7

+ 9.0 + 9.6

4 8.9 +11.8

+27.3 +13.5

+23.3 +17.3

+10.3 +15.3

+10.5

+ 2.5

+ 2.2

+19.7 +10.9 +11.4

+ 8.1 + 5.3 + 7.3

4 5.7 + 6.8 + 5.7

+ 7.5

+ 4.4

+ 8.9 + 6,6

+35.6 +28.8 +29.8

+11.9 + 5.9 +10.0

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 +15.1 +28.8

+10.6 + 9.4

+10.5 +12.9 + 8.9 + 5.3 + 7.4 + 6.6

+ 1.1

+14.0

+ 7.4 + 9.8

+L1.6

+ 9.7

- 1.4 +16.0 +12.2

.4 9.3

+12.0 + 9.5

+ 7.8

+25.1 +18.5 +24.9 +21.8

+17.6

+25.5 +28.6 +25.9 +10.7 +15.0

+ 7.1 +11.7 + 2.3

+ 9.7 + 9.6 + 3.4

+14.3 +11.3 +6.5

+15.1 +15.8

+ 8.0 +10.7

+15.2 + 9.1 +10.1 + 3.2 _________

2.5

________

+ 3.0

+14.5

+14.

8.4

-12.5

1-34.4

+18.9 -30.0 -87.5 7.2

+49.6 +32.4 -28.7 +58.1 -

9.0

-10.9 -55.2 +4.4 -15.8

-26.3 -32.1 n.a.

I.________-_______

FR 712 - E

Agregate 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 commercial paper are included beginning October 1, n.a.-Not Available

1970.

CONFIDENTIAL (FR)

Table 3

AGGREGATE RESERVES AND MONETARY VARIABLES

September 17,

1971

SEASONALLY ADJUSTED

_ __I___

___

__~ __

---" ,Commercial _

Aggregate Reserves T o ta l

- -3

Period

Total

loney Supply .-

Currency

Demanos

Total

C Bank

Time Deposits

Non red borrowed Required

Other

CD's

L-1i 12

Adjusted redit Proxy

Deposits (In millions of dollars) 1970:

1971:

(In billions of dollars)

Jan. Feb. Mar.

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

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

29.4 30.0 30.4

Apr. May June

28,236 27,890 27,902

27,350 26,916 27,056

28,646 27,692 27,713

290.2 289.1 290.5

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

31.2 31.7 30.9

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

48.1 48.2 48.2

162.5 163.7 164.6

208.2 213.2 218.5

16.9 19.0 21.7

191.3 184.2 196.8

315.8 321.9 324.5

28.7 28.5 29.7

Oct. Nov. Dec.

29,385 29,474 29,925

28,928 29,033 29,584

28,134 29,233 29,703

310.6 314.0 319.6

213.0 213.5 214.6

48.5 48.7 48.9

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 29.7 31.2

Jan. Feb. Mar.

10,229 30,515 10,748

29,801 30,176 30,398

30,029 30,255 30,534

323.9 329.1 333.2

214.8 217.3 219.4

49.2 49.6 50.0

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

Apr. May tune

30,816 31,253 31,257

30,644 30,961 30,801

30,611 30,998 31,046

336.6 339.7 341.2

221.1 223.9 225.6

50.5 50.9 51.2

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

July Aug. p

31,266 31,654

30,465 30,876

31,094 31,473

343.7 347.2

227.5 228.1

51.7 51.8

175.8 176,3

256.8 258.2

30.1 30.3

226.6 227.8

348.0 351.1

27.6 n.a.

7 14 21 28

31,032 30.831 31,552 31,414

30,462 29,950 30,346 30,849

30,769 31,026 31,135 31,332

343.2 343.4 343.3 344.4

228.7 227.4 227.7 226.9

51.8 51.7 51.8 51.7

176.9 175.7 175.9 175.2

256.0 256.6 256.9 257.5

29.6 30.1 30.1 30.5

226.5 226.5 226.8 227.0

347.5 347.7 347.8 348.7

28.2 28.4 28.3 28.J

4 11 18 25

31,776 31,473 31,761 31,415

31,022 30,980 36,572 30,679

31,357 31,490 31,507 31,349

344.2 344.4 346.8 350.1

226.7 228.6 228.7 228.1

51.8 51.9 51.9 51.7

174.9 176.7 176.7 176.5

257.5 257.4 257.9 258.7

30.1 29.7 30.3 30.5

227.4 227.7 227.6 228.2

348.1 348.7 350.5 353.8

27.9 27.8 27.9 28.4

31,938 32.337

31,243 31,651

31,633 32,108

349.9 349.9.

227.4 227.1

51.8 51.7

175.6 175.5

259.1 260.3

30.8 31,3

228.4 229.0

353.9 353.7

28.2 28.3

Week enditg: 1971: July

Aug.

Sept.

NOTES.

13 ddendum' Nonbank Comm Paper

I p 8 0

Aggregate reserve series have been adjusted to eliminate changes in percentage reserve requirements against deposits, Buro-dollax borrowings are incllded beginning October 16, 1969, and requireefnts on bank-related coamercial paper are 1970. Adjusted credit proxy includes mainly total member bank deposits subject to reserve requirements, bank-related dollar borrowings of U.S. banks. Weekly data are daily averages for statement weeks. Monthly data are daily average paper figures which are for last day of month. p - Preliminary. n.a. - Not Available.

but reserve requirements on included beginning October 1, commercial paper, and Euroexcept for nonbank coirmercial FR 712 -F

Table 4

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

Free reserves

Period

Excess reserves

Total I

Borrowings

Banks

R s e rve C i t Major banks Outside N.Y. 8 N.Y.

ther

Country

Monthly (reserves weeks ending in): 1970--January February March

759 916 751

169 210 129

928 1,126 880

148 106 90

287 317 225

232 289 287

261 414 278

April

687

178

- 865

227

331

119

188

May

765

159

924

165

241

228

290

June

736

171

907

140

289

217

241

July August September October

-1,134 - 706 - 374 - 274

183 175 235 193

1,317 881 609 467

218 143 101 12

460 278 115 40

348 273 274 313

2@1 187 119 102

November

199

210

409

294

December

264

348

265

1971--January

February March

June July Aug. p

1971--Apr.

May

June

July

Aug.

Sept.

140

238

378

262

71 120

264 192

335 312

29 41

30 17

248 238

29 16

2 6 303 672 633

154 218 211 158 194

152 212 514 830 827

15 78 103 77 153

9 36 5 223 130

119 60 159 270 318

'9 38 167 260 226

277

19L.

14 21 28

58 3 -128

184

208 81 48

150 84 176

17 -42

-i 34

127 79 86

6 4 14

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 27 161

217 25 152. 202

516

232

750

107

192

201

308

7 14

-384 86

277 5

-252

661 991

1,121

344

255 241

282

309

-89

257 189

545

397

333

236

212

58 55 161 153

330

434

764

122

307

292

566

593

18 25

-955 680

328

224 91

218

1,1"9 771

338 229

254

326 313

261 132

1 p Sp 15 P

-36 - 541 - 191

345 224 266

708 765 457

52 286

370 306 231

187 173 129

99 -97

Preljminar

V - Prelirinar".

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

Total Federal Reserve credit float) (Exc

Period

May

June

July

Aug.

Sept.

( --

707

206

+3,220

(- 143)

+1,180

124

82)

+ 124

12) 70)

+ 84 + 113

+ -

7 14 21 28

+ 155 - 255 4+ 149 + 54

145

86 423 - 43

+ +

5 12 19 26

4 + + +

+ +

712 272

+ 1

304

+ +

12/30/70)

2 9 16 23 30

771 201 503 115

144 -

305

974 202

57 418 2/

4 160 +1,156

106 2/

7 14 21 28

+ +

362 364

+ -

743 957

4 11 J8 25

I p 8p 15 p

47 2/

128 (+ 360 (+

11 439 463

(--

) ) ) )

141

1 73

116

296

383

399

+ -

468 387

309 - 54

50 25

71 56

328 99 167

168

23 9

+ +

207 134 537

+ -

47 20

)

586

) ) -70 )

+ -

40 49 157 101

14 25 18 10

117

+ +

218 76

+ -

68 20

-70 --

+ 109

)

282 ( -) ( -) -145 (- 145)

+ +

-4

91 15

+ 35 28

Member banks borrowing +

243

884

6 4 6

57) 87)

Bankers' acceptances,

50 -

f'iures it paretthesis reflect reserve effect of match sale-purchase agreement. Includes effect of changes in special certificates 6f $ +94 tillion of the week of June 9, and $ -510 rtillio of the week of June 23. p - Preliminary

+ + -

162 119

( --

( 397 (

47 68 11 - 7

+ -

(+ 144)

(

+ -

8 27

((-

101 (-S

17 298 50 S 73

+ + +

335 - 204 + 483

67 63

S 73

+ + +

-359

+ +

( -) (-) (- 39)

+ 348 (+ 39) 41,151 ( -) 131 208 25 27

+ -

)

+1,059 373 74 562

)

384 ( -173 (-400 (-256 ( --

.-------

Other

Repurchase . agreements

+4,279

45,192 +4,276

1970 (12/11/69 -

1971--Apr.

Bills 1

+5,539 +3,351

1969 (12/25/68 - 12/31/69)

Federal Agency Securities

U.S. Government securities__ Total holdings

-- _____________-~_ _

$ +416 million of the week of June

16,

____________

Table 6 MAJOR SOURCES AND USES OF RESERVES Retrospective and Prospective Changes (Dollar amounts in millions, based on weekly averages of daily figures) ,L----of r p serve . 1 v su o tect r a Sac t Federal Reserve Foreign I Other nonmember Gold Currency Treasury credit (excl. deposits deposits and ousdeat stock floart 1/ and Bold loans F.R. accounts I/ Sl floatl i nd i c a t (Si g effect on r e s e r ves)

-------------------- --Period

1969 (12/25/68 - 12/31/69 1970 (12/31/69 - 12/30/7(

1971--Api

May

June

July

Aug.

Sept.

7 14 21 28

+5,539 +3,351

279

275

+ +

348

5 12 19 26

+ + + 4-

771 201 503 115

2 9 16 23 30

305

974

7 14 21 28

+ +

362 364

+ -

743 957

4 11 18 25

335

204

483

116

+ + -

383

1 8 15

+1, 154

- 813 + 773

-2,676 -3,122

243

- 131 -384

+ 307 - 248 - 229

+ 83 + 218

+ 169 + 522

+ 202 + 160 +1,156

- 86 - 114

468 387

F6r retrospective details, see Table 5. 2 Includes $400 million in special drawing account. p - Prelirifnary.

+ -

379 181 192

--~-------- - ------

398 648 776

+ 241 + 667

+ +

54 1

+ 235 + 241 4 301 - 10

+ + +

14 14 21 1

+ -

497 211 421 177

+ -

5 25

327

+ 291 - 122 + 291

334

54 - 244 + 176

+ 376 ;- 217 + 11

+ 204

4 29

- 266 17 + 125 - 113

45 76 36

453 153 65

- 178 + 16 -

898

-1,655

i'-

Change

----

SBank use Of reserves

in total reserves

Required reserves

Excess reserves

+1,448 +1,163

+1,340 +1,257

+ 108 / -

171

99 69

- 173

+ 21z

4 -

187 23

+ +

440 252

72 99

306

+ 317

561

+ -

406 188

- 128 + 72

+ 111

178

- 212

146

+ 181

250

351

24 213

+ 45 - 272

401

+ 277

- 215

179 74

+ 450 490

+ 197

-45

- 315

+ + -

-33 28 228 33 28

43 82

+ 110

+ + -

- 127 33 135

-37 5 - 7 8

89 29 1 332

361

31 57

+ +

166 459

+ 254 - 121

255

+ 155

+ 344

+ 256

133

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

Levels, Item

March

Money supply--M

Plus: Time deposits other than large CD's

Equals:

Money supply--MN

1971

Dollar Change 2nd Qtr.,

June

Aug.7

217.4 223.6

224.7

6.2

227.8

7.2

218.9

226.1

436.3 449.6

452.5

1971 June to Aug., 1.1

13.3

Plus: 4.

U.S.

Gov't. deposits at

member banks 5.

Net domestic commercial bank deposits at member banks

4.5

4.4

5.7

-0.1

4.3

4.0

4.2

-0.3

28.0

31. 2

0.4

2.8

4.5

3.9

-2.5

-0.6

1.9

2.7

217

2.6

Demand deposits at nonmember banks

38.3

39.9

40.3

0.4

Time deposits at nonmember banks

56.5

58.8

60.2

1.4

Currency component of the money supply

49.5

51.1

51.9

Deposits at Edge Act Corps., agencies and foreign branches

0.8

0.7

Foreign deposits at F.R.

0.4

Large CD's

Nondeposit funds 1/

7.0

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

0.2

28.4

-0.1

Less: 10.

11.

12.

13.

14.

-0.1

Equals: 15.

credit Proxy Adjusted

339.2 344.7

348.6

3.9

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

1971

Table 7A

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

Levels Item 1. Money supply--M 1 2.

Plus: Time deposits other than large CD's

3. Equals:

March

1 971

June

IJune to Aug., 1971 Percentage Dollar Percentage Change Jhange Change

I 2nd Otr. 1971

Dollar Aug. p. hChange

219.4 225,6

228.1

6.2

11.3

2.5

6.6

218.3 225.8

227.8

7.5

13.7

2.0

5.3

437.6 451.4

455.9

12.6

4.5

6.0

Money supply--

13.8

Plus: 4.

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

4.8

3.9

6.1

-0.9

Net domestic commercial bank deposits at member banks

4.7

4.3

4.7

-0.4

27.8

28,6

30.3

0.8

7.0

4.5

3.9

50.0

51.2

51.8

1.2

91.8

95.7

98.0

3.9

Large CD's

Nondeposit funds 1/

-2.5

Less: 8.

Currency component of the money supply Deposits at nonmember banks, and other items 2/

2.3

Equals: 10.

Adjusted Credit Proxy

340.2 345.7

351.1

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/

Cite this document

APA

Federal Reserve (1971, September 20). Bluebook. Bluebooks, Federal Reserve. https://whenthefedspeaks.com/doc/bluebook_19710921

BibTeX

@misc{wtfs_bluebook_19710921,
  author = {Federal Reserve},
  title = {Bluebook},
  year = {1971},
  month = {Sep},
  howpublished = {Bluebooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/bluebook_19710921},
  note = {Retrieved via When the Fed Speaks corpus}
}