bluebooks · March 28, 1988

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

MONETARY POLICY ALTERNATIVES

Prepared for the Federal Open Market Committee By the staff

Board of Governors of the Federal Reserve System

STRICTLY CONFIDENTIAL (FR)

March 25, 1988

CLASS I - FOMC

MONETARY POLICY ALTERNATIVES

Recent developments (1)

Since the February FOMC meeting, reserve paths have been

constructed assuming adjustment plus seasonal borrowing of $200 million, in accordance with the Committee's decision to maintain the slightly reduced degree of reserve pressure sought in the days preceding the meeting.

This

level of borrowing was expected to be associated with federal funds trading around 6-1/2 percent, once the market had perceived the degree of Federal Reserve easing.

Over the three complete maintenance periods since the FOMC

meeting, adjustment plus seasonal borrowing has averaged $238 million, and the federal funds rate has averaged 6.59 percent.

The difficulties of some

Texas banks and the associated surge of extended credit have had little apparent impact on reserve markets.

The Desk readily offset the increased

supply of reserves, and bank reserve management does not seem to have been affected.

Excess reserves have fallen on balance over the intermeeting

period in typical seasonal fashion, and willingness to tap discount credit does not appear to have diminished further. (2)

Most other interest rates have risen somewhat over the

intermeeting period, especially in bond markets where yields increased around 3/8 of a percentage point.

Data and reports on the economy

suggested more strength than had been anticipated, prompting a shift in market sentiment about prospects for future inflation and Federal Reserve policy.

Despite the Texas bank situation, spreads between private and

KEY MONETARY AGGREGATES (Seasonally adjusted annual rates of growth) QIV '87 to Mar.pe

Mar.pe

Nov. to Mar.pe

1.1

6-1/2

4-1/2

9.7

8.7

9-1/4

7-1/2

8.2

10.2

7-1/2

6-3/4

Domestic nonfinancial debt

8.0

10.6

n.a.

9-1/23

Bank credit

5.9

8.4

n.a.

9.7

13.4

2-1/2

3-1/4

3-3/4

Total reserves

18.4

2.6

3-1/2

3-1/4

Monetary base

16.6

4.7

7-1/2

7-3/4

710

191

242

1295

1135

948

Jan.

Feb.

12.8

Money and credit aggregates

Reserve measures

Nonborrowed reserves

Memo:

(Millions of dollars) Adjustment plus seasonal borrowing Excess reserves

pe - preliminary estimate. 1. The March figures assume adjustment plus seasonal borrowing of $200 million and excess reserves of $850 million over the reserve period ending April 9. 2. Includes "other extended credit" from the Federal Reserve. 3. Fourth quarter to February. NOTES: Monthly reserve measures, including excess reserves and borrowing, are calculated by prorating averages for two-week reserve maintenance periods that overlap months. Reserve data incorporate adjustments for discontinuities associated with changes in reserve requirements.

Treasury rates have continued to fluctuate in a narrow range, well below the relatively high levels reached after the stock market collapse, though prices of bank stocks fell following reports of those problems.

Broad

stock price indexes posted sizable gains through most of the period, reaching their highest levels since last October.

They have retreated in

the last week, perhaps prompted by renewed concerns about the prospects for interest rates and the dollar; however, substantial stock price declines in the last two days were accompanied by decreases in Treasury bill and bond rates, in a pattern similar to last October. (3)

The dollar's weighted average exchange value against 10

major currencies declined by about 1-1/2 percent since the last Committee meeting.

Although January trade figures were generally better than

expected, incoming economic data were interpreted as suggesting stronger domestic demand, calling into question the prospects for reducing external imbalances.

Sterling was particularly strong, pushing through Britain's

de facto target ceiling rate of 3.00 marks per pound, later prompting a 1/2 percentage point reduction in the Bank of England's official lending rates.

Elsewhere, interest rate movements were fairly narrow.

dollar weakened at the end of the intermeeting period

As the

the Desk

bought dollars against yen, with Desk purchases amounting to $148 million.

(4)

The broader monetary aggregates expanded rapidly again in

February and March.

Over the two months combined, M2 and M3 increased at 9

and 8-3/4 percent rates, respectively, leaving M2 a little above and M3 at

the upper bound of the Committee's 6 to 7 percent November-to-March growth ranges.

On a quarterly average basis, both broad aggregates increased at a

6-3/4 percent rate in the first quarter, implying a small decline in velocity (based on the Greenbook GNP projection)--the first since the last quarter of 1986.

The strength in M2 and drop in its velocity reflected the

decrease in the opportunity costs of holding deposits in this aggregate that has resulted from the fall in market interest rates on balance since October.

Within M2, liquid retail components as a whole increased in the

first quarter following several months of declines, as rates on these instruments fell more slowly than those on time deposits or market instruments; even so, flows into small time deposits remained quite rapid, owing to their still large rate advantage.

Flows into money funds, both at the

M2 and M3 levels, continued strong in February, but in March shares of institution-only money funds leveled out as their rates fell into closer alignment with market rates. February.

Issuance of large time deposits was brisk in

Bank credit growth picked up last month, while reliance on

funding from foreign offices was reduced; the supply of funds in Eurodollar markets may have contracted as foreign official institutions shifted dollar investments to U.S. government securities.

In March, however,

issuance of large time deposits decelerated sharply, perhaps associated with the weakness in credit at large banks that is suggested by data for the first part of the month. (5)

M1 slowed sharply in February, but growth is estimated to

have rebounded in March.

On balance over the two months, NOW accounts have

increased at a relatively robust pace, but demand deposits have declined

further.

Owing to the weakness in demand deposits, the velocity of M1

continued to increase in the first quarter, though at a slower pace than over the second half of 1987.

With transactions accounts relatively

sluggish on balance and excess reserves declining, total reserves advanced at only a 3 percent rate over February and March.

Relatively flat reserve

growth along with slowing expansion in currency led to a deceleration in the monetary base over February and March, holding the rise from November to March to 7-1/2 percent. (6)

Expansion of nonfinancial debt picked up to a double-digit

pace in February and early indications are that growth has continued strong in March.

Overall business borrowing has been sizable, in part reflecting

heightened merger and acquisition activity, and has been focused increasingly on longer-term markets in response to the decline in bond rates since last fall.

Tax-exempt bond issuance also increased in the last two months,

spurred by a resumption of refinancings.

Bank data suggest that consumer

installment borrowing remained substantial in February and early March. Treasury borrowing has strengthened in February and March, but sales to foreign official institutions and state and local governments have enabled it to hold down offerings to the general public.

Policy alternatives (7)

Three short-run policy options are presented below.

Alter-

native B would retain the $200 million assumption for adjustment plus seasonal borrowing now used in constructing paths for nonborrowed reserves, with federal funds rates remaining generally in the 6-1/2 percent area, once any quarter-end pressures were past.

Under alternative C, the

borrowing objective would be raised to $400 million and the funds rate would move up to the vicinity of 7 percent.

Under alternative A, federal

funds would be expected to trade around the current 6 percent discount rate; this could be accomplished by reducing the discount rate by 1/2 point while keeping the $200 million borrowing objective, or by decreasing this objective.

The staff estimates that borrowing on the order of $100 million

might represent the level associated with this alternative.

However, this

estimate is subject to considerable uncertainty as we have very limited experience with operating at borrowing around frictional levels.

More-

over, at very low levels of borrowing, the funds rate might become quite sensitive to relatively minor changes in borrowing behavior.

Such changes

could include the normal pattern of seasonal credit as well as other influences. (8)

The relationship between the funds rate-discount rate

spread and borrowing specified in alternatives B and C (and A with a discount rate cut) corresponds to average experience over the period since December.

Although depository institutions may be somewhat less reluctant

1. The only period in recent years in which the federal funds rate fluctuated around or below the discount rate for some time was from late 1982 to the spring of 1983. The borrowing objective averaged $225 million through this period.

to be seen at the window than they were immediately after the stock market crash, some concern seems to remain, and achieving a given spread appears to require targeting about $100 million less borrowing than suggested by the relationship from early 1986 through mid-October 1987.

The specifi-

cations of the policy alternatives also assume that the Texas bank situation and indications of other difficulties of depository institutions will not alter overall borrowing behavior in the period ahead.

And they

abstract from any effects at low total borrowing levels of rising seasonal borrowing expected over coming months.

The Committee may wish the Manager

to remain alert to any need for revisions to intended borrowing should the relationship to money market conditions be affected by these potential influences on discount window use. The anticipated growth in the monetary aggregates from

(9)

March to June implied by these policy alternatives is shown in the table below, together with the associated federal funds rate ranges.

(More

detailed data are shown on the table and charts on the next few pages.) Alt. A

Alt. B

Alt. C

8 7 6

7 6-1/2 4-1/2

6 6 3

4 to 8

5 to 9

Growth from March to June M2 M3 M1 Associated federal funds rate range

Alternative Levels and Growth Rates for Key Monetary Aggregates M2 M3 M1 ------------------------------------ ------------------------ -----------------------Alt. A Alt. B Alt. C Alt. A Alt. B Alt. C Alt. A Alt. B Alt. C Levels in billions 1988 January February March

2925.5 2946.8 2969.6

3687.3 3718.7 3741.6

758.9 759.6 763.7

April May June

2989.7 3010.1 3029.7

2988.7 3007.1 3022.3

2987.7 3004.1 3014.9

3761.8 3783.8 3806.5

3761.2 3781.9 3801.8

3760.6 3780.0 3797.1

767.9 770.8 775.4

767.5 769.6 772.5

767.1 768.4 769.6

9.7 8.7 9.3

8.2 10.2 7.4

12.8 1.1 6.5

8.1 8.2 7.8

7.7 7.4 6.1

7.3 6.6 4.3

6.5 7.0 7.2

6.3 6.6 6.3

6.1 6.2 5.4

6.6 4.5 7.2

6.0 3.3 4.5

5.3 2.0 1.9

Quarterly Ave. Growth Rates 2.7 1987 Q2 Q3 2.8 Q4 4.0 6.8 1988 Q1 8.5 Q2

2.7 2.8 4.0 6.8 8.0

2.7 2.8 4.0 6.8 7.5

4.6 4.5 5.5 6.7 7.3

4.6 4.5 5.5 6.7 7.1

4.6 4.5 5.5 6.7 6.8

6.6 0.8 4.0 3.9 5.6

6.6 0.8 4.0 3.9 4.8

6.6 0.8 4.0 3.9 4.0

Nov. 87 to Mar. 88 Feb. 88 to June 88 Mar. 88 to June 88

7.4 8.4 8.1

7.4 7.7 7.1

7.4 6.9 6.1

6.8 7.1 6.9

6.8 6.7 6.4

6.8 6.3 5.9

4.4 6.2 6.1

4.4 5.1 4.6

4.4 4.0 3.1

4.0 6.8 7.7 7.4 7.8

4.0 6.8 7.4 7.4 7.3

4.0 6.8 7.2 7.4 6.9

5.4 6.7 7.1 7.1 7.1

5.4 6.7 7.0 7.1 6.9

5.4 6.7 6.8 7.1 6.7

6.3 3.9 4.8 4.1 5.0

6.3 3.9 4.4 4.1 4.4

6.3 3.9 4.0 4.1 3.7

Monthly Growth Rates 1988 January February March April May June

Q4 Q4 Q4 Q4 Q4

86 87 87 87 87

to to to to to

Q4 87 Q1 88 Q2 88 Mar. 88 June 88

Chart 1

ACTUAL AND TARGETED M2 Billions of dollars

3200 Actual Level Estimated Level --* Short Run Alternatives -

3150

-1

3100

3050

-- 3000

2950

2900

I O

I N

1987

I D

I J

I F

I M

I A

I M

I J

1988

I J

I A

I S

2850

2800 D

Chart 2

ACTUAL AND TARGETED M3 Billions of dollars

4050 -Actual Level - -Estimated Level * Short Run Alteratives

4000

3950

3900

r'C

3850

/*o .ooso

3800

/ "

3750

3700

3650

3600

N 1987

J 1988

3550

Chart 3

M1 Billions of dollars

900 Actual Level -- Estimated Level -----Growth From Fourth Quarter Short Run Altematives

880

f /0 0f

-1 860

15%

I I V I

I I

840

I I I

10%

I V

-4 820

-- 800

I I

5% I

Ir I II

-r

I I

-- 780 *

----

/ I~ I

I /

,*V

.--

- -'

-- 760

0% 740

I O

I N

1987

I D

I J

I F

I M

I A

I M

I J

1988

I J

I A

I S

720 D

Chart 4

DEBT Billions of dollars 9400 -

Actual Level -1

9300

9200

11% -

9100

9000

8900 7%

8800

8700

-8600

-8500

8400

8300

8200

I O

I N

1987

I D

I J

I F

I M

I A

I M

I J

1988

I J

I A

I O

I N

8100

8000 D

(10)

With recent conditions in the reserves market maintained

under alternative B, interest rates would tend to remain around current levels, at least for a time.

But given the staff economic forecast, which

implies a flow of data that would not allay market concerns about potentially inflationary pressures on resources, the market might well remain edgy.

In addition, if signs of further expansion in domestic demand

were combined with trade data suggesting sluggish adjustment of U.S. external imbalances, the dollar could come under further downward pressure which, in this context, would be likely to contribute to some increases in U.S. interest rates. (11)

Given the financial conditions associated with alternative

B, M2 and M3 are expected to grow at 7 and 6-1/2 percent annual rates, respectively, from March to June, leaving them well into the upper halves of their 4 to 8 percent annual ranges.

Although the broader aggregates

would be expected to slow somewhat from the pace of the last three months, growth would still exceed the projected expansion of nominal income.

important impetus to growth of M2 will continue to be the reduced opportunity cost of holding retail interest-bearing accounts.

To be sure,

opportunity costs are likely to widen a little once again in coming months as returns on retail balances edge off further in lagged response to the

2. On a quarterly average basis the growth rates of M2 and M3 would increase somewhat in the second quarter; this pattern primarily reflects the damping effects on the first quarter growth of the weakness in money growth late in 1987. The velocities of M2 and M3 would be expected to decline in the second quarter by 2-1/2 and 1-1/2 percentage points, respectively, somewhat more than seems in train in the first quarter.

-10-

previous decline in market rates.

Nevertheless, the expected second-quar-

ter spread between market rates and the average return on retail balances in M2 still would represent a very substantial reduction from its peak in the third quarter of last year.

Inflows to these accounts might be sup-

ported by other influences as well:

the personal saving rate is projected

to remain high relative to last year, and additions to IRAs should be considerably smaller than in recent years in response to tightened taxreform restrictions. (12)

M3 growth in the spring and early summer will be damped by

weaker inflows to money market mutual funds as their rate advantage over short-term market instruments narrows further.

Depositories are expected

to maintain the recent pace of issuance of managed liabilities to fund credit expansion in the face of a moderation in core deposit growth.

Bank

credit growth is projected to be supported by some strengthening in business loans, reflecting a projected widening financing gap and continued rapid share retirements.

However, consumer lending at banks is likely to

weaken a little, as the rise in consumer spending moderates. borrowing should remain at around the first-quarter pace.

Mortgage

For thrifts,

asset growth at around the moderate pace of recent months would continue to be bolstered by demand for ARMS, which are retained in their own portfolios to a greater extent than are fixed-rate mortgages.

Overall, however, the

debt of domestic nonfinancial sectors is projected to slow to around an 8 percent rate over the second quarter, leaving this aggregate just above the midpoint of its 7 to 11 percent annual range.

The deceleration results

entirely from a marked slowdown in federal borrowing, as the Treasury trims

-11-

its auctions to moderate the surge in its cash balance associated with higher-than-usual spring tax payments. (13)

M1 growth in April might be boosted by a buildup in trans-

action balances associated with tax payments, which are projected to exceed the typical volume reflected in the transactions account seasonals, though not matching last year's exceptional surge. abated by early May.

Any such effect will have

On a March-to-June basis, M1 is expected to increase

at a rate of about 4-1/2 percent under alternative B.

Demand deposits are

anticipated to strengthen only a little on balance over the next three months, after the somewhat inexplicable weakness through the first quarter. NOW account growth, while moderating from recent rapid rates, would remain above the pace of the second half of 1987.

M1 velocity would continue to

increase, but at a slower rate than in the first quarter. (14)

The more restrictive monetary posture of alternative C, at

least at this time, would come as some surprise to financial markets.

With

the funds rate averaging around 7 percent, the 3-month Treasury bill rate could move into an area around 6-1/4 percent.

Rate spreads between bank

and thrift paper and Treasury bills could widen, if concerns about their asset quality and earnings prospects intensify, which might be more likely, given the already troubled status of many depository institutions.

A good

portion of the increases in short-term rates might show through in longerterm rates.

But, an upward movement in U.S. interest rates, especially if

viewed as reflecting Federal Reserve resolve to avoid inflation and faster external adjustment by containing domestic demand, would help to support

3. A special adjustment was made to prevent last year's tax payments from distorting demand deposit seasonal factors.

-12-

the dollar in the near term, and over time the net increase in bond yields could be limited. (15)

The broader monetary aggregates under alternative C would

post a more marked slowing over the course of the quarter than under the other alternatives, as the effects of the rebound in market interest rates increasingly took hold.

Both aggregates would end the quarter a bit

closer to, though still above, the midpoints of their longer-run ranges. The attractiveness of transactions and other liquid accounts would be lessened further, as their rates lag in typical fashion behind market yields.

M1 probably would be growing very sluggishly by June, leaving its

growth from the fourth quarter to June a bit below its current 4 percent rate through March. (16)

Under alternative A, the easing of reserve market condi-

tions would ripple through other financial markets.

The 3-month Treasury

bill would drop to below 5-1/2 percent, but declines in longer-term rates might be small.

Absent a weaker economic picture than contemplated under

the staff forecast, market participants may not expect such a policy easing to be sustained for long.

The dollar could come under substantial downward

pressures, particularly if concerns about inflation and external adjustment increased. (17)

With the lower short-term market interest rates of alter-

native A, M2 growth would not be expected to moderate much over the next three months.

Expansion of this aggregate, at an 8 percent rate from March

to June, would leave M2 only a little below the upper end of its annual target cone.

Opportunity costs of holding retail deposits within M2 would

-13-

continue the declines begun last fall.

Inflows into small time deposits

might abate as their rates completed their downward adjustment, but growth of NOWs, savings deposits and MMDAs could pick up noticeably.

With some

boost to required compensating demand balances of businesses also coming from lower market rates, M1 might well grow at a 6 percent annual rate from March to June.

M3 would be strengthened somewhat less than the other

aggregates over the three months, as lower market interest rates shift some credit demands to nonbank sources in light of lagging bank lending rates, but this aggregate would still record a 7 percent increase from March to June.

-14-

Directive language (18)

Draft language for the operational paragraph, including

the usual options and updating, is shown below.

The second sentence

calling for continued flexibility in operations is shown in brackets.

The

decision on whether to retain this or a similar sentence might depend on an assessment of the state of financial markets as well as the Committee's discussion of operating procedures.

OPERATIONAL PARAGRAPH

In the implementation of policy for the immediate future, the Committee seeks to DECREASE SOMEWHAT (Alt. A)/ maintain (Alt. B)/INCREASE SOMEWHAT (Alt. C) the{DEL: slightly reduced]degree of pressure on reserve positions {DEL: sought-in recent-days]. [The Committee agrees that the current more normal approach to open market operations remains appropriate; still sensitive conditions in financial markets and uncertainties in the economic outlook may continue to call for some flexibility in operations.] Taking account of conditions in financial markets, somewhat (SLIGHTLY) lesser reserve restraint WOULD

(MIGHT), or

somewhat (SLIGHTLY) greater reserve restraint would (MIGHT) be acceptable depending on the strength of the business expansion, indications of inflationary pressures, developments in foreign exchange markets, as well as the behavior

-15-

of the monetary aggregates.

The contemplated reserve

conditions are expected to be consistent with growth in November-through]March [DEL: both] M2 and M3 over the period from[DEL: THROUGH JUNE at annual rates of about ____ PERCENT AND ____ [DEL: 6 to-7] percent, RESPECTIVELY.

The Chairman may call for

Committee consultation if it appears to the Manager for Domestic Operations that reserve conditions during the period before the next meeting are likely to be associated with a federal funds rate persistently outside a range of 4-to-8 percent]. ____ TO ____[DEL:

March 28, 1988

SELECTED INTEREST RATES Spercent MIt~-foU.

-U.S. Gov't. constant----maturity yields--

-Treasury bills---secondary markt--federal funds

87--High

3 month

6 month

12 month

cds sec ekt 3-month

comi. paper 1-month

money market mutual fund

bank prime loan

3-year

Lfln-Tlr-

-----

10-year

30-year

corp. A utility rec off

muni. Bond Buyer

conventional ho rtgages---

sec mkt

primary

fixedrate

market

ARM

7.6Z 5.95

6.84 5.24

7.36 5.36

7.64 5.40

8.49 5.83

8.12 5.88

6.70 5.28

9.25 7.50

9.29 6.37

9.96 7.05

9.97 7.54

11.50 8.79

9.59 6.92

11.9 .97

1.58 9.03

8.45 7.47

7.02 6.38

5.88 5.61

6.35 5.81

6.67 6.15

7.05 6.58

6.88 6.50

6.79 6.04

8.75 8.50

8.06 7.33

8.91 8.16

9.07 8.40

10.30 9.63

8.31 7.76

10.68 9.98

10.53 9.84

7.88 7.49

6.15 6.37 6.85 6.73 6.58 6.73 7.22 7.29 6.69 6.77 6.83 6.58

5.59 5.64 5.66 5.67 5.69 6.04 6.40 6.13 5.69 5.77 5.81 5.66

5.60 5.90 6.05 5.99 5.76 6.15 6.64 6.69 6.19 $.36 6.25 5.93

5.68 6.09 6.52 6.35 6.24 6.54 7.11 7.05 6.50 6.69 6,52 6.21

6.17 6.52 6.99 6.94 6.70 6.75 7.37 8.02 7.24 7.66 6.92 6.60

6.22 6.39 6.83 6.86 6.57 6.62 7.26 7.38 6.77 7.76 6.76 6.55

5.32 5.49

7.50 7.75 8.14 8.25 8.25 8.25 8.70 9.07 8.78 8.75 8.75 8.51

6.58 7.32 8.02 7.82 7.74 8.03 8.67 8.75 7.99 8.13 7.87 7.38

7.25 8.02 8.61 8.40 8.45 8.76 9.42 9.52 8.86 6.99 8.67 8.21

7.55 8.25 8.78 8.57 8.64 9.59 9.61 6.95 9.12 8.83 8.43

8.84 9.51 10.05 10.05 10.17 10.37 10.84 11.07 10.39 10.42 10.05 9.75

7.03 7.87 8.35 8.13 8.09 8.11 8.61 9.06 8.39 8.43 8.11 7.63

9.01 10.05 10.58 10.38 10.20 10.39 11.01 11.42 10.73 1Q.82 10.43 10.02

9.04 9.83 10.60 10.54 10.28 10.33 10.89 11.26 10.65 10.65 10.43 9.89

7.54 7.58 7.88 7.93 7.81 7.76 7.95 8.25 8.00 7.96 7.85 7.61

9 87 16 87 23 87 30 87

6.89 6.84 6.58 6.75 6.81

5.47 5.66 5.90 5.68

6.17 6.31 6.45 6.44 6.32

6.58 6.64 6.76 6.72 6.68

7.60 7.64 7.92 7.67

6.42 6.46 6.53

7.50

7.03 7.62 8.12 7.97 7.67

8.75 8.75 8.75 8.75 8.75

8.10 6.09 8.25 8.11 8.09

9.03 9.02 9.17 8.92 8.85

9.15 9.18 9.33 9.02 8.94

10.42 10.70 10.41 10.21 10.25

8.40 8.57 8.47 8.40 8.29

10.73 10.98 10.83 10.73 10.66

10.60 10.66 10.69 10.64 10.61

7.95 7.91 7.99 7.98 7.95

JAN 6 88 JAN 13 88 JAN 20 88 JAN 27 88

7.02 6.81 6.89 6.66

6.64 6.67 6.56 6.38

7.05 7.02 6.92 6.83

6.88 6.83 6.77 6.70

6.79 6.57 6.48 6.38

8.75

8.02

8.81

8.94

10.30

8.75

8.06

8.91

9.07

9.99

8.75

7.68

8.68

8.85

9.92

5.87

i.29 6.35 6.28 6.17

8.75

7.73

8.48

8.65

9.76

8.28 8.31 8.00 7.84

10.68 10.43 10.28 10.08

10.50 10.53 10.34 10.16

7.87 7.88 7.82 7.74

3 88 10 88 17 88 24 88

6.77 6.38 6.65 6.64

5.68 5.63 5.72 5.66

6.07 5.93 5.99 5.88

6.25 6.15 6.26 6.21

6.66 6.58 6.58 6.62

6.62 6.50 6.55 6.55

6.33 6.22 6.14 6.16

8.68 8.50 8.50 8.50

7.47 7.35 7.40 7.37

8.25 8.16 8.27 8.23

8.41 8.40 8.49 8.46

9.63 9.81 9.82 9.75

7.84 7.76 7.90 7.83

10.00 10.05 10.06 9.98

9.94 9.84 9.92 9.87

7.64 7.61 7.59 7.59

HAR 2 88 MAR 9 88 MAR 16 88

6.60 6.51 6.61 6.51

5.61 5.70 5.68 5.72

5.81 5.90 5.82

6.19 6.26 6.25

6.58 6.61 6.62

6.54 6.53 6.56

6.10 6.04 6.05

6,88

6.28

6.62

6.56

6.03

8.50 8.50 8.60 8.50

7.33 7.42 7.44 7.52

8.17 8.27 8.32 8.42

8.41 8.52 8.58 8.70

9.78 9.83 9.98 10.01

7.80 8.02 8.09 8.27

10.08 10.11 10.06 10.22

9.85 9.96 9.92 9.99

7.53 7.53 7.49 7.52

6.45 6.66

5.66 5.79 5.70

5.83

6.24

6.59

6.04 5.99

6.40 6.34

6.67 6.64

6.54 6.58 6.61

8.50 8.50 8.50

7.46 7.66 7.61p

8.41 8.51 8.47p

8.69 8.77 8.72p

Laow

8--High Loa Monthly MAR 87 APR 87 MAY 87 JUN 87 JUL 87 AUG 87 SEP 87 OCT 87 NOV 87 DEC 87 JAN 88 FEB 88

5.79

6.01 6.02 6.00 6.22 6.57 6.45 6.57 6.57 6.22

8.97

Hoek'.y Meekly DEC 2 87

DEC DEC DEC DEC

FEB FEb FEB FEb

MAR 23 88 Daily MAR 18 88 MAR 24 88 MAR 25 88

6.60p

6.61 6.69

5.e

NOTE: Meekly data for columns 1 through 11 are sttement week averages. Data in column 7 are taken from Donoghue's Honey Fund Report. Columns 12, 13 and 14 are 1 day quotes for Friday, Thursday or Friday, respectively, following the end of the statement wak. Column 13 is the Bond Buyer revenue index. Column 14 is th. FNHA purchase yield, plus loan servicing fee on 30-day mandatory delivery comitments. Colum 15 is the average contract rate on new commitments for contract rate on nm fixed-rate mortgagesi FRHsI with 80 percent loan-to-value ratios at a sample of savings and loans. Column 16 is the average initial commitments for 1-year, adjustable-rate mortgages(ARs) at S&Ls offering both FRHs and ARHs with the ame number of discount points.

Strictly Confidential (FR)Class IIFOMC

Money and Credit Aggregate Measures Seasonaly adjusted

Period

M1 1

PEICRIT AI8UALLI 1985 1986 1907

Money stock measures and liquid assets nontransactions components

In M2

In M3 only

MAR. Bank credit total loans and

28,

1988

Domestic nonfinancial debt2 US. total other government

Investments1

IANUAL GROWTH: (Uil TO 011) 12.0 15.6 6.3

8.9 9.4 4.0

7.9 7.4 J.J

3.4 8.2 10.8

7.7 9.2 5.4

8.5 8.3 5.2

10.2 9.7 1.9

15.2 1i.7 8.9

12.7 12.8 0.1

13.3 13.3 9.8

QUARTERLI AVIIAGE 1ST QUT. 1981 21D UT. .1987 JRD UT. 1987 6TH UT8. 1987

13.2 6.6 0.8 1.O

6.5 2.7 2.8

4.2 1.J J.S 4.0

6.7 12.7 10.9 11.1

6.5 4.6

6.2 4.1

4.5

4.2

5.5

6.0

10. 8.2 6.2 5.8

12.2 8.7 5.9 7.5

10.* 9.0 9.0 10.6

10.8 8.9 8.2 9.8

molaltl 1987--f b. HAIL AP8. nAi JUsI JUL AUG. SEPT. OCT. NOT. DEC.

-0.2 1.8 17.2 2.9 -7.1 2. .7 1.6 14.0 -5.6 -2.9

0.6 2.1 5.5 0.7 1.1 .7

0.9 1.2 1.5 0.0 3.9

J.6 6.1 12.0 1.0 6.3

4.8 6.0 1.0 1.8

4.8 5.9 J. 3.4 3.6

2.6 2.6 5.7 5.0 5.9 2. 2.3 5.7 5.0 7.* 5.0 1.4

3.5 -0.5

e.8

11.9 5.7 6.5 22.4 24.8 7 9.6 6.0 12.6 20.2 -O.J

9.7 8.6 7.0 2.6 -1.0

9.4 11.2 7.6 8.2 7.6 1.8 8.8 6.5 3.9 12.6 8.0

5.4 6.1 10.4 10.9 9.6 8.1 7.8 10.J 11.5 11.3 8.9

6.4 7.3 9.7 10.2 9.1 6.6 8.1 9.4 9.7 11.6 8.7

12.8 1.1

9.7 8.7

8.5 :1.4

2.4 15.9

8.2 10.2

11.5

5.9 8.4

5.2 11.3

8.9 10.4

8.0 10.6

747.5 756.2 752.7 750.9 758.9 759.6

2880.9 2895.4 2897.7 2902.1 2925.5 2946.8

2133. 2138.9 2144.9 2151.3 2166.6 2181.2

760.1 747.9 760.5 760.3 761.8 771.9

3620.9 3643.1 3658.2 3662. 3687.3 3718.

4282.0 4311.7 4324.9 4330.6 4372.2

2214.7 2227.6 2232. 2230.6 2242.0 2 257.7

191J. 1919.3 1939.5 1952.4 1960.8 1979.2

6201.4 6260.6 6319.6 6366.7 6413.8 6469.4

15 22 29

764.1 761.1 759.9 762.1 754.9

2941.$ 2940.4 2946.6 2953.2 2947.5

2177.2 2179.2 2186.8 2191.1 2192.5

765.9 769.2 714.5 770.8 774.1

3707.2 3709.6 3721.1 3724.0 3721.6

7 P 14 P

755.8 760.5

2954.J 2965.5

2198.5 2205.1

771.1 774.8

3725.5 3740.3

1988--JAM. IEB. OUTNULI LEVELS 1987--SEPT. OUT. NOV. DEC. 1988--JA . rFEL

HBa.

1/ 2/

4.4 8.1 6.7 0 025 5.9 7.0 8.3 3.7 1.6

(SBtLLIOrS)

8EELI LEVELS (SBILLIOIS) 1986-rEB. 1

4.0

8114.5 8179.9 8259.0 8319.1 8374.6 8848.6

rDIC AIIUAL IATES FOR BANK CBEDIT ARE ADJUSTED FOR A TRANSrBR Or LOANS FRON CONTIEINTAL ILLIIOIS NATIONAL BANK TO TIH BjIGINIING SBPTIInBE 26, 1984. LEVELS OF ADJACENT MONTHS, AND HAVE BEEN ADJUSTED DEBT DATA ARK ON A 8ONTHL AVERAGE BA'1S, DERIVED BY AVERAGING END-OP-FOINT TO BEnotE DISCONTINUITIKS. P-PBELIIIARI PB-PRELIHINAMI ESTIMATE

Components of Money Stock and Related Measures Billions of dollars, seasonally adjusted unless otherwise noted -.

bmall

denoml-

Ovenight Other Demand checkable RPs and deposits deposits Eurodollan

Currency

Period

MAR.

MMDAe NSA

I Savings deposits

NSA -

ANWUALL 1T(8T

--- -

nation

lime deposits -

868.1 817.0

211.5 212.5

85.1 85.4

463.1 445.6

865.9 852.1

212.1 209.9 210.6

83.5 82.1 81.7

468.9 454.0 458.6

210.6 213.1 216.3

83.6 84.0 81.3

460.2

883.3 901.7 913.1

218.8 220.9

924.7 942.5

299.9 362.2 115.

877.1 858.9

1987-F88. MAR.

183.6 1864.

295.9 295.0

215.1 248.0

80.1 76.9

572.0 571.8

389.7 J96.3

105.6 187.0 187.8

299.3 298.9 293.3

253.1 253.9 254.3

76.9 76.2 76.9

566.8 558.6 555.1

404. 1 409.5

189.0 190.2 191.4

292.3 292.1 290.5

255.6 257.2 268.6

75.7 79.7 83.4

549.4 565.0

415.5 117.8

193.1 195.0 196.5

295.9 291.3 288.0

260.3 259.5 259.3

85.9 79.6 77.9

533.9 527.7 525.2

417.0

198.4 199.6

289.9 287.8

263.4 265.1

82.0 76.6

524.0 522.6

414.3

1988-J11N. FEB.

1/ 2/ 3/

MMM

899.

509.9 569.2 528.9

OBC.

- 10 -

433.9

67.2 78.0 81.1

OCT.

28, 1988 Short. term CommerIeasury clal paper securilles

Savings bonds

depo' 1

6.1 8«.7 87.2

176.8 228.6 259.7

AUG. SEPT.

Term Eurodollr NSA

116.8 207.6 220.6

263.5 294.6 291.7

JULY

Large denomlnation time

I I

Banker acceptances

QT): 166.9 179.3 194.9

MAT JUne

1985 1986 1987

APR.

Money market mutual funds. NSA Instilugeneral lions purpose, end brokert only dealer 2

50.5

413.1

418.6

1115.0 «14. J 616.2

859.1 865.9 872.1

77.6 81.7 92.7

78.9

89.7 99.6

292.3 28.10 268.1

201.6 228.5 255.2

13.2 37.8 05.1

88.8 88.7

93. 3 94.2

280.1 267.8

239.0 239.9

38.9

95.1 95.9 96.6

257.6 261.6

101.1

03.9 87.0 89.7

246.3 253.7 252.0

00.9 42.1 43.1

85.7 90.6 946.

97,5 98.1 98.4

254.7

251.8 251.8 256.6

r3.4

465.3

107.0 107.5 109.2

472.3 180.5

106.2 108.7

222.2

82.5 89.5 89.6

226.2 232.2

98.7

408.5

461.5 479.2

462.

484.7

162.7

62.7 82.2 106.8

87.2

87.2 102.5

105. 4

93.3 91.3

105.6 108.9

85.3 84.6

259.7

257.9

261.8

39.6

63.5 *-.3

98.8 99.3 100.2

271.1

251.2 252.5 258.9

*4.S

269.9 263.4

101.4

270.9

269.0

43.5

45.0 *5.7

IICLUDIS BSTAIL RIPORCHAS8 AIGBKBERTS. ALL IRA AiD KEOGB ACCOUNTS AT COMHERCIL BINKS AND THRIFT INSTITUTIONS A11 SUBTRACTED FROM SMALL TIHE DEPOSITS. BECL&DBS IRA AID KBOGNH ACCOUNTS. IET OF LARGE DEIOMIIATION T1RE DEPOSITS HELD Bt1 1ON1 MARKET MUTUAL FUNDS AND THRIFT INSTITUTIONS. P-PR ELNIMARt

STRICTLY CONFIDENTIAL (FR) CLASS II FOMC

Net Changes In System Holdings of Securities' March 28,

1988

Millions of dollars, not seasonally adjusted Treasury bills

Period

1982 1983 1984 1985 1986 1987

Net purchases 8,698 15,468 11,479 18,096 20,099 12,933

1986--Q3 Q4

4,668 9,668

1987--Q1 Q2 Q3 04

-1,914 5,823 4,690 4,334

Ntchange

3,C 100 2,4 100 7,7 700 3,5 00 1,0 100 9,0 129

5,698 13,068 3,779 14,596 19,099 3,905

312 484 826 1,349 190 3,358

1,797 1,896 1,938 2,185 893 9,779

388 890 236 358 236 2,441

307 383 441 293 158 1,858

4,668 9,668

190

893

236

158

-2,714 5,823 -3,539 4,334

1,767 143 1,449

-252 5,036 2,356 2,639

1,226 619 596

871 795 3,388 150

143 300 670 479

2,551

619

-8100 8,2 i29 --

4,528 795 3,388 150

3,657

1988--Jan. Feb.

-49 -192

600 1,600

Feb.

Mar.

Memo:

6 13 20 27

600

3 10 17 24

-330 -157 -100 10

2 9 16 23

336

Net purchases3

Redemptions (-)

1987--Sept. Oct. Nov. Dec.

1988--Jan.

Treasury coupons

1,000 600

within 1_ -year50

-649 -1,792

Federal Redemptions (-)

Net change

agencies redemptions

Net change outright holdings total

or 2,803 3,566 3,440 4,185 1,476 17,366

8,312 16,342 6,964 18,619 20,178 20,994

1,461 -5,445 1,450 3,001 10,033 -11,033

-1,476

4,577 10,927

4,044 9,925

-252 -8,948 -3,610 5,059

-3,076 14,735 12 9,323

-14,254 2,121 -1,433 2,533

4,676 1,039 4,038 4,246

26 7,493 -3,331 -1,629

-780 -2,788

-4,807 1,247

-3,805 --

50 2,589 --

800

300 650

70 596

-4,109 -975

-175

-2,320 -2,527

2,451

-731

-600 -350 -450

-330 -1,157 -700 10

-701 -1,782 -700 10

-350 -625

-175

-290 -4,565 -6,495 10,863 -2,643 309

336

LEVEL (bil.$) Mar. 23

42 -3

110.1

23.0

Net RPs5

47.6

1. Change from end-of-period to end-of-period.

2. Outright transactions in market and with foreign accounts. 3. Outright transactions in market and with foreign accounts, and short-term notes acquired in exhange for maturing bills. Excludes maturity shifts and rollovers of maturing coupon issues.

14.2

25.5

-1,963

2,055 -100

227.7

110.2

4. Reflects net change and redemptions (-) of Treasury and agency securities. 5. Includes changes in RPs (+), matched sale-purchase transactions (-), and matched purchase sale transactions (+). w i th in 6. The levels of agency issues were as follows: 1 5-10 over10 total 2 3 1-year2 .

2.6

3.4

1.2

7.4

Cite this document

APA

Federal Reserve (1988, March 28). Bluebook. Bluebooks, Federal Reserve. https://whenthefedspeaks.com/doc/bluebook_19880329

BibTeX

@misc{wtfs_bluebook_19880329,
  author = {Federal Reserve},
  title = {Bluebook},
  year = {1988},
  month = {Mar},
  howpublished = {Bluebooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/bluebook_19880329},
  note = {Retrieved via When the Fed Speaks corpus}
}