bluebooks · October 18, 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.

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Content last modified 6/05/2009.

(CONFIDENTIAL

FR)

October 14, 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

October 14,

CONFIDENTIAL (FR)

1971.

MONETARY AGGREGATES AND MONEY MARKET CONDITIONS Recent developments (1)

In September and early October both the narrowly and broadly

defined money supply aggregates fell considerably short of the paths projected in the last blue book, as shown in the table on page 2.

The outstanding

level of M1, instead of rising from the reduced levels of early September as expected, dropped further as the month progressed, and for the month as a whole, declined at a 3.7 per cent annual rate.

As a result, M 1 growth over

the third quarter was reduced to 3.0 per cent and for the second and third quarters combined to about 7.0 per cent.

With private demand deposits turning

down and time deposits other than CD's growing less than anticipated, the expansion of M2 was virtually halted in September and was reduced to a 4.5 per cent annual rate in the third quarter.

Growth of the adjusted credit

proxy, on the other hand, remained about on target for both September and the third quarter, as greater than expected strength in large CD's and nondeposit sources of funds approximately offset the shortfalls in other deposits. (2) As incoming data on the money supply aggregates continued to fall short of path levels, the Desk sought to provide enough reserves to promote somewhat easier money market conditions, aiming at gradually reducing the Federal funds rate to around 5-1/4 per cent or a little below.

In the

two weeks ending October 6, required reserves were below path, on balance, as indicated in the table on page 3.

At the same time nonborrowed reserves were

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

Sept. 21 Path

Adjusted Proxy Sept. 21 Actual Path

Sept. 21 Path

Actual

1.5 5.0

2.6 -3.7 3.0

5.5 6.0

4.8 1.6 4.5

8.0 9.0

1.0.3 8.5 9.0

228.4

228.0 227.3

458.0

455.9 456.5

353.4

351.0 353.5

15 22 29

229.0 230.6

227.1 226.8 226.7

458.7 460.9

455.8 456.1 456.4

353.1 353.1

353.9 352.9 353.0

6 13p

229.2 228.8

226.9 226.7

459.8 459.7

457.4 457.6

354.4 353.6

353.2 353.8

Actual

Annual Rates of Growth, per cent August September 3rd Quarter Levels, billions of $ August September Week ending Sept.

Oct.

p - Partly projected.

Reserve Aggregates: September 21 Paths vs. Actual (Seasonally unadjusted, in millions of dollars)

Statement Week Ending

Actual Minus September 21 Path

Actual

September 21 Path

31,082 30,656 30,729 353 426

30,924 (30,910) 30,374 (30,360) 30,699 (30,680) 225 550

158 (172) 282 (296) 30 ( 49) 128 -124

31,092 30,782 30,795 297

31,249 (31,146) 30,699 (30,596) 31,024 (30,921) 225

-157 (-54) 83 (186) -229 (-126) 72

September 29 Total reserves Nonborrowed reserves Required reserves Excess Borrowings October 6 Total reserves Nonborrowed reserves Required reserves Excess

Borrowings

310

550

-240

October 13 Total reserves Nonborrowed reserves Required reserves Excess

Borrowings

NOTE:

30,766 30,316 30,665 101

450

31,188 (31,338) 30,638 (30,788) 30,963 (31,137) 225

550

-422 (-272) -322 (-172) -298 (-148) -124

-100

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

-4above target path, and as a result net borrowed reserves were much reduced, with banks electing both to hold more excess reserves and to reduce their borrowings from the Federal Reserve.

The funds rate initially dropped less than might

have been expected under these conditions--averaging, for example, 5.43 per cent in the week ending September 29.

But by the week ending October 13

the Federal funds rate had softened to about the 5-1/4 per cent target.

that week, nonborrowed reserves dropped off sharply relative to target, but the demand for reserves, as indicated by the shortfall in required reserves relative to target, was also lower than earlier anticipated. (3)

Since the last meeting of the Committee, market interest

rates have experienced significant across-the-board declines as shown in the table below.

In fact, for most series, recently prevailing rate levels Recent Interest Rates On Market Securities

August

Series

Rate Levels (Per cent per annum) Prevailing at Most recent Last Meeting

(10/14)

(9/20)

5.15 5.50 5.63

4.72 5.38 5.50

4.44 5.13 5.11

10-yr. U.S. Treas. New Issue Corps.

6.68

6.15

5.87

(Aaa basis) Municipals (Bond

7.97

7.56

7.22

6.03

5.38

4.99

Series Short-term 3-mo. Treas. bill 30-89 day Fin. Paper 60-90 day CD's Long-term

Buyer)

-5are close to or below the earlier lows reached in the immediate aftermath of the President's mid-August speech.

While there is still uncertainty

surrounding the wage-price control program, the plans recently announced have so far contributed to strengthening of bond markets.

But in addition

bond prices have risen in response to the recent moderate easing of money market conditions and to the prospects for further easing of money market conditions inferred from the recent slow growth of the monetary aggregates.

(4)

The following table provides a somewhat broader and longer-

range perspective on developments in major financial aggregates for selected recent periods. Fourth and First Qtrs. combined (March over Sept.) Total Reserves

Second Quarter (June over March)

Third Quarter (Sept. over June)

Second and Third Qtrs. combined (Sept. over March)

8.9

6.6

10.4

8.6

10.3

5.3

10.9

8.2

6.2

11.3

3.0

7.2

M 2 (M1 plus time deposits at commercial banks other than large CD's)

13.7

12.6

4.5

8.6

M3 (M2 plus deposits at thrift institutions)

14.6

14.8

7.4

11.2

9.7

6.5

9.0

7.8

10.5

9.1

9.8

9.6

Large CD's

$ 6.1

$ 0.7

$ 3.8

$ 4.6

Bank-related commercial paper N.S.A.

- 2.9

0.0

- 0.1

- 1.0

Nonbank commercial paper

- 0.4

- 0.9

Nonvorrowed Reserves 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/ Short-term market paper (Actual $ change in billions)

0.13/

0.1 4/

Other than interbank and U.S. Government. Based on month-end figures. Includes loans sold to affiliates and branches. August over June. 4/ August over March. 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. 1/ 2/ 3/

Prospective developments (5)

Three alternatives for Committee consideration are summarized

in the text table below, with the monetary aggregate paths laid out in more detail in the table on the next page.

(Two tables at the end of

text show weekly paths for the monetary aggregates and more detail on aggregate reserves). Alternative A

Alternative B

Alternative C

Federal funds rate

5--5-3/8

4-1/2--5

3-3/4--4-1/2

Member bank borrowings

300--450

150--300

50--150

October November December

3% 1 3-1/2

3% 2 4

3% 3 5-1/2

4th Q. 1971 1st Q. 1972

2-1/2 4-1/2

3 6

4 7-1/2

Growth in M1 (SAAR)

(6) The money market conditions shown for the three paths vary from a range around those recently prevailing (Alt. A) to considerably easier specifications.

Overall credit conditions--as typified by behavior

of short- and long-term interest rates--might well ease somewhat between now and the next Committee meeting even under Alternative A.

Credit demands

from businesses and State and local governments in long-term markets appear to be tapering off, and investors have shown a greater willingness to purchase longer-term securities.

Investors' demands will be influenced, however, by

their evaluation, as the details of Phase II become known, of the extent to which it seems to promise significant restraint on wage and price pressures.

-8-

Alternative Monthly and Quarterly Paths of Key Monetary Aggregates M

Alt. A

1 Alt. B

Alt. C

Alt. A

227.9 228.1 228.8

227.9 228.3 229.1

227.9 228.5 229.5

459.0 460.3 462.2

459.0 460.6 463.0

459.0

231.4

232.4

233.9

468.4

470.3

471.8

Alt.

Alt. C

1971 October November December

460.8 463.6

1972 March

Per Cent Annual Rates of Growth October November December

3.0 1.0 3.5

4th Q. 1971 1st Q. 1972

2.5 4.5

3.0 2.0 4.0

3.0 3.0 5.5

6.5 3.0 5.0

6.5 4.0 6.5

6.5 4.5 7.5

4.0 7.5

5.0 5.5

5.5 6.5

6.0 7.0

Adjusted Credit Proxy Alt. A Alt. B Alt. C October November December

Alt. A

Total Reserve Alt. C Alt. B

355.1 358.0 357.5

355.1 358.5 358.7

355.1 358.9 359.7

31.7 32.0 31.9

31.8 32.1 32.0

31.8

362.6

364.6

367.1

32.5

32.7

33.0

-14.5 10.5

-14.0 12.5

-13.5 14.5

- 6.0

- 4.0

- 2.5

- 3.5 8.5

- 2.0 9.5

- 0.5

32.2

32.1

1972 March

Per Cent Annual Rates of Growth October November December 4th Q. 1971 1st Q. 1972

5.5 10.0 -1.5 4.5 5.5

5.5 11.5 0.5 6.0 6.5

5.5 13.0 2.5 7.0 8.0

11.5

-9(7)

Short-term credit demands are likely to expand in the fourth

quarter both for seasonal reasons and as business activity improves cycllically. But we would not expect such demands to be reflected in much, if any, nearterm upward pressure on Treasury bill or private short-term rates.

The

peak period of seasonal pressure on short-term markets normally comes after mid-November.

Also, the Treasury's mid-November refunding--to be announced

on October 27--may reduce short-term market pressures by emphasizing debt lengthening, perhaps partly through incorporation of an advance refunding. On the other hand, the Treasury could announce in conjunction with the refunding that it will raise cash around mid-November through a bill issue. On balance, we would expect the 3-month bill rate to be in a 4-1/4--4-3/4 per cent range between now and the next meeting of the Committee, given the money market specifications of alternative A.

This bill rate range assumes

no substantial bill sales by foreign central banks. (8)

An easing of money market conditions that entailed a Federal

funds rate dropping appreciably below the 5 per cent discount rate for a sustained period could well lead to significant declines in other market rates, particularly if expectations of an accompanying discount rate cut should become pervasive.

The lower the Federal funds rate were to drop--

and particularly if it moved into the range of alternative C--the greater would be the possibility of a large speculative build-up in bond positions, especially during this forthcoming Treasury financing period.

Such a

build-up would carry with it the potential for a sharp subsequent market reversal or for the need to expand money and credit rapidly to forestall such a reversal.

-10(9)

The growth rate in M1 is expected to remain quite small

in October and November under all three alternatives considered here. However, in the course of the ensuing several months money growth is expected to pick up to a more normal rate in

relation to projected GNP expansion.

The exact timing is particularly hard to predict, though, depending as it does on when the public completes the readjustment of its cash position following the very large, partly precautionary build-up of cash balances in the spring and early summer.

The timing and extent of this readjustment

is especially uncertain in light of the limited degree to which Phase II has been spelled out thus far. (10)

Our best present estimate is that under the money market

conditions of alternative A, M 1 will grow in the first quarter of next year at a 4-1/2 per cent annual rate following the 2-1/2 per cent rate indicated for the fourth quarter.

Under the easing alternatives, money

growth would accelerate more as lower interest rates themselves tended to increase the public's demand for cash.

For alternative B, the annual rate of

money growth rises from 3 per cent in the fourth quarter to 6 per cent in the first quarter,.andfor alternative C from a 4 per cent annual rate to a 7-1/2 per cent annual rate over the same period. (11)

The bank credit proxy in the fourth quarter is expected

to grow less rapidly than in the third quarter under any of the alternatives; under alternative A, the growth rate is projected to drop below 5 per cent. The slowing in growth reflects mainly a turn-around in the availability of

-11U.S. Government deposits to finance credit expansion; these deposits are expected to decline irregularly in the fourth quarter following a substantial rise in the third.

Growth in time deposits other than large

CD's is expected to remain moderate in the fourth quarter, with growth rates somewhat larger under alternativesB and C as a result of the lower market interest rates likely to develop. (12)

A fairly sizable expansion in bank CD's is anticipated

between now and year-end, although the growth rate is likely to be less than the exceptional September pace.

Somewhat stronger business loan

demands, assuming GNP growth as projected in the Greenbook, and a willingness to acquire securities in anticipation of declining long-term market interest rates are expected to encourage banks to issue CD's. It is likely, though, that banks will lower CD offering rates if shortterm market rates decline,

but not so rapidly as to forestall a somewhat

greater increase in CD's in November under alternatives B and C than under alternative A, with the additional funds used to build up positions in securities.

-12-

Possible directive language (13)

This section presents possible language for the second

paragraph of the directive for the three alternative policy courses discussed above.

All three alternatives include a qualifying instruc-

tion to the Manager to take account of the forthcoming Treasury refunding, the terms of which are expected to be announced on October 27, as noted in paragraph (7).

In addition, in all three alternatives it is

proposed to delete the instruction to take account of developments in capital markets, given the recent strengthening of those markets. Finally, in alternatives B and C--in which the primary instruction is oriented toward the monetary and credit aggregates rather than money market conditions--the objective is described in terms of growth "over the months ahead."

Restoration of tnat phrase is suggested on the

assumption that, after focusing on the near-term at its September meeting, the Committee will now wish to return to its more customary time-horizon for policy. (14)

Alternative A.

This language is proposed for possible

use if the Committee decides to call for maintenance of prevailing money market conditions, subject to a proviso clause. "To implement this policy, [DEL: achieve to seeks Committee the moderate account taking aggregates, credit and monetary in growth of markets.] capital in developments

System open market operations

until the next meeting of the Committee shall be conducted with a and] reserves bank achieving view to [DEL: objective] that with consistent money market conditions; [DEL:

MAINTAINING ABOUT THE PREVAILING PROVIDED

-13-

THAT SOMEWHAT EASIER CONDITIONS SHALL BE SOUGHT, OF THE FORTHCOMING TREASURY FINANCING,

TAKING ACOUNT

IF IT APPEARS THAT THE

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

the Committee adopts this alternative,

may wish to consider the

money market conditions noted for alternative A in paragraph (5)

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.

The proviso

clause has been formulated in one-way terms, guarding against significant shortfalls but not excesses, on the assumption that the Committee would not want money market conditions to be tightened in the coming period if M1

and M2 should appear to be expanding on paths above those

projected, which represent comparatively low growth rates for the fourth quarter. (15)

Alternative B.

This language is proposed for possible

use if the Committee decides to seek the growth rates for the aggregates over the months ahead discussed earlier in connection with alternative B, including a fourth-quarter rate for M 1 of 3 per cent and moving up to a 6 per cent path in the first quarter. "To implement this policy, the Committee seeks to achieve account taking , moderate growth in monetary and credit aggregates [DEL: of developments in capital markets]

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

-14money market conditions consistent with that objective, TAKING ACCOUNT OF THE FORTHCOMING TREASURY FINANCING." (16)

Alternative C. This language differs from that of

alternative B in indicating that the Committee seeks "actively to promote" rather than "to achieve" moderate growth in the aggregates over the months ahead.

It is proposed for possible use if the

Committee decides to pursue the more aggressive course contemplated by the specifications given earlier for alternative C. "To implement this policy, the Committee seeks ACTIVELY to PROMOTE [DEL: achieve] moderate growth in monetary and credit markets] capital in developments of account taking , aggregates [DEL:

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, TAKING ACCOUNT OF THE FORTHCOMING TREASURY FINANCING."

-15-

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

October

November

Alt. A

Alt. B

Alt.

Alt. A

Alt. B

Alt. C

20 27

227.8 229.3

227.8 229.4

459.3 461.0

459.3 461.1

229.1 228.4 228.0

229.2 228.6 228.2

229.3 228.7 228.4

460.4 460.2 460.1

460.5 460.5 460.4

460.5 460.4 460.5

10 17

Credit Proxy Alt. B Alt. A

Alt.

Total Reserve Alt. A Alt. B

Alt.

October

20 27

354.5 356.9

354.5 357.0

31.7 31.8

31.7 31.9

November

3 10 17

357.9 358.2 358.0

358.1 358.8 358.5

358.2 358.7

31.7 31.9 32.2

31.7 31.9 32.3

31.8 32.0 32.3

358.8

-16Total and Nonborrowed Reserve Paths (Daily averages in millions of dollars, seasonally adjusted)

Total Reserves

Nonborrowed Reserves

Alt. A

Alt. B

Alt. C

Alt. A

Alt. B

Alt.

31,747 32,025 31,860

31,756 32,098 31,986

31,783 32,166 32,103

31,359 31,601 31,461

31,412 31,774 31,687

31,501 32,042 32,004

32,521

32,749

33,022

32,121

32,449

32,922

-11.0 14.0 - 3.5

-8.0 20.5 -1.5

1971 October November December

1972 March

Per Cent Annual Rates of Growth 1971 October November December 4th Q. 1971 1st Q. 1972

-12.0 10.5 - 6.0

-11.5 12.5 - 4.0

-11.0 14.5 - 2.5

-13.0 9.5 - 5.5

- 3.5 8.5

- 2.0 9.5

- 0.5 11.5

- 3.0 8.5

4.0 11.5

9.5

Weekly Paths--Seasonally Adjusted Nonborrowed Reserves

Total Reserves

Alt. A

Alt. B

Alt. C

Alt. A

Alt. B

Alt. C

October

20 27

31,677 31,782

31,677 31,832

31,677 31,882

31,343 31,242

31,343 31,392

31,343 31,642

November

3 10 17

31,653 31,890 32,208

31,703 31,948 32,278

31,753 32,006 32,344

31,265 31,477 31,812

31,415 31,635 31,982

31,665 31,893 32,248

Weekly Paths--Not Seasonally Adjusted Nonborrowed Reserves

Total Reserves Alt. A

Alt. B

Alt.

Alt. A

Alt.

Alt. C

October

20 27

31,101 30,764

31,101 30,814

31,101 30,864.

30,701 30,364

30,701 30,514

30,701 30,764

November

3 10 17

30,898 31,076 31,300

30,948 31,133 31,370

30,998 31,191 31,435

30,498 30,676 30,900

30,648

30,898 31,091 31,335

30,833 31,070

STRICTLY (FR) CONFIDENTIAL

CHART 1

10/15/71

MONETARY AGGREGATES NARROW MONEY SUPPLY M1

BILLIONS OF DOLLARS

- 23

220

It, I

PATH

-35%

-210

(10/13/71)

I Ill

BROADER MONEY SUPPLY

5 5% PATH

i',/i (10/13/71)

197'0

1971

i _____

71 -

Actual -

Currently Projected

--- Wkly Path, indicated at FOMC Meeting

(9i21/71)

Z-

Longer Run Path

CHART 1A

STRICTLY CONFIDENTIAL (FR)

10/15/71

MONETARY AGGREGATES ADJUSTED CREDIT PROXY

BILLIONS OF DOLLARS

-355

364

-345

-360 4.5% PATH 356

352

-1348

344 I

TOTAL RESERVES

1971

1970

'71 -

Actual Currently Projected

--- Wkly Path, ndicated at FOMC Meeting

(9/21/71)

Longer Run Path

10/15/71

CHART 2

INTEREST BEARING SOURCES OF BANK FUNDS BILLIONS OF DOLLARS

280

S260

TOTAL TIME AND SAVINGS DEPOSITS

-240

-220

200

TIME AND SAVINGS DEPOSITS OTHER THAN CD'S

CO'S-

0 NONOEPOSIT SOURCES DE

1970

S10

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

AA,,A

WEDNESDAY

GOVERNMENT BO 20 YEAR AVERAGES

I I 1 I 1970

1971

l l1 1. 1 1970

I 1 I 1 1 I 11 1971

STRICTLY CONFIDENTIAL (FR)

Table 1

PATHS OF KEY MONETARY AGGREGATES

Period

Path as of

Actuals &

Current Proj

Sept. 21

Path as of sept.

Actuals & Current Proj

Total Reserves

Adjusted Credit Proxy

Broad Money Supply (M2 ) 2/

Narrow Money Supply (MI) 1/

October 15, 1971

Path as of sept. 21

Actuals & Current Prol

Path asof Sept. 21

Actuals & CurrentProl

Monthly Pattern in Billions of Dollars 1971'

Apr. May June

221.1 223.9 225.6

442.0 447.3 451.4

341.7 343.8 345.7

30.8 31.3

July Aug. Sept.

228.4

227.5 228.0 227.3

458.0

454.1 455.9 456.5

353.4

348.0 351.0 353.5

32.1

31.3 31.7 32.1

Oct.

229.3

(227.9)

460.5

(I459.0)

355.2

(355.1)

32.1

(31.7)

31.3

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

1971:

17.8 12.6

8.4 11.3

Ist Qtr. 2nd Qtr. 3rd Qtr.

s.0

3.0

6.0

4.5

Apr. May June

9.3 15.2 9.1

12.1 14.4 11.0

July Aug. Sept.

1.5

10.1 2.6 -3.7

7.2 4.8 1.6

4.5

( 3.0)

(6.5)

Oct.

5.5 6.5

9.0

10.9 6.5 9.0

11.0 6.6 11.0

10.4 2.7 17.0 0.2

5.3 7.4 6.6

0.3

8.0

8.0 10.3 8.5

17.0

14.1 16.0

6.0

(5.5)

-1.0

(-12.0)

Weekly Pattern in Billions of Dollars 1971:

Aug. Sept.

228.3

456.4

353.8

31.4

227.5 227.8

455.9 456.6 455.8 456.1 456.4

31.9

353.1 353.1

353.8 353.8 353.9 352.9 353.0

31.8 32.1

457.4 457.6 459.3)

354.4 353.6 356.0

353.2 353.8 (354.5)

32.0 32.1 32.1

8 15 29

229.0 230.6

226.8 226.7

458.7 460.9

6 13 pe 20

229.2 228.8 229.4

226.9 226.7 (227.9)

459.8 459.7 460.8

22 Oct.

227.1

32.3

I-

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. 1/ Currently plus private demand deposits. i, plus time deposits other thai large Ch's. 2/

32.2 31.5

32.3 31.9 31.7 (31.7) ______________

pe-Partially estimated.

FR712-D Rev2/16/71

STRICTLY CONFIDENTIAL (FR)

Table 1-A

PATHS OF KEY MONETARY AGGREGATES

October 15, 1971

Monthly Pattern in Billions of Dollars 1971,

Apr. May Tuhe

248.3 251.4 254.4

July Aug. Sept.

6.2

3.7 6.1 6.3

261.2

256.8 258.2 261.6

229.6

226.6 227.8 229.2

Oct.

5.7

263.6

(265.0)

231.2

(231.2)

5.4 4.2

( 4.6)

221.0 223.4 225.8

27.3 27.9 28.6

5.1 4.1 4.5

30.1 30.3 32.4

4.3 3.9 4.1 ( 4.6)

(33.8)

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

1971:

1st Qtr. Ind Qtr. 3rd Qtr.

10.5

27.3 13.5 11.3

6.5

27.2 13.7 6.0 14.8 13.0 12.9

Apr. May June

10.7 15.0 14.3

July Aug.

9.5

4.3 6.4 7.4

8.5

(10.5)

Sept.

14.0

11.3 6.5 15.8

Oct.

11.0

(15.5)

Weekly Pattern in Billions of Dollars 1971:

Aug.

8.2

258.7

228.2

30.5

3.7

Sept.

1 8 15 22 29

8.0 7.5 8.0 5.5 4.5

261.5 262.2

259.1 260.3 260.6 262.0 263.2

229.7 230.3

228.4 228.8 228.7 229.3 229.7

30.8 31.5 31.9 32.7 33.5

4.0 3.8 3.7 4.1 4.5

4.8 4.3 (3.9)

262.7 263.2 263.9

263.4 264.5 (265.4)

210.6 230.9 231.4

230.5 230.9 (231.5)

32.8 33.6 (33.9)

Oct.

NOT O :

6 13 pe 20

pe-Partially estimated.

Annual rates of change other than those for the past Data shown in parenthesis are current projections.

~4-

are rounded to the nearest half per cent.

4.3 4.7 (4.6) L

FR 712-K Rev 2/16/71

CONFIDENTIAL (FR)

Table 2

AGGREGATE RESERVES AND MONETARY VARIABLES

October 15, 1971

RETROSPECTIVE CHANGES, SEASONALLY ADJUSTED (Annual rates in per cent)

Semti-annua lly 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 1911

+ 8.9

+ 8.2

+13.5

+ 8.8

+10.3

+ 9.4

+10.5

420.8

+20.8

-18.2

Quarterly 3rd Qtr. 1970 4th Qtr. 1970

+19.1

+24.4 + 9.4

+24.1 +15.1

+17.2 + 8.3

+6.1 +3.4

+ 3.3 +5.8

4 6.7 + 2.7

+32.2 +21.8

+ 9.3

-16.2

+11.6

+20.4

+11 .0 + 5.3

+17.0 + 9.6

+10.9 + 6.5

+8.9

+9.6

+ 6.6

+11.3

+ 9.6

+ 8.9 +11.8

+27.3 +13.5

+23.3 +17.3

-24.7 -12.5

+10.4

+10.9

+ 9.7

+ 9.0

+3.0

+6.3

+ 2.1

+11.3

+12.4

+31.6

+10.1 +13.1 +21.4

+ 1.1 + 7.0 +16.5

+ 1.1 +2.8 +6.2

+ 7.5 +4.9 +4.9

+ 4.4

+ 2.2 + 6.6

+20.3 +15.1 +28.8

+10.6 + 9.4 +14.5

+32.4 -28.7 +58.1

+16.1 +19.3 +14.9

+10.5 +12.9 4 8.9

+ 1.1 +14.0 +11.6

+ 7.4 + 9.8 + 9.7

- 1.4 +16.0 +12.2

+25.5 +28 6 +25.9

+25.1 +18.5 +24.9

- 9.0 -10.9 -55.2

+ 5.3 I 7.4 + 6.6

+ 9.3 +15.2 + 9.1

+12.0 + 9.5 + 7 1

+ 7.8 +17.6 + 9.7

+10.7 +15.0 +14.3

+21.8 +14.2 +15.1

+ 4.4 -15.8 -26.3

4 8.0 +10.3 + 8.5

+10.1 +2.6 - 3.7

+11.7 +2.3 + 4.6

+ 9.6 + 2.7 - 6.1

+11.3 + 6.5 +15.8

+15.9 + 8.4 +12.5

-32.1 - 1.7 31.6

1st Qtr. 2nd Qtr.

1971 1971

3rd Qtr.

1971

0.7

+ 6.6

+11.0 p

1970--Oct. Nov. Dec.

+ 3.6 +18.4

1971--Jan. Feb. Mar.

+12.2 +11.4 + 9.2

Apr. May June

+ 2.7 +17.0 + 0.2

+ 9.7 +12.4 - 6.2

+17.2 411.1 +5.3

July Aug. Sept. p

+ 0.3 +14.7 +16.0

-13.1 +16.1 +29.8

4 8.8 +11.9 + 8.3

NOTE:

1.9

-22.8 + 8.8

+15.1 - 8.8

0.7

p - Preniitnary. Aggregate reserve series have been adjusted to eliminate changes in percentage reserve requirements against deposits, but reserve requirements FR 712- E on Eurodollar borrowings are included beginning October 16, 1969, and requirements on bank-related commercial paper are included beginning October 1, 1970.

CONFIDENTIAL (FR)

Table 3

AGGREGATE RESERVES AND MONETARY VARIABLES

October 15,

1971

SEASONALLY ADJUSTED

(In millions of dollars) 1970:

1971:

(In billions of dollars)

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

Sept.

28,041 28,585 29,240

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

164.5 164.8 165.7

222.2 225.0 230.4

Jan.

30,229 30,515

30,748

323.9 329.1 333.2

214.8 217.3 219.4

165.5 167.7 169.4

235.3

Mar.

29,801 30,176 30,398

30,029

Feb. Apr. May June

30,816 31,253 31,257

30,644 30,961 30,801

30,611 30,998

221.1 223.9 225.6

50,5 50.,

31,046

336.6 339.7 341.2

170.5 173.0 174.4

31,266 31,650 32,072

30,465 30,873 31,639

31,094 31,473 31,906

343.7 347.1 349.5

227.5 228. 0 227.3

51.7 51.8 52 0

175.8

31,7/6 31,473 31,761 31,415

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

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

344.2 344.4 346.8 350.1

226.7 228.7 228.7 228.3

51.8 51.9 51.9 51.7

175. 0

349.9 350, 0 350.2 348.8 348.4

227.5 227.8 227.1 226.8 226.7

51.8 52.0 52.0 51.8

175.8 175.8 175.1 174.8 174.9

226.9

52.1

174.8

July Aug.

Sept.

30,255 30,534

48.7

48.9 49.2 49.6 50.0

51.2

21.7

191.3 184.2 196.8

315.8 321.9 324.5

23.2 23.9 26.0

199.1 201.1 204.4

324.8 326.7 331.2

246.1

27.1 27.4 27.8

208.2 213.5 218.3

334.1 337.1 340.2

248.3 251.4 254.4

27.3 27.9 28.6

221.0 223.4 225.8

341.7 343.8 345.7

256.8 258.2 261.6

30.1 30.3 32 4

226.6 227.8 229.2

348.0 351.0 353.5

227.4 227.7 227.6 228.2

348.1 348.7 350.5 353.8

27.9 27.8 27.9 28.4

228.4 228.8 228.7 229.3 229.7

353.8 353.8 353.9 352.9 353.0

28.2 28.3 28.2 28.4 28.5

230.5

353.2

28.5

240.9

176.2 175.3

WOek endino: 1971:

Aug.

Sept.

Oct.

NOTES:

4 11 18 25

31,918 32,319 32,205 31,542 32,268

I 8 15 22 29 6

3....

31,899

31,225 31,633 31,779 31,338 31,862

31,634 32,109 32,048 31,674 31,865

31,649

31,667

______

348.9 =

_______

________I____

52.0

257.5 257.4

176.8 176. 8 176.6

257.9

258.7 259.1 260.3 266.6 262.0 263.2 263.4 I

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, 1970. Adjusted credit proxy includes mainly total member bank deposits subject to reserve requirements, bank-related commercial paper, and EurOdollar borrowings of U. S. banks. Weekly data are daily averages for statement weeks. Monthly data are daily averages except for nonbank commercial paper figures which are for last day of month, p-Preliminary.

FR 712 - F

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

Free reserves

Excess reserves

Banks R e s e r v e Major banks

Total

Mtl

8 N.Y.

Borrowings C i t v

Other

Country

Outside N.Y.

Monthly (reserves weeks ending in): 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

287 317 225 331 241 289 460 278 115 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

140 71

238 264

378 335

45 29

36 30

262 248

35 29

120 2 6 303 672 633 323

192 154 218 211 158 194 214

312 152 212 514 830 827 537

41 15 78 103 77 153 37

17 9 36 85 223 130 104

238 119 60 159 270 318 249

16 9 38 167 260 226 147

80 58 3 128

277 208 81 48

197 150 84 176

-17 -42

--1 34

184 127 79 86

13 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 16 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

232

750

107

132

203

308

7 14 21 28

384 986 839 478

277 5 282 67

661 991 1,121 545

-252 47 9

149 309 344 88

257 189 397 236

255 241 333 212

March April May June July Aug. Sept. p

1971--Apr.

May

June

July

7 14 21 28

330

434

764

122

307

292

566

593

328

218

18 25

955 680

224 91

1,179 771

338 229

254 97

326 313

261 132

Sept.

1 8 15 22 2 9 p

382 560 210 390 73

324 205 247 - 61 353

706 765 457 329 426

52 286 97 49 37

370 306 231 106 230

185 173 130 88 159

Oct.

6 p 13 p

13 349

297 101

310 450

5 113

112 127

164 109

Aug.

p - Preliminary.

99 --86 -29 101

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

Total Federal Reserve credit S(Excl. float)

Period

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

+5,539 +3,351

U.S. Government securities Total holdings

+5,192

Bills 1/ +4,279 ( -) +3,220 (- 143)

+ 707 +1,180

+ + +

124 84 113

+ +

71 56

)

57) 87) 144)

109

+ +

91 15

7 14 21 28

+ + -

145 86 423 43

+ + + +

4 128 360 30

May

5 12 19 26

+ + + +

712 272 304 144

+ + + +

384 173 400 256

2 9 16 23 30

57 2 - 418 47 2 106 +1,059

7 14

+ + + -

June

July

21 28

Aug.

Sept.

13 439 463

+ 348 +1,151

373 74 562 359

131

208

+ +

25 27 101 50

)

) )

)

+ -

67 63

+ -

35 28

)

141 1 - 73 + 296

+ +

397

)

+ + +

399 309 54 320 595

282

--- ) )

145

+ -

655 299

206 124

Bankers' acceptances

39) 39)

+ +

+ -

Federal Agency Securities Repurchase Outright agreements

)

4 11 18 25 8 15 22 29

Oct.

Other

+4,276

1971--Apr.

Repurchase agreements

)

70) 70)

S 25

145) 145)

- 191

307

)

394

)

39 5

153

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, of the week of June 23. Preliminary.

I $ +416 million of the week of June 16, and $ -510 million

Member banks borrowings

245

884

Table 6

MAJOR SOURCES AND USES OF RESERVES Retrospective and Prospective Changes (Dollar amounts in millions, based on weekly averages of daily figures) of r e s e r v e s u pp 1 y n a f f e c t F a c t o r s Federal Reserve Gd Currency rForeign I Other nonmember credit (excl. o outside erat s Float deposits deposits and

Poriod

float)

banks

(S 1969 (12/25/68-12/31/69) 1970 (12/31/69-13/30/70)

1971--Apr.

May

June

Jult

Aug.

Sept.

Oct.

45,539 +3,351

ign

eraonand

gold loans

e f f

cates

c t

F.R. accounts

Change

Bank use

in total

qird reere

f reserves xc res

reserves

reserves)

-+1,150-

-2,676 -3,122

- 813 + 773

+ 241 + 667

+ +

54 1

898 -1,655

+1,448 +1,163

+1,340 +1,257

+ 108 - 94

14 14 21

+ +

173 217 187

270 45 313

+ +

171 24 440

- 99 - 69 - 127

7 14 21

+ +

279 275 348

----

257 -483 - 414

- 243 + 249 - 131

+ 235 + 241 + 301

+ +

- 384

129 351 465 69

580

219

252

+ 307 - 248 + 83 + 218

+ -

497 211 421 177

+ -

14 13 5 25

+ -

72 99 45 315

+ + -

623 696 278 116

+ + -

306 561 406 188

+ 317 - 135 - 128 + 72

-36 1

33 28 228

+ +

30 390 327

81 178 146

+ 111 - 212 + 181

5 12 19 26

+ + + +

771 201 503 115

+ +

2 9 16

+ +

305 974 202

--- 80 - 240 -378

+ 169 + 522 + 398

- 327 + 291 - 122

+ +

+ 160

-125

- 648

+ 291

294

250

+1,156

- 776

- 334

373

351

-616

+ 376

- 244

+ 217

213

- 272

358

+ 176

110

678

401

+ 277

895

+ 204

- 453

309

- 215

51 -168

+ 266 17

- 153 - 65

37 5

89 29

+ -

271 564

179 74

+ 450 - 490

- 114

+ 275

+ 197

494

361

- 133

+ 408

175

+ 233

+ -

336 4

+ -

455 46

- 119 + 42

171 229

362

364

743

957

4 11

+ -

335 204

+ 483

384

+ 125

+ 178

116

- 113

332

381

392

- 45

- 280

8 15

+ -

670 387

191 190

- 76 - 36

+ 163 + 326

+ +

29 26

57 256

575

238

- 374

+ 683

491

183

- 308

29 p

839

878

- 242

- 719

722

308

+ 414

6 p 13 p

+ -

575 217

190 372

- 139 + 52

37 49

102 85

10 326

+ -

66 130

- 56 - 196

+ 86

/ Pot retrospective detaile, see Table 5. 2/ Includes $400 million in special drawing account, p -Prelimtnary

483

97 76

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

Levels,

1971

1 Item

'Marchl June 1 Sept.p

Dollar Change

2nd Qtr. 1971

3rd Qtr. 1971

Money Supply--M 1

217.4

223.6

225.7

6.2

2.1

Plus: Time deposits other than large CD's

218.9

226.1

229.2

7.2

3.1

Equals: Money supply--M 2

436.3

449.6

454.9

13.3

5.3

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

4.5

4.4

6.2

-0.1

Net domestic commercial bank deposits at member banks

4.3

4.0

4.4

-0.3

0.4

28.0

28.4

32.1

0.4

3.7

Plus: 4.

Large CD's

Nondeposit funds 1/

7.0

4.5

4.1

-2.5

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

1.9

2.2

0.3

F.R. Float

2.7

3.0

Demand deposits at nonmember banks

38.3

39.9

40.8

1.6

0.9

Time deposits at nonmember banks

56.5

58.8

60.8

2.3

2.0

Currency component of the money supply

49.5

51.1

52.0

1.6

0.9

Deposits at Edge Act. Corps., agencies and foreign branches

0.8

0.7

0.8

-0.1

0.1

Foreign deposits at F.R.

0.4

339.2

344.7

-0.4

Less: 10.

11.

12.

13.

14.

Equals: 15.

Credit Proxy Adjusted

352.1

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

Table 7A

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

Levels, 1971

2nd Qtr. 1971 Dollar

Item 1. Money supply--M 1 2.

March IJune Sept.p I Change 219.4 225.6 227.3 6.2

3rd Otr. 1971

Percentage

Dollar

Percentage

Change 11.3

Change 1.7

Change 3.0

Plus: Time deposits

218.3

225.8

229.2

7.5

13.7

3.4

6.0

437.6

451.4

456.5

13.8

12.6

5.1

4.5

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

4.8

3.9

6.3

-0.9

Net domestic commercial bank deposits at member banks

4.7

4.3

-0.4

27.8

28.6

32.4

0.8

3.8

7.0

4.5

4.1

-2.5

-0.4

8. Currency component of the money supply

50.0

51.2

52.0

1.2

0.8

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

91.8

95.7

98.0

3.9

2.3

340.2

345.7

353.5

5.5

other than large CD's 3.

Equals: Money supply--

Plus: 4.

Large tD's

Nondeposit funds 1/

2.4

Less:

Equals: 10.

Adjusted Credit Proxy

6.5

7.8

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/

9.0

Cite this document

APA

Federal Reserve (1971, October 18). Bluebook. Bluebooks, Federal Reserve. https://whenthefedspeaks.com/doc/bluebook_19711019

BibTeX

@misc{wtfs_bluebook_19711019,
  author = {Federal Reserve},
  title = {Bluebook},
  year = {1971},
  month = {Oct},
  howpublished = {Bluebooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/bluebook_19711019},
  note = {Retrieved via When the Fed Speaks corpus}
}