bluebooks · July 17, 1978

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 this document may contain occasional gaps in the text. These gaps are the result of a redaction process that removed information obtained on a confidential basis. 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). 2 A two-step process was used. An advanced optimal 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.

Strictly Confidential (FR)

Class I FOMC

July 14, 1978

MONETARY AGGREGATES AND MONEY MARKET CONDITIONS

Prepared for the Federal Open Market Committee By the staff

Board of Governors of the Federal Reserve System

STRICTLY CONFIDENTIAL (FR) CLASS I - FOMC

July 14,

1978

MONETARY AGGREGATES AND MONEY MARKET CONDITIONS Recent developments (1)

Growth in M-1 slowed to an annual rate of about 6

per cent in June, but appears to be accelerating again in July. For June-July, M-1 is expected to expand at about a 7½ per cent annual rate, just above the mid-point of the Committee's range, and M-2 is projected to increase at about a 9 per cent rate, in the upper half of its range.

Growth in the interest-bearing component

of M-2 in June was bolstered by the rapid expansion of large-denomination time deposits and the introduction of the new six-month "money market" certificate.

Banks are estimated to have issued $2 billion of

the latter instruments during the month, resulting in a strengthening of the growth of small-denomination time deposits that about offset a decline in savings deposits of individuals.

At thrift

institutions, growth of the six-month certificate contributed to a strengthening of total deposit inflows in June.

By the end

billion of the new certificates

of the month, an estimated $6 were outstanding at thrifts.

Growth in Monetary Aggregates over June-July Period Ranges

Memo:

Latest Estimates

M-1

5 to 10

7.6

M-2

6 to 10

9.1

Federal funds rate (per cent per annum)

to 8

Avg. for statement week ending June 21 7.53 July

7.78

5 12

7.72 7.72

(2)

Following the June meeting the Account Management,

in accordance with the Committee's instructions, adopted operating policies to raise the Federal funds rate by a ¼ of a percentage point to 7¾ per cent.

This target has been maintained in subsequent

weeks as incoming data have suggested that growth in the monetary aggregates in the June-July period would be well within the Committee's ranges.

The rise in the Federal funds rate contributed to a marked

increase in member bank borrowing at Federal Reserve Banks in late June.

However, the level of borrowing then declined following the

mid-year increase in the discount rate to 7-1/4 per cent.

Reflecting

in part the decrease in member bank borrowing and a rise in reserves required to support Government deposits after the mid-June tax date, growth in nonborrowed reserves is expected to accelerate to around a 20 per cent annual rate over the June-July period. (3)

Both long- and short-term interest rates generally

have risen 1/8 to 3/8 of a percentage point since the June FOMC meeting, reflecting for the most part the somewhat tighter monetary policy stance.

During June, demands in credit markets from a number

of nonfinancial sectors appear to have moderated.

Public bond

offerings by corporations picked up somewhat and commercial paper issuance increased sharply, but borrowing by businesses from banks slowed markedly from the extraordinarily rapid pace in May.

In addi-

tion, a fall-off in advance refunding operations led to a decline in

long-term borrowing by State and local governments.

As expected,

the Treasury redeemed $6 billion of short-dated cash management bills in late June, but it has since raised $3.5 billion through sales of 1-year bills, 2-year notes and 15-year bonds.

Conditions

in primary mortgage markets appear to have stabilized somewhat in recent weeks, perhaps reflecting improved funds availability at thrift institutions.

Both interest rates on commitments to make

new mortgages and the percentage of associations reporting funds in short supply have changed little since mid-June. (4)

Bank credit growth slowed markedly in June, following

unusually rapid increases in the preceding two months.

Not only

was the increase in business loans much smaller than in any previous month this year, but the increase in other lending also moderated somewhat.

Given the reduced pace of loan growth, banks augmented

portfolios of investment securities and reduced outstanding negotiable CDs, while only moderately increasing their use of nondeposit funds. (5)

The table on the next page shows percentage annual

rates of change in related monetary and financial flows over various time periods.

1976 & 1977 Average

Past Twelve Months June '78 over June '77

Past Six Months June '78 over Dec. '77

Past Three Months June '78 over Mar. '78

Past Month June '78 over May '78

Nonborrowed reserves

2.5

6.1

6.2

3.7

20.7

Total reserves

3.2

8.5

9.0

12.1

16.3

Monetary Base

7.7

9.6

9.3

10.5

11.5

6.8

8.0

7.8

11.1

6.2

10.4

8.6

8.0

9.1

7.9

12.3

9.8

7.9

8.6

8.4

M-4 (M-2 plus CD's)

8.6

10.7

10.2

10.4

6.6

M-5 (M-3 plus CD's)

11.1

9.3

9.4

7.6

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

thrift institutions)

Bank Credit Loans and investments of

all commercial banks 2/ Month-end basis

9.8

11.2

11.7

13.5

6.0

Monthly average

9.5

11.2

11.8

11.3

9.6

Short-term Market Paper

(Monthly average change in billions) Large CD's Nonbank commercial paper

-0.4

2.0

2.1

1.6

0.2

0.4

-0.4 0.1

1/ Other than interbank and U.S. Government. 2/ Includes loans sold to affiliates and branches. NOTE: All items are based on averages of daily figures, except for data on total loans and investments of commercial banks, commercial paper, and thrift institutions--which are derived from either end-of-month or Wednesday statement date figures. Growth rates

for reserve measures in this and subsequent tables are adjusted to remove the effect of discontinuities from breaks in the series when reserve requirements are changed.

Prospective developments (6)

Alternative longer-run growth ranges for the monetary

aggregates over the QII '78 to QII '79 period are shown below for Committee consideration.

Alternative B continues the ranges for

M-1, M-2, and M-3 adopted by the Committee in April for the QI '78QI '79 period, but specifies a somewhat higher range for bank credit.

Alternatives A and C represent, respectively, more and

less expansive policies.

Alt. A

Alt. B

Alt. C

Current Ranges

M-1

5 to 7½

4 to 6½

3 to 5½

4 to 6½

M-2

7 to 9½

M-3 Bank Credit

6½ to 9

6 to 8½

6½ to 9

8 to 10½

7½ to 10

7 to 9½

7½ to 10

9 to 12

8½ to 11½

8 to 11

7½ to 10½

(7) All alternatives assume a shift in the relationship among the monetary and credit aggregates, as follows:

(a) In

view of the strength in demand for M-1 in recent quarters, growth of M-1 is expected to be near the upper end of the ranges shown-i.e., 7¼, 6¼, and 5¼ per cent for alternatives A, B, and C, respectively.

(b) However, if the regulation authorizing automatic

transfers from savings to demand deposits becomes effective November 1, M-1 growth would probably fall into the lower half of the ranges shown as the public shifts demand balances to savings accounts.

to be near the mid-points of the respective ranges.

(d) Given

-6aggregate credit demands associated with the staff's GNP projection, growth in bank credit is likely to be near the upper end of the revised ranges shown for this aggregate. (8)

The demand for M-1 is expected to remain quite strong

over the new QII '78 to QII '79 policy period, when nominal GNP is projected to rise about 11 per cent.

Thus, over the next several

months a further substantial rise in short-term rates appears needed to restrain M-1 growth even to the high end of the ranges shown. As indicated in Appendix I, the staff anticipates that the Federal funds rate would have to rise to the 8¾ to 9¾ per cent range by fall under alternative B.

Interest rates in the fourth quarter would

be about one percentage point lower under alternative A and threequarters of a percentage point higher under alternative C. (9)

Even with the assumption that M-1 grows near the

upper end of its ranges, the GNP projection implies relatively rapid increases in the velocity of M-1.

Under alternative B, V-1

is projected to rise by 4½ per cent over the QII '78-QII '79 period,1/ as compared with an increase of 3¼ per cent over the preceding four quarters.

Efforts by the public to economize on cash as interest

rates rise would contribute to an increase in velocity, but--given the interest rates assumed--the 4

per cent rise that is projected

also presupposes a further modest downward shift in the demand for money.

Such a shift could develop as higher interest rates

Projected velocity changes are shown in Appendix II.

-7induce more intensive marketing of earlier innovations and cash management services.

Over recent quarters, however, the demand

for money has been about as strong as would be expected from historical relationships.

If that tendency continues, efforts to constrain

M-1 to the upper end of the ranges presented will require

higher

interest rates and/or lower GNP growth than projected. (10)

While growth in M-1 is anticipated to be in the

upper end of its ranges, growth in M-2 and M-3 over the QII '78 to QII '79 period is expected to be near the mid-points of their respective ranges.

The initial success of both banks and thrifts

with the new six-month certificate suggests that these institutions may be better able to maintain interest-bearing deposit inflows than the staff previously assumed.

However, as interest rates rise,

depository institutions may become less aggressive in their offerings

of the new certificate.

In addition, the projected rise in rates

can be expected to slow growth of interest-bearing deposits subject to a fixed rate ceiling.

As in other recent Bluebooks, the projected

high level of interest rates has led the staff to assume another increase in deposit rate ceilings this fall;1/ without such an increase, M-2 growth would be near the low end of its longer-run range. (11)

In view of the persistent tendency for M-1 to

grow above its longer-run ranges over the past several quarters on

We have assumed a 25 basis point increase in ceiling rates on all deposits with maturities of four years or more.

-8average, a considerable moderation of M-1 growth over the next year would be required to compensate for such overshoots and bring M-1 growth to within a 4 to 6¼ per cent range over periods longer than one year ending in QII '79.

As can be seen from the lower

panel of appendix table III-1, the 6¼ per cent M-1 growth contemplated under alternative B implies annual rates of expansion of about 7 per cent for periods beginning as far back as the fourth quarter of 1975. However, constraining M-1 growth over QII '78 to QII '79 to a 5¼ per cent rate, as under alternative C, would produce M-1 growth close to the 6½ per cent upper end of April longer-run range for periods beginning with the second quarter of 1977.

As shown in the

lower panels of appendix tables III-2 and III-3, under all alternatives M-2 and M-3 would grow within their current 6½ to 9 and 7½ to 10 per cent longer-run ranges for periods starting with the fourth quarter of 1976 and ending in QII '79.

(12)

If the regulation authorizing automatic transfers

from savings to demand deposits for commercial banks becomes effective as scheduled on November 1, measured M-1 growth may be reduced by 1 to 3 percentage points over the QII '78 to QII '79 period.1/ However, there is great uncertainty about such estimates since we do not know the pricing policies that commercial banks will

A suit to delay the effective date of the regulation, brought by the Savings and Loan League, is now before the courts. No decision is likely before October.

-9adopt; these policies, of course, will affect the attractiveness of the service to households and the willingness of individuals to transfer demand balances to savings accounts.

A lower growth of

M-1 resulting solely from such shifts to savings accounts would

have the same policy implications as a higher growth before automatic transfers.

Although M-2 might expand a bit more rapidly with

automatic transfers if the new service attracted savings deposits from thrift institutions, staff believes such shifts would probably be relatively modest.

In any event, M-3 growth would be virtually

unchanged since that aggregate would be unaffected by shifts of funds between commercial banks and thrift institutions.

Appendix IV

discusses automatic transfers, and their possible affect on the monetary aggregates, in more detail. (13)

Shorter-term specifications for the monetary

aggregates and the Federal funds rate believed to be generally consistent with the longer-run alternatives are summarized below for Committee consideration.

Two short-run alternatives are

shown, one calling for no change in the funds rate over the intermeeting period--which might be associated with either long-run alternatives A or B--and the other contemplating a ¼ point rise in the rate.

An easing alternative for the short-run is not presented

since all proposed longer-run ranges involve either stable or rising rates over the next several months.

(More detailed and longer-

term data are shown in the tables on pp. 10 and 11.)

-10Alternative Levels and Growth Rates for Key Monetary Aggregates M-1

M-2

Alt. A

Alt. B

Alt. C

Alt. A

Alt. B

Alt. C

1978

June July August

350.4 353.0 354.6

350.4 353.0 354.5

350.4 352.9 354.2

840.6 847.6 853.2

840.6 847.6 853.0

840.6 847.3 852.3

1978

QII QIII QIV

348.4 354.9 361.5

348.4 354.7 359.6

348.4 354.3 358.3

835.1 853.5 872.2

835.1 853.1 869.2

835.1 852.3 866.9

1979

QI QII

367.8 373.8

364.7 370.2

362.1 366.7

890.5 908.6

885.4 902.2

880.9 895.9

8.9 5.4

8.9 5.1

8.6 4.4

10.0 7.9

10.0 7.6

9.6 7.1

Growth Rates Monthly: 1978

July August

Quarterly Average: 1978

QIII QIV

7.5 7.4

7.2 5.5

6.8 4.5

8.8 8.8

8.6 7.5

8.2 6.9

1979

QI QII

7.0 6.5

5.7 6.0

4.2 5.1

8.4 8.1

7.5 7.6

6.5 6.8

7.5 6.8

6.4 5.9

5.7 4.7

8.9 8.3

8.2 7.6

7.6 6.7

7.3

6.3

5.3

8.8

8.0

7.3

Semi-Annual: QII '78-QIV '78 QIV '78-QII '79 Annual: QII '78-QII

'79

-11Alternative Levels and Growth Rates for Key Monetary Aggregates (cont'd) Bank Credit

M-3 Alt. A

Alt. B

Alt.

Alt. A

Alt. B

Alt. C

1978

June July August

1429.6 1441.3 1451.5

1429.6 1441.2 1450.9

1429.6 1440.8 1449.9

924.0 932.4 939.7

924.0 932.4 939.2

924.0 932.2 938.6

1978

QII QIII QIV

1420.1 1451.7 1483.8

1420.1 1450.9 1479.3

1420.1 1449.9 1475.7

916.3 940.4 963.0

916.3 939.7 960.8

916.3 938.8 958.5

1979

QI QII

1514.7 1545.3

1506.7 1534.7

1499.5 1524.4

985.0 1007.0

981.7 1002.8

978.2 997.9

Growth Rates Monthly: 1978

July August

9.4 7.6

10.9 9.4

10.9 8.8

10.6 8.2

10.2 9.0

9.8 8.4

Quarterly Average: 1978

QIII QIV

8.9 8.8

8.7 7.8

8.4 7.1

10.5 9.6

1979

QI QII

8.3 8.1

7.4 7.4

6.5 6.6

9.1 8.9

9.0 8.3

8.3 7.5

7.8 6.6

10.2 9.1

8.8

8.1

7.3

Semi-Annual: QII '78-QIV '78 QIV '78-QII '79

9.2 8.2

Annual: QII '78-QII '79

9.9

9.4

8.9

-12Alt. A or B

Alt. C

Ranges for July-August M-1

5 to 9

4½ to 8½

M-2

7 to 11

6½ to 10½

Federal funds rate (Intermeeting period) (14)

7½ to 8

7¾ to 8¼

Alternative B contemplates a Federal funds rate

centered on the prevailing 7¾ per cent level between now and the next FOMC meeting.

Growth of M-1 in the July-August period is

expected to be in a 5

to 9

per cent annual rate range under this

alternative, largely in consequence of the step-up in M-1 growth that appears in train for July.

With growth at the mid-point of

that range, the level of M-1 will remain well above that implied by the upper end of the FOMC's current longer-run range, as indicated in Chart 1 on the following page.

And for the third quarter as a

whole M-1 growth may be around a 7-1/4 to 7-1/2 per cent annual rate-high relative to the longer-run range but slower than in the second quarter, mainly reflecting the current deceleration in economic

activity and a lagged response to the appreciable increase in shortterm rates this spring. (15)

Expansion in M-2 under alternative B is likely to be

in a 7 to 11 per cent annual rate range over the July-August period. Growth at the mid-point of this range would maintain M-2 in the upper half of its longer-run range, as shown in Chart 2.

Chart 1

RECENTLY ESTABLISHED M-1 GROWTH RANGES AND ACTUAL M-1

BILLIONS OF DOLLARS 6%%

Projection

-Q1 '79

----

- 360

- 350

6V2%

S340 Q4 '77-Q4 '78 S350 4%

S340 320

350 '78

340

310

320

-1350

310

Q2 '77-

Q2 '78

340

320 330 310

320

310 1977

1978

Chart 2

RECENTLY ESTABLISHED M-2 GROWTH RANGES AND ACTUAL M-2

BILLIONS OF DOLLARS 9% 890

Q1'78-Q1'79

-*- Projection

875

S-

r" - -

8 60

845

-/ 830 SQ4'77-Q4'78

815

845 S-

830 9%

Q3'77-Q3'78

755 -

-815

845

- 830

740

S815 770 - 845

9'4

755 740

S7/

830

815

Q2'77-Q2'78 7%

800

755

- 785

740

770 755

740 1977

I 1978

-13(16)

The strength of M-2 relative to M-1 over July-August

reflects the expectation of both continued large inflows from the new six-month money market certificate and rapid growth in large denomination time deposits included in M-2.

With strong business

loan growth anticipated to resume this summer, it is likely that banks will return to the negotiable CD market and aggressively offer other large denomination time deposits.

In addition, while savings

deposits can be expected to decline, as they did in June, further success of commercial banks in marketing the new six-month certificate is likely to enable them to sustain net inflows of interest-bearing

deposits subject to regulatory ceilings at near recent rates. (17)

Inflows of deposits to thrift institutions this

summer are also likely to be maintained at near the increased June pace, as these institutions continue aggressively to offer six-month

certificates at rates 25 basis points above what banks can pay. Savings deposits are expected to contract as depositors shift to the new instrument, but the ceiling rate advantage at thrifts is likely to permit these institutions to continue to attract more new money than commercial banks. (18)

If the Federal funds rate were maintained at the

currently prevailing 7% per cent level, as envisioned under alternative B, most other short-term rates would likely show little net change over the intermeeting period.

The recent rise in short-term

rates as a whole has brought them roughly into line with the prevailing funds rate.

Moreover, short-term credit demands are not

-14likely to add significantly to market rate pressures in the weeks immediately ahead.

While the short-term credit demands of financial

and nonfinancial businesses and of Federal agencies are likely to be strong over this period, the Treasury is not expected to add substantially to the net supply of bills. (19)

Interest rates on longer term securities are also

likely to be little changed under alternative B. Corporate bond offerings are expected to increase in July, but the forward calendar for August is seasonally light.

In the municipal sector,

new bond issuance is anticipated to fall further over the summer, as the normal seasonal lull is reinforced by a continued lack of advance refunding operations, recently discouraged by changes in IRS regulations and the previous rise in bond yields.

Over the

intermeeting period, the Treasury is likely to obtain a sizable amount of new cash in conjunction with a regular issue of two-year notes and with its mid-August refunding.-

The market is in a good

technical position, however, with security dealers carrying large net short positions in coupon issues.

As bond yields remain little

changed, while thrift deposit flows are sustained at around current levels, mortgage rates are also likely to stay fairly stable.

I/ The terms of this refunding are to be announced in late July. The staff expects the Treasury to sell $6 to $6 billion of new securities in this operation, rolling over $4k billion of publicly-held debt issues maturing on August 15, and raising about $14 to $2 billion of new money.

-15-

(20)

Alternative C involves an increase in the Federal

funds rate to around the mid-point of a 7% to 8k per cent range by

mid-August.

M-l growth would likely be in a 4

to 8 per cent

annual rate range over July-August and M-2 growth in a 6k to 10k per cent range.

Some additional upward pressure on short-term

interest rates in general likely would be associated with such an upward adjustment in the Federal funds rate.

With business loan

demands strong, the prime rate would likely rise further, and banks and other lenders would be expected to continue to firm non-rate terms of lending.

The current level of borrowing from the Federal

Reserve discount window would probably increase back to the $14 billion area, intensifying pressures for another adjustment in the discount rate.

At the same time, the higher short-term rates would

tend to provide support for the dollar in international exchange markets. (21)

Only a small part of an increase in money market

rates is likely to be transmitted to the bond market, since the

current level of long-term market yields already anticipates a further tightening of monetary policy.

However, further upward

rate pressures could be expected to occur in mortgage markets, as rising short-term rates slow thrift deposit flows and increase the cost of funds to thrift institutions. (22)

Under either alternative, both short- and long-term

interest rates are likely to be under considerable upward

-16pressure from late surmer into 1979 if longer-run growth in the monetary aggregates is to be contained within the proposed ranges, given the staff's GNP projection.

High private credit demands and agency borrow-

ing to support housing, as well as rising interest rates, will be accompanied by further erosion in liquidity positions and balance sheet distortions associated with short-term borrowing by banks, thrift institutions, and businesses.

Banks and thrifts can be expected, therefore,

to become less willing lenders, while nonfinancial businesses reassess their expenditure programs.

-17Directive language (23) the directive.

Given below are suggested operational paragraphs for Alternative language consistent with the short-run

specifications discussed in the preceding section is shown for the Committee's initial Federal funds rate objective.

At a later point

in the operational paragraph, alternative language is also provided that enables the Committee to place main emphasis on monetary aggregates or on money market conditions.

The specifications adopted at

the last meeting are shown in strike-through form.

In the short run, the Committee seeks to achieve bank reserve and money market conditions that are broadly consistent with the longer-run ranges for monetary aggregates cited

above, while giving due regard to developing conditions in financial markets more generally.

During the period until

the next regular meeting, System open market operations shall be directed initially at attaining a weekly-average Federal funds rate (A) or (B) AT ABOUT the current level.

(C) slightly (OR SOMEWHAT) above the current level. Subsequently, operations shall be directed at maintinaing the weekly-average Federal funds rate within the range of 7 -ee-8 TO

per cent.

In deciding on the specific objective

for the Federal funds rate the Manager shall be guided mainly

-18by the relationship between the latest estimates of annual rates of growth in the June-Javy JULY-AUGUST period of M-l and M-2 and the following ranges of tolerance: 5-te-l9 per cent for M-l and 6-ee-19

per cent for M-2.

If, giving approximately equal weight to M-l and M-2, their rates of growth appear to be

Monetary aggregates emphasis significantly above or below the mid-points Money market emphasis CLOSE TO OR BEYOND THE UPPER OR LOWER LIMITS

of the indicated ranges, the objective for the funds rate shall be raised or lowered in an orderly fashion within its range. If the rates of growth in the aggregates appear to be above the upper limit or below the lower limit of the indicated

ranges at a time when the objective for the funds rate has already been moved to the corresponding limit of its range, the Manager is promptly to notify the Chairman who will then decide whether the situation calls for supplementary instructions from the Committee.

Chart 3

RECENTLY ESTABLISHED M-3 GROWTH RANGES AND ACTUAL M-3

BILLIONS OF DOLLARS

Q1'78-Q1'79 Q-8-Q1-

-Projection

1530 1500

Oe , %-

e0 ,-

1470

10%

1410

Q4'77-Q4'78 .*1380

S1440 -

1290 -10

1410

1380

12 0 Q3'77-03'78 1260 -*

1440

1230L -

0ei

1380

1290 1260 -

10%%

1230

-1440

Q277-278

1290

1410 12901380

1260 -

1410

1350

1230 -

- 1320

1290 1260 1230 1977

1978

1979

Chart 4

RECENTLY ESTABLISHED BANK CREDIT GROWTH RANGES AND ACTUAL BANK CREDIT

BILLIONS OF DOILLARS o10% --

Projection

Q1 '78-01 '7S

-970 -950 -930 -910

10%

-890 - 930 S77

Q4 '77-Q4 '78

910 -890

10%

- 930

-910 -890

10%

890

1977

277% O''2 '77-Q2 '78

-870

Appendix I Proiected Federal Funds Rates

1978 QIII

QIV 1979 QI

QII

Alt. A

Alt. B

8 to 8k

8s to 8%

7% to 8%

8% to 9%

9k to 10

8% to 9

8% to 9%

9% to 10

8k to 9k

8% to 9%

9k to 10k

to 8

Alt. C

Appendix II

Implied Velocity Growth Rates V-1 (GNP/M-1) 1978

1979

Alt. A

Alt. B

Alt. C

7.8

III

2.7

2.9

3.3

2.9

4.8

5.8

4.2

5.5

6.9

3.9

4.3

5.3

9.0

III

1.3

1.4

1.9

1.6

2.9

3.5

2.9

3.8

4.7

2.2

2.8

3.6

V-2 (GNP/M-2)

1978

1979

Appendix Table III-1 MONEY STOCK--M-1 (Annual rates of growth, compounded quarterly)Base Period

Ending Period

1975

1976

1977

1978

741V

751

7511

75IV

761

7611

76111

76 IV

771

7711

77111

77IV

2.3

4.3

6.4

III

5.0

6.3

4.4

5.1

4.5

2.8

4.5

5.0

4.6

3.7

4.7

4.9

5.4

5.2

4.8

5.9

7.0

III

4.7

5.1

4.9

4.6

5.2

5.4

3.8

5.1

5.5

5.3

5.1

5.7

6.1

5.6

7.4

5.3

5.7

5.6

5.5

6.0

6.3

6.1

7.3

7.1

5.6

6.0

5.9

6.4

6.7

6.6

7.6

7.7

8.3

III

5.8

6.2

6.7

7.0

7.8

7.9

8.3

6.0

6.3

6.8

7.1

7.8

7.9

8.1

8.0

7.7

6.0

6.3

6.7

6.9

7.4

7.5

7.3

6.7

5.7

6.2

6.6

7.0

7.2

7.3

7.8

8.0

7.9

7.8

7.6 7.2 6.8

7.7 7.2 6.8

* * * *k *

1979

7511

781 7811

II Alt. Alt.

6.5 6.2

6.7 6.5

Alt. C

6.0

6.2

I/ Rased on quarterly average data.

6.8 6.5 6.2

7.1

7.3

7.6

6.8

6.9

7.2

6.5

6.6

6.9

7.6 7.1 6.6

7.5 6.9 6.3

7.5 6.8 6.1

7.8 7.0 6.2

7.3 6.3 5.3

Appendix Table III-2 MONEY STOCK--M-2 (Annual rates of growth, compounded quarterly)! / Base Period

Ending Period '1975

1976

1977

1978

751

74IV

75III

75ZV

7611

76IV

771

7711

77111

6.4

8.3

10.2

III

8.8

10.1

8.3

9.0

8.4

6.9

8.9

9.5

9.3

8.9

11.0

9.1

9.7

9.5

9.4

10.7

III

9.1

9.5

9.4

9.3

10.1

9.6

10.1

10.0

10.1

10.9

10.8

11.1

13.2

9.8

10.2

10.3

11.0

10.9

11.1

12.3

11.3

9.7

10.1

10.7

10.6

10.7

11.3

10.3

9.4

III

9.8

10.1

10.2

10.6

11.0

10.3

9.8

9.7

10.0

10.4

10.3

10.2

10.5

9.8

9.3

8.4

9.5

9.7

10.0

9.4

9.6 *

1979

7511

II Alt. Alt. Alt.

9.3 9.1 8.9

9.4 9.3 9.1

9.6 * * 9.4 9.2 9.0

Based on quarterly average data.

77IV

781 7811

10.4 9.6

8.9

10.3

9,9

9.8

9.9

9.3

8.8

8.6

7.8

7.1 7.8

9.6

9.8

9.7

9.6

9.7

9.2

8.7

8.6

8.0

9.4 9.2 9.0

9.5 9.3 9.1

9.4 9.2 9.0

9.4 9.1 8.8

9,4 9.1 8.8

9.0 8.7 8.4

8.8 8.4 8.1

8.7 8.3 7.9

8.5 8.0 7.6

8.5 8.0 7.5

8.5

8.8 8.1 7.5

8.8 8.0 7.3

Appendix Table

III-3

MONEY STOCK-M3 (Annual rates of growth, compounded quarterly)Base period

Ending Period 1975

1976

74IV

751V

761

7611

761

76IV

771

7711

77111

77IV

781

10.6

13.0

III

11.5

13.1

13.2

11.1

12.0

11.5

11.4

12.2

11.9

11.2

12.7

11.5

12.2

12.0

11.6

12.5

12.2

III

11.5

12.0

11.8

11.5

12.1

11.8

11.3

11.9

12.5

12.4

12.2

12.8

13.1

15.0

12.0

12.5

12.4

12.3

12.8

13.0

13.9

12.7

11.9

12.3

12.2

12.0

12.4

12.8

11.7

10.6

11.9

12.3

12.2

12.1

12.4

12.7

11.9

11.5

12.5

11.9

12.2

12.1

12.0

12.2

12.4

11.7

11.4

11.8

11.2

11.6

11.8

11.7

11.6

11.8

11.7

11.6

11.0

10.5

9.6

8.0

11.3

11.6

11.4

11.3

11.4

11.3

11.2

11.1

10.5

10.1

9.1

8.1 8.2

10.7 10.4 10.2

10.5 10.3 10.0

10.4 10.1 9.9

10.3 10.0

9.8 9.5 9.2

9.5 9.2 8.8

* *

* * * * * * *

7811

9.8

9.9

II Alt. Alt. Alt. C

751

8.3

1979

7511

IV III

1978

751

10.8 10.6 10.4

10.9 10.7 10.5

10.8 10.6 10.4

Based on quarterly average data.

10.6 10.4 10.2

9.7

9.4 9.0 8.6

8.9 8.5 8.1

8.6 8.1 7.6

8.7 8.1 7.5

8.8 8.1 7.3

APPENDIX IV

Effects of Automatic Transfers from Savings Accounts on the Rates of Growth of the Monetary Aggregates If the Federal Reserve-FDIC regulations permitting household depositors to make automatic transfers from savings to demand accounts become effective November 1, M-1 growth is likely to be depressed as depositors shift balances from demand to savings accounts.

On the

other hand, M-2 growth may be augmented slightly as savings accounts at commercial banks become somewhat more attractive relative to accounts at thrifts.

Since funds shifting into bank savings

accounts will be primarily from bank demand deposits and thrift sav2/ ings accounts, the effect on M-3 growth should be negligible. The impact of automatic transfers on the quarterly growth pattern of the monetary aggregates depends importantly on the pricing and promotion strategies adopted by banks as they offer this new service to depositors.

If banks choose to offer automatic transfers

with minimal service charges, then the characteristic of such accounts will resemble those of NOW accounts in their introductory stage, so that the NOW account experience in New England can be used to infer 1/ FDIC regulations also will permit insured mutual savings banks (MSBs) with third party payment powers to offer automatic transfer services. Such MSBs may then be able to attract some additional transactions balances from commercial banks because they can offer a 1/4 percentage point greater return on savings accounts. However, the total number of MSBs offering checking accounts or NOW accounts is relatively small, and this effect on the aggregates has been ignored. 2/ It is conceivable that funds could flow into commercial bank savings accounts from other sources--say, Treasury securities or money market mutual funds--and therefore boost M-2 and M-3 growth. However, such flows are likely to be too small to significantly alter the anticipated growth of these aggregates.

IV-2

reasonable limits on the timing and magnitude of the shift of deposits. Based on this experience, as much as $1.4 billion per month could be

converted from demand to savings accounts in the first year the automatic transfer service is offered.

High service charges, on the other hand,

could reduce such conversion sharply, perhaps to a rate of $450 million

1/ In addition, Board staff estimates suggest that shifts

per month.-

from thrift accounts to commercial bank savings accounts may average around $250 million per month in the first year. Based on these rough estimates of the deposit'shifts among accounts, projected levels and rates of growth of the monetary aggregates with and without automatic transfers are shown in Table IV-1.

It is

apparent that the potential impact on the quarterly rates of growth of M-1 could be substantial.

Over the QII '78 to QII '78 period, M-1

growth may be reduced by around 1 to 3 percentage points, while the rate of expansion of M-2 is projected to be little changed.

However,

it should be emphasized that there is considerable uncertainty surrounding the projections of M-E growth during the initial period after introduction of automatic transfers. 1/ In the four New England states where NOWs were offered by both commercial banks and thrift beginning in February 1976, an estimated 17 per cent of household demand deposits shifted to NOWs in the first year, or about 1-1/2 per cent per month. With automatic transfers, competitive pressures in some areas likely will be less intense because only banks will be offering this service in conjunction with checking accounts. In these areas banks may charge more for such services and discourage some depositors from utilizing this service.

Table IV-1 Possible Growth Rates for M-l and M-2 Without and With Automatic Transfers from Savings Accounts (per cent at an annual rate)

Alternative A Without

y With!

Without

With!-

Without

1978 QIV

7.2

5.6 - 6.6

5.3

3.8 - 4.7

4.3

1979 QI qll

7.0 6.5

2.4 - 5,5 1.9 - 4,9

5.7 6.0

1.1 - 4,2 1,3 - 4,5

4.2 5.1

-0.3 - 2,7 0.4 - 3.6

QII '78 - QII '79

7.3

4.5 - 6.3

6.3

3.5 - 5.3

5.3

2.5 - 4.3

M-2

Alternative C

Alternative B

1978 QIV

9.0

7.6

7.8

6.9

1979 QI QII

8.8 8.5

7.6 7.8

7.9 8.0

6.6 6.9

QII '78 - QII '79

9.1

8.2

8.3

7.4

Range for M-l growthassumes 1/2 to 1-1/2 per cent of eligible household demand deposits transfer to savings accounts each month, beginning November 1978.

With 2.8 - 3.8

Chart I

Money Market Conditions and Interest Rates

MONEY MARKET CONDITIONS

Per cent

INTEREST RATES Short-term

Percent

10 10

Weekly Averages

INTEREST RATES Long-term

cent

11 11

10 FHA MORTGAGES FNMA Monday Aucti

FEDERAL FUNDS RATE

Per

Weekly

New Issue

-i

GOV T. BONDS

S10-Yr.

Averages

TREASURY BILLS S3-Month Billions of dollars

-2 .

PRIME COMMERCIAL PAPER 4-6 Month

Net Borrowed

2 I

I I

1 I I

1977

I I

I I I

1978

I I

1977

II I

1978

I1 I1 I I

I I

1977

I I

I97 I

I I 1II

1976

CONFIDENTIAL (FRI Class I-FOMC 7/14/78

Chart

Actual and Projected Reserves /

Billions of dollars 38

I I

TOTAL I

I I

NONBORROWED

l i

Annual rate, per cent MONTHLY GROWTH RATES TOTAL

~1I~ii

El 39 +

NONBORROWED 20 J

J J 1977

J J 1978

Teble 1

CONFIDENTIAL (FR) CLASS 1-FOMC

MONETARY AGGREGATES

JULY

14,

1978

ACTUAL AND CURRENT PROJECTIONS. SEASONALLY ADJUSTED Money Supply Broad Narrow (2)

Period Period)

Total Govt U.S. Deposits

tala

Time & Savings Deposits thr ThansCD's Other

CD's

Non deposit Sources of ources of unds

261.7 264.5 268.4 (273.0)

83.4 87.1 86.7 t 88.5)

MONTHLY LEVELS-$BIL

X ANNUAL

829.7 835.1 840.6 (847.61

346.3 348.6

1978--APR. MAY JUNE JULY

350.4 (353.0)

(

8.3 7.3 11.3 13.91

566.8 573.6 576.9 S583.1)

483.4 486.5 490.2 1494.6)

221.6 222.0 221.7 (221.6)

68.1 68.2 69.7

GROWTH

QUARTERLY 6.8

7.4

14.7

7.9

1.5

13.6

64.0

4.4

11.1

6.6 9.2

13.0 9.9

8.2 7.7

2.6 1.3

13.2 13.1

43.2 22.9

1977--47H QTR.

7.5

8.2

13.1

8.6

5.4

11.6

44.9

1978--IST QTR. 2ND QTR.

5.6 9.5

6.9 8.3

13.4 11.0

7.9 7.4

2.6 1.6

12.7 12.3

50.0 32.8

19.0 8.0 6.2 8.9)

11.5 7.8 7.9 10.0)

6.2 7.7 9.1 10.8)

3.3 2.2 -1.6 -0.51

8.3 12.8 17.7 20.61

20.5 53.2 -5.5 24.9)

7.6)

9.0)

10.0)

-1.1)

19.3)

1977--4TH QTR. 1978--1ST QTR. 2ND QTR. QUARTERLY-AV

MONTHLY 1978--APR. MAY JUNE JULY JUNE-JULY

8.3 14.4 6.9 12.9) 9.9)

9.6)

WEEKLY LEVELS-$BIL 1978-JUNE

7 14 21 P 28 P

351.7 351.1 349.2 349.9

841.u 840.7 839.4 841.4

6.6 7.6 15.3 11.1

576.7 576.9 576.4 577.3

489.3 489.6 490.2 491.4

222.2 222.0 221.6 221.5

267.1 267.6 266.6 269.9

JULY

5 P

354.1

846.5

12.5

579.4

492.5

221.2

271.2

NOTE: 1/ 2/

68.5 69.0 69.9 70.3

DATA SHOWN IN PARENTHESES ARE CURRENT PROJECTIONS. P - PRELIMINARY INCLUDES TREASURY DEPOSITS AT MEMBER BANKS AND FEDERAL RESERVE BANKS. SECURITIES SOLD UNDER AGREEINCLUDES BORROWINGS FROM OTHER THAN COMMRCLIAL BANKS IN THE FORM OF FEDERAL FUNDS PURCHASED, MENTS TO REPURCHASE, AND OTHER LIABILITIES FOR BORROWED MONEY, PLUS GROSS LIABILITIES TD OWN FOREIGN BRANCHES (EURODOLLAR BORROWINGS), LOANS SOLD 10 AFFILIATES, LOAN RPS, AND OTHER MINOR ITEMS.

Table 1-A

TIME AND SAVINGS DEPOSITS AT ALL COMMERCIAL BANKS SEASONALLY ADJUSTED EXCEPT AS NOTED Total and Savings

Total

indvual Nonprofit _ Nonprofit

1978

Time Deposits Large

Business ((NSA)

Government NSA)

Total

Large Small Negotiable CD's Denomination Denomination

BILLIONS)

1977-OCT. NOV. DEC. 1978-JAN. FEB. MAR. APR. MAY JUNE

CHANGES (S

14,

IMemo:

2 OUTSTANDING

JULY

Savings Deposits

Time

Period

CONFIDENTIAL (FR) CLASS l-FOMC

531.9 540.2 545.2 551.0 557.5 562.9 566.8 573.6 576.9

219.6 219.4 219.6 220.7 220.9 221.0 221.6 222.0 221.7

55.5

17.7

204.1 204.2 204.2 205.2 205.4 205.6 206.4 206.7 206.3

10.5 10.8 10.8 10.5 10.4 10.4 10.4 10.5 10.6

5.0 4.5 4.5 5.0 5.2 5.0 4.9 4.7 4.8

312.3 320.7 325.7 330.3 336.6 342.0 345.2 351.6 355.1

147.9 156.8 160.6 164.1 170.1 173.7 175.4 180.5 182.0

164.5 164.0 165.0 166.2 166.5 168.2 169.7 171.1 173.1

66.4 70.9 74.0 76.3

16.9

2.3

-1.6

37.9

23.9

13.9

11.3

0.8 0.4 0.3

-0.2 -1.2 -0.6

5.7 9.2 14.2

-0.7 5.9 12.7

6.6 3.3 1.4

-0.3 0.7 7.1

0.4 -0.3

16.7 14.3

14.2 10.0

2.5 4.3

8.8 6.5

-0.5 0.0 0.5 0.2 -0.2

8.4 5.0 4.6 6.3 5.4 3.2 6.4 3.5

8.9 3.8 3.5 6.0 3.6 1.7 5.1 1.5

-0.5 1.0 1.2 0.3 1.7 1.5 1.4 2.0

4.5 3.1 2.3 3.1 2.6 1.4 3.7 -0.4

79.4

82.0 83.4 87.1 86.7

BILLIONS)

1977 YEAR QUARTERLY AVERAGE: 1977--11 III IV

10.4 13.1 17.1

4.6 3.9 2.9

4.1 4.7 3.3

1978--I

18.0 15.3

1.4 0.9

1.2 1.1

-0.2 0.2 1.1 0.2 0.1 0.6 0.4 -0.3

0.1 0.0 1.0 0.2 0.2 0.8 0.3 -0.4

-0.3

0.1

MONTHLY AVERAGEs

1977-NOV. DEC. 1978-JAN. FEB. MAR. APR. MAY JUNE

8.3 5.0 5.8 6.5 5.4 3.9 6.8 3.3

0.3 0.0 -0.3 -0.1 0.0 0.0 0.1 0.1

-0.1 -0.2 0.1

AND 18), RESPECTIVELY, ON TABLE 1-MONETARY NOTE: COLUMNS (11, 12)t AND (9) ON THIS TABLE CORRESPOND TO COLUMNS (4), (6). (2), AND (6) REFLECT DAILY DATA REPORTED BY MEMBER BANKS, WITH ESTIMATES FOR NONMEMBER BANKS AGGREGATES. FIGURES IN COLUMNS (II) DERIVED FROM DATA REPORTED BY SMALL MEMBER BANKS, BENCHMARKED TO NONMEMBER CALL REPORT FIGURES. SAVINGS DEPOSITS OF BUSINESS AND GOVERNMENTAL UNITS-COLUMNS (4) AND (5)-- AND LARGE DENOMINATION TIME DEPOSITS -- COLUMN (7)-REFLECT BREAKDOWNS REPORTbO EACH WEDNESDAY BY LARGE COMMERCIAL BANKS BLOMN UP TO REPRESENT DEPOSITS AT ALL COMMERCIAL BANKS ON THE BASIS OF CALL REPORT RELATIONSHIPS.

CONFIDENTIAL (F.R.) CLASS l-FOMC

TABLE 2

BANK RESERVES ACTUAL AND CURRENT PROJECTIONS, SEASONALLY ADJUSTED BANK RESERVES Period

MONTHLY

JJLY 14,

1978

REQUIRED RESERVES

Total

Non borrowed

Monetary

Total

Private

Total Time

Gov't. and

Reserves

Base

Required

Demand

Deposits

Interbank

LEVELS-SMILLIONS

36.954 37.268 37,773 138,304)

1978--APR. MAY JUNE JULY PERCENT ANNUAL

36,397 36,056 36,679 (37,325)

131,337 132,655 133,922 1135,204)

36,806 37,049 37.556 (38,126)

21,598 21,883 22,151 (22,242)

13,293 13,428 13,575 9 (13,64 )

(

1,915 1,738 1,830 2,234)

GROWTH

QUARTERLY 1977-41H

QTR.

7.1

7.6

9.6

7.3

5.2

13.5

1978-1ST 2ND

QTR. QTR.

5.8 12.1

8.6 3.7

7.9 10.5

5.7 11.9

-1.1 13.7

12.9 10.1

QUARTERLY-AV 1977-4TH

OTR.

6.1

3.5

9.1

6.3

6.1

9.1

1978--IST 2NU

QTR. QTR.

8.5 6.5

14.5 0.5

9.6 8.1

8.3 7.0

3.6 5.0

12.8 11.5

( (

9.10.2 16.3) 16.9)

1.9 -11.2 20.7) 21.1)

( 1

7.8 12.0 11.5) 11.5)

( 1

11.1 7.9 16.4) 18.2)

( (

10.0 15.8 14.71 4.9)

16.7)

(

21.1)

(

11.5)

(

17.41

(

9.81

MONTHLY 1978-APR. MAY JUNE JULY JUNE-JULY

4.7 12.2 13.11 6.5)

9.9)

(

WEEKLY LEVELS-$MILLIONS

NOTE!

1978-JUNE

7 14 21 28

37,093 38,092 37,968 37,620

36,448 37,299 36,774 35,904

133,018 134,068 134,122 134,139

37,044 37,979 37,671 371376

21,778 22,282 22,285 22,293

13,566 13,600 13,582 13,565

1,699 2,097 1,803 1,517

JULY

5 12

38,895 37,257

37,701 36,353

135,117 133,839

38,095 37449

22,024 22,002

13,529 13,557

2,541 1890

RESERVE SERIES HAVE BEEN ADJUSTED TO REMOVE DISCONTINUITIES ASSOCIATED WITH CHANGES DATA SHOWN IN PARENTHESES ARE CURRENT PROJECTIONS.

IN RESERVE REQUIREMENT RATIO.

TABLE 3 1 NET CHANGES IN SYSTEM HOLDINGS OF SECURITIES($ million, not seasonally adjusted) Treasury Coupons Net Purchases 3/

Treasury Ne/ Bills sChange Change V

Within W1 year

5 - 10

Over 10

Total

-468 863 4,361

789 579 797 3,284 3,025 2,833

539 500 434 1,510 1,048 758

167 129 196 1,070 642 553

1,582 1,415 1,747 6,202 5,187 4,660

2,126 886 186

526 681 628

171 96 166

152 128 108

959 1,021 1,001

1,280

1977--Qtr. II Qtr. III Qtr. IV

Federal Agencies Purchases 4/

_Net

1 - 5

-490 7,232

STRICTLY CONFIDENTIAL (FR) CLASS II - FOMC JULY 14, 1978

I Within t 1 year

5 - 10

- 5

Net Change Outright

Over 10

592 400 1,665 824 469 792

-2,655 5,444

345 288

1,123 1,156

459 468

247 334

2,175 2,246

1978--Jan. Feb. Mar.

-627 -2,695 668

311

100

556

288

813

370

147

1,618

Apr. May June

1,670 -620 4,395

100 53 135

235 290 631

191 101 176

145 74 115

671 519 1,057

-290 --

-101 --- -

June

3 10 17 24 31 7 14 21

28 July

LEVEL--July

5 12 19 26

238 -141 -291 -426

53 S

74 --- 253 361 2,349 199 963 -196

519 --- 1,059 864 3,082 1,613 891 1,433

1,631 9,273 6,303 7,267 6,227 10,035

-1,358 -46 -154 1,272 3,607 -2,892

726

3,666 4,273 -643

4,175 -2,331 34

---555

-1,133 1,224

--- 1978--Qtr. I Qtr. II

1978--May

Holdings olig6/5/ Total

707 ----

------

127

104

127

104

--- --- 24 --

301

7,930

-71

----------2,717 2,233

--- --- 2,341 -------135

301

5,724

--- -

30.8

11.8

S -

12.2

9.0

63.8

127

104

1.8

3.9

1.6

8.2

-1,026 -699 2,950

253 333 3,406 199

-3,973 -3,060 11,835 161

1,263

-10,119 7,080

-196

117.2

I(n h4llionc

Change from end-of-period to end-of-period Outright transactions in market and with foreign accounts, and redemptions (-) in bill auctions. Outright transactions in market and with foreign accounts, and short-term notes acquired in exchange for maturing bills. Excludes redemptions, maturity shifts, rollovers of maturing coupon issues, and direct Treasury borrowing from the System. 4/ Outright transactions in market and with foreign accounts only. Excludes redemptions and maturity shifts. 5/ In addition to net purchases of securities, also reflects changes in System holdings of bankers' acceptances, direct Treasury borrowings from the System, and redemptions (-) of Agency and Treasury coupon issues. 6/ Includes changes in both RP's (+) and matched sale-purchase transactions (-). I/ 2/ 3/

-7,149 4,141 1,874

426

-291

301

2,284 -415 -7,568 4,507 16

238 344

1,057

TotalRPs Total

TABLE 4 SECURITY DEALER POSITIONS AND BANK POSITIONS (millions of dollars)

Member Bank Reserve Positions Borrowing at FRB** Basic Reserve Deficit**

Underwriting Syndicate Positions

U.S. Govt. Security Dealer Positions

Muniipal BondsMunicipalExcess** Reserves BondsLT

Bills

BillsCoupon CoIssues Issues

1977--High Low

7,234 1,729

3,017 -1,445

487 116

1978--High Low

5,625 278

2,043 -739

349 151

399 -57

1977--June

4,752

206

217

July Aug. Sept.

3,899 2,533 4,812

-309 -933

-313

209 199 230

Oct. Nov. Dec.

4,142 3,617 4,257

-360 610 804

1978--Jan. Feb. Mar.

4,127 3,418 2,713

Apr. May June 1978--May

3 10 17 24 31

June

July

Corporate Bonds

STRICTLY CONFIDENTIAL (FR) CLASS II - FOMC JULY 14, 1978

To t a l

ew Yo r k

38 Others

1,861 20

-9,151 -4,234

-13,975 - 8,206

1,688 172

-8,224 -2,922

-14,602

154

262

-5,341

-10,332

275 200 209

323 1,084 626

-6,391 -5,581 -7,333

-11,012 -11,452 -11,120

186 210 367

210 251 193

1,305 863 570

-6,480 -6,971 -7,403

-11,511 -11,825 -11,350

327 1,492 740

293 197 268

268 243 200

484 406 328

-6,047 -4,980 -6,778

-12,299 -12,603 -11,060

3,183 1,023 *2,847

-183

202 264 188

149 219 2171

557 1,212 1,094p

-6,196 -4,038 4 510 - , p

-12,998 -11,653 -12,155p

1,624 1,249 278 531 1,929

-287 189 -739

-641 51

281 191 290 294 213

315 183 6 247 399

1,664 1,688 866 701 1,399

-3,641 -4,884 -4,357 -3,602 -3,480

-12,215 -12,180 -11,933 -11,731 -10,529

752 81

174 177

49 113

-6,400 -5,075 -3,905 -2,922

-13,273 -13,857 -12,784 -10,016

-3,596p -5,072p

- 7,569 -11,900p

*78

7 14 21 28

3,835 3,918 *2,930 *1,554

*-470 *-47

5 12

*730 *1,038

*-661

*-96

45 40p

513 -111

211

163

244p

645 794 1,194 1,716p

800t -192p

1,19 p 904p

156 115p

Seasonal

- 8,533

NOTE: Government security dealer trading positions are on a commitment basis. Trading positions, which exclude Treasury securities financed by repurchase agreements maturing in 16 days or more, are indicators of dealer holdings available for sale over the near-term. Underwriting syndicate positions consist of issues still in syndicate, excluding trading positions. The basic reserve deficit is excess reserves less borrowing at Federal Reserve less net Federal funds purchases. Weekly data are daily averages for statement weeks, except for corporate and municipal issues in syndicate which are Friday figures. * **

8 New York

Total

Strictly confidential Monthly averages for excess reserves and borrowings are weighted averages of statement week figures.

TABLE 5 SELECTED INTEREST RATES (per cent)

STRICTLY CONFIDENTIAL

Short-Term Federal Funds (1)

CD's New Comm. Treasury Bills y B IssuePaper Auction NYC 90-119 Market 3-mo 1-yr 6-mo 90-Day Day (0) (5) (3)

Bank rime pme Ra

U.S. Govt.-Constant Maturity Yields 3-yr

(FR)

CLASS II - FOMC JULY 14, 1978

7-yr

20-yr

(7)

(8)

(9)

(10)

Long-Term Corp.-Aaa Home Mortgages Utility Municipalr Secondary Market Byerond Primary Recently New GNMA FNMA Con. OBuyer e Issue Offered Auc. Sec. (11) (12) (13) (14) (15) (16)

1977--High Low

6.65 4.47

6,62 4.67

6.70 4.50

6.66 4.63

7.75 6.25

7.39 5.83

7.70 6.59

7.99 7.26

8.36 7.90

8.48 7.95

5.93 5.45

9.00 8.65

8.98 8.46

8.39 7.56

1978--High Low

7.78 6.58

7,79 6.55

8.00 6.65

7.84 6,68

9.00 7.75

8.56

8.57

8.73

9.18

9.20

6.31

9.73

10.02

9.20

7.40

7.72

8.01

8.61

8.48

5.58

8.98

9.13

8.43

1977--June

5.39

5.41

5.35

5.42

6.75

6.39

7.05

7.64

8.08

8,12

5.62

8.86

8.75

7.95

July Aug. Sept.

5.42 5.90 6.14

5.57 5.97 6.13

5.28

6.75 6.83

6.51

7.12

7.60

8.15

8.12

5.63

8.95

8.72

7.96

6.01

5.38 5.75 6.09

6.79 6.84

7.24 7.21

7.64 7.57

8.04 8.07

8.05 8.07

5.62 5.51

8.94 8.90

8.76 8.74

8.03 8.02

Oct. Nov. Dec.

6.47 6.51 6.56

6.52 6.52 6.52

6.53 6.56 6.65

6.51 6.54 6.61

7.19 7.22 7.30

7.44 7.46 7.59

7.71 7.76 7.87

8.23 8.28 8.34

8.22 8.25 8.38

5.64 5.49 5.57

8.92 8.92 8.96

8.82 8.86 8.94

8.16 8.19 8.27

1978--Jan. Feb. Mar.

6.70 6.78 6.79

6.80 6.86 6.82

6.82 6.77 6.73

6.75 6.76

Apr. May June

6.89 7.36 7.60

6.96 7.28 7.53

6.84 7.20 7.66

7.27 7.32 7.34 7.43 7.36

7.16 7.21 7.28 7.37 7.40

7.05 7.13

6.82 7.06 7.59 6.91 6.96 7.06

7.28 7.36

7.14

7.35 7.58 7.70 8.00

1978--May

3 10 17 24 31

June

7 14 21 28

7.47 7.49 7.53 7,78

7.35 7.41 7.56 7.71

July

5 12 19 26

7.72 7.72

7.74 7.79

6 13

7.72 2 7.7 p

Daily--July

7.06 7.18

7.73 7.84

5.78

7.52 7.75

7.75 7.93 8.00 8.00 8.00 8.27 8.63

7.61 7.67 7.70

7.86 7.94 7.95

8.14 8.22 8.21

8.68 8.69 8.71

8.60 8.67 8.67

5.71 5.62 5.61

9.02 9.15 9.20

9.17 9.31 9.35

8.56 8.64 8.60

7.85 8.07 8.30

8.06 8.25 8.40

8.32 8.44 8.53

8.90 8.95 9.09

8.85 8.98 9.07

5.80 6.03 6.22

9.36 9.57 9.70

9.44 9.66 9.91

8.71 8.90 9.05

7.19

8,00 8.21 8.25 8.25 8.46

7.99 8.06 8.07 8,15 8.19

8.16 8.25 8.26 8.30 8.34

8.40 8.44 8.44 8.47 8.49

-8.87 8.95 9.02 --

8.90 8.92 8.98 9.10 9.05

5.98 5.99 5.98 6.16 6.19

9.48 9.55 9.58 9.68 9.68

9.52 -9.63 -9.83

8.80 8.86 8.85 8.96 9.04

7.34 7.54 7.66 7.75

8.50 8.50 8.71 8,75

8.16 8.19 8.40 8.51

8.30 8.35 8.46 8.50

8.47 8.47 8.55 8.63

9.04 9.03 9.13 9.16

9.06 8.96 9.10 9.18

6.18 6.16 6.26 6.29

9.70 9.73 9.70 9.73

-9.86 -9.96

9.02 8.95 9.05 9.16

8.00 8.00

7.78

7.84

8.96 9.00

8.51 8 6 .5 p

8.52 8.57p

8.68 8 3 .7 p

9.18 9.19p

9.20 22 . p

6.31 6.32

9.73 n.a.

-10.02

9.14 9.20

--- 7.84 7.87

9.00 9.00

8.50 8.57p

8.52 8,58p

8.67 8 74 . p

7.20

--- 7.13

6.75

NOTE: Weekly data for columns 1, 2, 3, 6, and 7 are statement week averages of daily data. Weekly data in column 4 are average rates set in the auctions of 6-month bills that will be issued on the Thursday following the end of the statement week. Data in column 5 are 1-day Wednesday quotes. For columns 8 through 11, the weekly date is the mid-point of the calendar week over which data are averaged. Columns 12 and 13 are 1-day quotes for Friday and Thursday, respectively, following the end of the statement week. Column 14 is an average of contract interest rates on commitments for conventional first mortgages with 80 per cent loan-to-value ratios made by a sample of insured savings and loan associations on the Friday following the end of the statement week. Column 15 gives FNMA auction data for Monday preceding the end of the statement week. Column 16 is a 1-day quote for Monday preceding the end of the statement week. The FNMA auction yield is the average yield in bi-weekly auction for short-term forward commitments for Government underwritten mortgages. GNMA yields are average net yields to investors on mortgage-backed securities for immediate delivery, assuming prepayment in 12 years on pools of 30-year FHA/VA mortgages carrying the coupon rate 50 basis points below the current FHA/VA ceiling.

JULY 14.

1978

Appendix Table I-A

MONEY AND CREDIT AGGREGATE MEASURES lak

Rrervs

Money Stock Measures

dit

Total

Period Totll

Nonborrowed

Monetary Base

....... 1

ANNUALLY:

-0.3 1.0 5.2

1975 1976 1977

Loans and MI M2 M3 M4 Investmonts ns.. 4 5 * 7 B (PER CENT ANNUAL RATES OF GROWTH)

M7 7

3.2 1.2 2.7

5.9 7.0 8.3

3.9 8.0 11.3

4.4 5.7 7.9

6.5 7.1 10.1

9.6 10.3 11.8

10.0 10.0 11.9

10.8 12.1

10.7 12.6

2/ SEMI-ANNUALLY: 1ST HALF 1977 2ND HALF 1977

3.5 6.8

2.9 2.6

7.3 9.0

11.3 10.7

7.6 7.9

9.3 10.3

15T HALF 1978

7.6

7.5

9.0

11.4

7.6

10.6

9.7

11.7

8.0 7.1

3.9

9.2 9.6

10.3

9.0

7.8

9.5

6.8

9.6 11.6

12.3 11.8

12.5 13.6

8.6

7.9

3.7

10.5

9.5 13.5

11.1

9.7 10.4

9.0 9.4

11.2 10.6

1.7

8.8 9.1

11.1 9.9

8.1 7.5

9.5 10.9

QUARTERLYz 3R0 QTK. 1977 4TH QTR. 1977 1ST QTR. 2ND QTR.

1978 1978

6.8 12.1

4.4

OUARTEKLY-AV: 3RD QTR. 1977 4TH QTR. 1977

7.3

1ST QIR. 1978 2ND QTR. 1978

8.5 6.5

14.5

9.6 8.1

9.6 13.0

5.6 9.5

10.4 10.4

9.8

0.5

9.3

12.1 10.9

1977-JUNE JULY AUG. SEPT. OCT. NUV. DEC.

0.6 15.5 7.8 0.5 9.8 5.3 5.9

-1.4 13.5 -17.4 15.7 -13.4 20.9 16.1

7.1 11.1 8.4 8.0 10.0 8.1 10.4

9.6 12.8 10.5 7.2 12.9 9.2 6.3

7.1 11.8 6.2

8.9 11.9 7.5 9.2 12.7 11.6 10.0

10.2 12.9 11.5 12.2 13.5 11.6 10.1

9.1 13.0 12.1 12.1 14.5 13.3 12.5

1978-JAN. FEB. MAR. APR. MAY JUNE P

15.2 10.9 -8.6 9.4 10.2 16.3

18.3

13.5 7.0 3.0

13.6 7.9 6.9

3.5

7.8

18.5 15.6 6.0

19.0 8.0 6.2

11.8 8.5 8.7 12.3 11.8 6.6

10.5 7.9 6.3 10.4 10.0 7.6

13.4 9.5 10.5 12.3 10.6 6.3

.1l

3.5

11.6 12.3

11.4 13.3

MONTHLY:

1/ 2/ P -

13.7

-6.2 1.9 -11.2 20.7

12.0 11.5

8.7

11.2 0.7 8.2 10.3

-0.7

BASED ON DATA ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS. BASED ON QUARTERLY AVERAGE DATA. PRELIMINARY

Appendix Table 1.-

JULY 14, 1978

MONEY AND CREDIT AGGREGATE MEASURES SEASONALLY ADJUSTED. BILLIONS OF DOLLARS

Period

Total

Money Stock Measures

Bank Credit

Bank Reserves I Non-

Monetary

borrowed

Base

Total Loans

and Invest-

ments

M3 i

ANNUALLY: 1975 1976 1977

33.969 34,441 36,143

33,839 34.388 35,573

110,345 118,062 127,971

726.2 788.9 875.5

294.5 312.6 337.2

664.1 739.6 808.4

1091.8 1235.6 1375.0

745.4 802.3 882.4

1173.2 1298.3 1449.0

1307.3 1436.7 1602.0

1350.3 1484.0 1664.9

1977--JUNE

34,821

34,559

122,163

833.7

324.3

774.2

1302.0

837.5

1365.3

1506.6

1561.4

JULY AUG. SEPT.

35,271 35,501 35,517

34,948 34,440 34,892

123,294 124,155 124,984

842.6 850.0 855.1

327.5 329.2 331.6

782.9 787.9 793.8

1317.2 1330.0 1343.5

845.8 851.1 857.6

1380.0 1393.2 1407.4

1523.0 1539.0 1555.1

1578.3 1594.2 1610.3

OCT. NOV. DEC.

35,808 35,965 36,143

34,503 35,103 35,573

126,025 126,872 127,971

864.3 870.9 875.5

334.7 334.9 337.2

800.3 804.2 808.4

1356.8 1366.0 1375.0

866.7 875.1 882.4

1423.2 1436.9 1449.0

1573.0 1588.3 1602.0

1629.8 1647.8 1664.9

1978--JAN. FEB. MAR.

36,600 36,933 36,667

36,116 36,528 36,339

129,409 130,159 130,484

885.4 891.2 896.7

340.1 339.9 340.9

814.8 818.0 821.8

1385.4 1392.0 1399.5

891.1 897.4 903.9

1461.7 1471.3 1481.5

1617.8 1629.0 1642.0

1683.5 1696.8 1711.7

APR. MAY JUNE

36,954 37,268 37,773

36,397 36,056 36,679

131,337 132,655 133,922

910.5 922.3 926.9

346.3 348.6 350.4

829.7 835.1 840.6

1410.9 1419.7 1429.6

913.2 922.2 927.3

1494.3 1506.8 1516.3

1658.7 1674.0 1685.3

1729.3 1744.9 1757.0

10 17 24 31

37,218 37,484 37,022 37,340

35,530 36,618 36,321 35,941

132*170 132,857 132,547 133,188

347.3 347.5 347.4 351.5

832.4 833.9 834.7 840.3

919.1 920.8 922.3 928.1

JUNE

7 14 21P 2BP

37,093 38,092 37,968 37,620

36,448 37,299 36,774 35,904

133,018 134,068 134,122 134.139

351.7 351.1 349.2 349.9

841.0 840.7 839.4 841.4

928.4 928.0 925.6 927.2

JULY

36,895

37,701

135,117

354.1

846.5

933.5

MONTHLY:

WEEKLYt

1978-MAY

NOTES:

WEEKLY DATA ARE DAILY AVERAGES FOR STATEMENT WEEKS. MONTHLY DATA ARE DAILY AVERAGES. WEEKLY DATA ARE NOT AVAILABLE M3, M5, M6, MT, TOTAL LOANS AND INVESTMENTS AND THRIFT INSTITUTION DEPOSITS. 1/ BASED ON DATA ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS. DATA SHOWN IN MILLIONS OF DOLLARS. P - PRELIMINARY

FOR

JULY 14,

APPENDIX TABLE 2-A

197

COMPONENTS OF MONEY STOCK AND RELATED MEASURES mmmmmmmmm I

Period

(Per cent annual rates of growth)

2/ ANNUALLY

12.8

15.3 15.5 14.2

19.5 18.8 19.4

33.8 5.5 11.2

-0.7 13.9 25.4

8.9 13.3

0.6 24.9

12.9 14.5

16,6 20.6

2.1 20.2

25.6 22.3

8.0 11.5

11.7 15.0 11.3

17.5 25.0 11.1

7.8 7.4 11.4

7.2 7.2

10.4 11.9

11.9 10.0

15.3 6.4

1975 1976 1977

-6.4 -23.4

2 SEMI-ANNUALLY: 8.7 9.8

1ST HALF 1977 2ND HALF 1977 1978

10.0

6.9

12.4

7.7

2.1

12.7

43.5

7.5

17.4

34.5

38.2

1977 1977

10.0

8.7 5.4

9.9 14.7

10.8 7.9

10.9 1.5

10.8 13.6

3.2 64.0

16.2 11.6

21.7 18.8

31.0 22.7

2.9 55.1

151 QTR. 1978 ZND QTR. 1978 QUARTERLY-AVI

10.1 9.5

2.6 11.7

13.0 9.9

2.6 1.3

13.2 13.1

43.2 22.9

6.9 7.3

17.9 14.7

33.0

35.3

43.3 12.1

3RD OTR. 4TH QTR.

1977 1977

9.1 10.3

7.7 6.6

10.3 13.1

11.2 8.6

7.3 5.4

14.6 11.6

44.9

14.6 13.9

20.1 20.0

11.7 27,8

11.2 32.6

1ST QTR. 1978 2NU QTR. 1978

10.5 9.3

3.9 9.8

13.4 11.0

7.9 7.4

2.6 1.6

12.7 12.3

50.0 32.6

8.1

18.2 15.8

28.7 37.7

53.6 20.1

5.1 12.4 b.6

7.5 11.0 6.9

-9.5 7.6 11.4 48.9 81.3 52.5

19.8

11.3 -1.9 6.8

20.1 22.8 1.5 7.9 13.3 18.5 8.6

17.2

11.1 8.3 12.3

0.0 6.2 16.3 10.0 4.4 -1.1 1.1

14.3

7.9

10.5 14.9 8.4 8.9 9.1 9.5 4.9

12,0

11.2

10.1 11.9 8.3 9.2 13.7 18.7 11.1

17.1 16.6 14.0 11.0 9.5

19.5 24.7 21.5 15.8 18.2

-21.1 19.7 44.0 21.2 29.9 17.5

22.3 10.9 -2.2 0.0 34.8 54.9 68.7

12.8 14.2 11.6 U.3 14.4 6.9

8.9 8.6 7.0 6.2 7.7 9.1

6.0 1.1 0.5 3.3 2.2 -1.6

11.4 15.1 12.6 8.3 12.8 17.7

37.3 48.8 39.3 20.5 53.2 -5.5

7.8 6.2 6.6 6.6 6.5 8.5

17.9 15.2 20.0

42.4 18.2 35.9 50.8 33.4 19.0

55.4 38.4 31.9 19.0 5.1 11.6

1ST HALF QUARTERLY: 3RD QTR. 4TH QTR.

8.2 7.7

4.5

MONTHLYI 1977-JUNE JULY AUG. SEPT. OC1. NOV. DEC. 1978--JAN. FEB. MAR. APR. MAY JUNE

10.1 -4.3 1.9 23.5 6.1 5.1

10.8 9.4 8.0 7.9 11.8 10.4

1/ GROWTH RATES ARE BASED ON ESTIMATED MONTHLY PREVIOUS MONTH REPORTED DATA. 2/ BASED ON QUARTERLY AVERAGE DATA. P - PRELIMINARY.

a AVERAGE

1.6

19.4

14.7

12.1 16.8

_.. a

LEVELS DERIVED BY AVERAGING END OF

I CURRENT MONTH AND END

APPENDIX TABLE 2-B

JULY 14, 1978

COMPONENTS OF MONEY STOCK AND RELATED MEASURES Time and Savings Deposits Currency Demand Deposits

Period

Other Thn CD's

Total o t

I 1

Mutual Bank & S&L

Savings

otal

Savings

Other

Total

Savings

Other

I 7

Credit

Union Saving Shares Bonds

ShortTerm U.S Govt

Other Private

Gov'Sec

Sec i

Asets 1

Short term

Total

Non-

Deposit Gov't Funds Demand Depos

j/ 13

ANNUALLY: 450.9 489.7 545.2

369.6

427.0 471.2

160.5 201.9 219.6

209.1 225.1 251.6

81.3 62.7 74.0

394.8 456.9 519.8

33.0

68.6

220.8 231.9 248.6

1977--JUNE

84.2

240.1

513.2

449.9

213.0

236.9

63.3

JULY AUG. SEPT.

85.1 85.5 86.3

242.3 243.7 245.3

518.3 521.9 525.9

455.5 458.7

214.1 217.0 218.8

241.4 241.7 243.3

OCT. NOV. DEC.

87.1 87.7

247.6 247.2 248.6

465.6 469.3 471.2

219.6 219.4 219.6

66.4 70.9 74.0

511.0 515.7 519.8

45.5

88.6

531.9 540.2 545.2

246.0 249.8 251.6

220.7 220.9 221.0

254.0 257.2 259.9

76.3 79.4 82.0

523.2 525.9 528.8

47.5 48.1

83.4 87.1 86.7

531.7 534.6 538.4

49.5

1975 1976 1977

73.7 80.7

46.8

67.2 71.9 76.6

66.9 66.6 76.4

43.0 47.3 62.8

34.4 51.0 62.0

11.2 11.4

485.4

42.4

74.2

67.1

54.8

53.0

10.1

62.8 63.2

491.2 498.2

43.1 43..8

11.8

55.2 55.2

55.7

10.2

44.7

68.2 70.7 72.3

53.5

505.1

74.7 75.1 75.4

55.3

63.8

57.5

10.7

75.8 76.2 76.6

74.1 75.3 76.4

56.8 59.4 62.8

58.1 60.1 62.0

10.3 6.7 11.4

77.0 77.4 77.8

79.1 80.3 82.7

65.7

65.3

67.8 69.6

66.6

78.2 78.6 79.0

86.2 88.6 90.0

70.7 71.0 71.7

68.1 68.2

39.1

6.3

MONTHLY:

462.1

90.7

250.7 249.8 250.2

91.3 92.2 93.0

255.1 256.4 257.5

566.8 573.6 576.9

483.4 486.5 490.2

10 17 24 31

92.0 92.2 92.6

255.3 255.2 255.0 258.9

571.8 573.3 574.9 576.6

485.1 486.5 487.3 488.8

221.8 221.8 222.2 222.3

263.3 264.7 265.2 266.5

86.9 87.6 87.8

7 14 21P 28P

92.9 92.8 92.9 93.2

258.9 258.3 256.3 256.7

576.7 576.9 576.4 577.3

489.3 489.6 490.2 491.4

222.2 222.0 221.6 221.5

267.1 267.6 268.6 269.9

87.4 87.4 86.2 85.8

93.1

260.9

579.4

492.5

221.2

271.2

86.9

1978-JAN. FEB. MAR.

89.4 90.1

APR. MAY JUNE P

551.0 557.5 562.9

474.7 478.1 480.9

221.6 222.0 221.7

261.7 264.5 268.4

46.1 46.0

48.9

50.0

50.7

67.0

9.7 7.5 7.9

69.7

8.3 7.3 11.3

68.8 68.1 68.3 68.1

8.9 7.4 6.5 5.7

68.5 69.0

8.6 7.6

69.9

15.3

70.3

11.1

WEEKLYt 1976-MAY

JUNE

JULY 1/ 2/ 3/

92.3

86.7

ESTIMATED MONTHLY AVERAGE LEVELS DERIVED BY AVERAGING END OF CURRENT MONTH AND END OF PREVIOUS MONTH REPORTED DATA. INCLUDES PRIVATE DOMESTIC NONFINANCIAL INVESTORS' HOLDINGS OF COMMERCIAL PAPER, BANKERS ACCEPTANCES, SECURITY RP'S AND MONEY MARKET MUTUAL FUND SHARES. BORROWINGS BY BANKS FROM OTHER THAN COMMERCIAL BANKS IN THE FORM OF FEDERAL FUNDS PURCHASED, SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE, AND OTHER LIABILITIES FOR BORROWED MONEY, PLUS GROSS LIABILITIES TO OWN FOREIGN BRANCHES (EURODOLLAR BORROWINGS,) LOANS SOLD TO AFFILIATES, LOAN RPS, AND OTHER MINOR ITEMS. INCLUDES TREASURY DEPOSITS AT MEMBER BANKS AND FEDERAL RESERVE BANKS.

12.5

STRICTLY CONFIDENTIAL CLASS I - FOMC

TO:

Federal Open Market Committee

FROM:

Arthur L. Broida

DATE:

July 17, 1978

SUBJECT: Corrected version of bluebook Appendix II

Given below is a corrected version of Appendix II for the blue book dated July 14, 1978.

Appendix II

Implied Velocity Growth Rates V-1 (GNP/M-1) 1978

1979

Alt. A

Alt. B

Alt. C

7.8

III

3.0

2.9

3.1

3.8

4.8

5.2

5.3

5.5

6.0

5.1

4.3

4.2

V-2 (GNP/M-2) 1978

1979

9.0

III

1.8

2.4

2.9

3.8

3.5

2.4

Cite this document

APA

Federal Reserve (1978, July 17). Bluebook. Bluebooks, Federal Reserve. https://whenthefedspeaks.com/doc/bluebook_19780718

BibTeX

@misc{wtfs_bluebook_19780718,
  author = {Federal Reserve},
  title = {Bluebook},
  year = {1978},
  month = {Jul},
  howpublished = {Bluebooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/bluebook_19780718},
  note = {Retrieved via When the Fed Speaks corpus}
}