bluebooks · September 26, 1994

Bluebook

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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) Class I -

September 23,

FOMC

1994

MONETARY POLICY ALTERNATIVES Recent Developments1 (1)

The System tightened the stance of monetary policy on

August 16 through Board approval of an increase in the discount rate of 1/2 percentage point, to 4 percent, and a decision by the Committee to allow the entire increase in the discount rate to show through to interest rates in reserve markets.

The latter was implemented by

leaving the borrowing assumption unchanged at $450 million. Short-term rates, which had incorporated an anticipation of a somewhat less aggressive policy move, backed up on the announcement of these actions that day.

Commercial banks increased their prime rates 1/2

percentage point, to 7-3/4 percent, maintaining the 300 basis point spread over the federal funds rate that has prevailed since late 1992. However, expectations of the level of short-term rates likely to prevail beyond the next few months were revised down in response to the accompanying announcement suggesting that the Federal Reserve would take no further action for a time, and perhaps also to a sense that less tightening might ultimately be required following the unexpectedly aggressive action.

This shift in expectations was reflected in

federal funds futures rates after October, shown in the upper left panel of Chart 1, and in declines in note and bond yields. (2) policy move.

Short-term rates remained steady in the weeks after the In the last few weeks, however, these rates have moved

1. Financial market quotations in this section are taken as of noon, Friday, September 23. 2. To accommodate shifts in seasonal credit demands, the borrowing assumption was subsequently raised to $475 and $500 million and reduced more recently back down to $475 million. Borrowing averaged $498 million in the maintenance period ending August 31 and dropped to $447 million in the period ending September 14 on declines in both seasonal and adjustment borrowing.

Chart 1

Federal Funds Futures Percent

Percent -* 8

Daily r-

FOMC August 16

30-Year Bond *

10-Year Note

" Sept.

3-Month Bill

Aug. 15

/. I Aug

I Sept

Oct

I Nov

I Dec

I Jan

8/23

1112

Feb

9/1

9/12

9/2:

Treasury Yield Curves Percent September 23 .................... °°..°-e

------

*.................

*.............

up appreciably.

Markets built back in a steeper trajectory of near-

term Federal Reserve tightening as incoming economic data were seen as pointing to a greater risk of inflation.

The initial declines in

long-term rates were rolled back within a few days of the System action, and these rates have risen noticeably further in response to the recent data.

On balance over the intermeeting period, long-term

rates have moved up about 20 to 40 basis points.

Equity markets also

declined in recent days, but advanced on net over the period. (3)

With inflation concerns heightened, rising interest

rates in the latter part of the period did not buoy the dollar, which declined about 1-3/4 percent, on balance.

Contributing to the dol-

lar's weakness were signs of unexpected strength in the German economy and associated increases in German interest rates:

Short-term rates

moved only slightly higher, but long-term rates rose 35 basis points. In Japan, incoming data pointed to a subdued recovery, and short- and long-term rates showed little change.

In Canada, market concerns over

a possible Quebec secession faded in the wake of the weaker-thanexpected showing of support for the Parti Quebecois in provincial elections.

Consequently, the Canadian currency rose 2-1/2 percent

against the U.S. dollar, while Canadian short- and long-term interest rates declined 50 and 10 basis points, respectively.

(4)

The monetary aggregates declined in August and data for

early September suggest a leveling off this month, leaving M2 and M3 a little above the lower bounds of their long-term ranges.

On balance,

the aggregates have been weaker than anticipated at the time of the

last meeting, even after allowing for the effects of the recent tightening of monetary policy. liquid components.

Weakness in August was concentrated in the

Demand deposits, continuing to be depressed by

declines in mortgage refinancing, contracted in August, following two months of surprising strength.

Other checkable deposits and savings

deposits also ran off, reflecting the substantial gap between rates on these and competing instruments that has opened up since the System Some of the balances in the latter

began to tighten in February.

accounts apparently have been shifted into small time deposits, which accelerated in August.

Rates on time deposits, although reacting more

slowly than usual to increases in market rates, have risen somewhat in recent weeks, whereas returns on liquid deposits have barely budged this year.

In light of the sluggish behavior of deposit rates, the

overall weakness in M2 is roughly in line with historical relationships embodied in money demand models, given the staff forecast of spending in the current quarter.

The relative attractiveness of mar-

ket investments can be seen in the volume of noncompetitive tenders in Treasury auctions, which was exceptionally heavy in August.

Flows

into stock mutual funds continued to be strong, but outflows from bond funds persisted; the total of the two was well below the pace of 1992 and 1993, suggesting, at most, modest net shifts between M2 and capital market mutual funds.4

Institution-only money funds dropped

sharply in response to the rise in market yields, and as a consequence M3 also was weak last month.

The broader aggregate was buoyed by

3. M1 declined at a 2 percent rate in August, as currency growth slowed a bit, while transaction deposits ran off. Reserves dropped at a 6 percent rate, holding down the growth of the base to 6-1/4 percent. Over all of 1994, reserves have dropped at a 1-1/2 percent rate, while the base has increased at a rate of 8-3/4 percent. 4. M2+ was flat in August; from the fourth quarter of last year through August, this expanded aggregate grew at a 1-1/4 percent rate, nearly the same pace as for M2.

brisk issuance of large time deposits, as banks continued to rely on managed liabilities to fund credit growth.

As in recent months,

however, banks continued to make heavy use of sources outside the monetary aggregates, particularly borrowings from foreign offices. (5) mained strong. percent.

Bank credit slowed in August, although loan growth reBusiness loans expanded at an annual rate of almost 10

Anecdotal evidence of further easing in the standards and

terms for business loans continued to accumulate.

In recent months,

bank lending to businesses has been boosted by rising external financing needs and growing merger and acquisition activity, as well as by shifts away from capital market financing.

Consumer loan growth at

banks remained in double digits in August, suggesting that consumer credit continued to expand briskly.

Nonetheless, growth of overall

debt of nonfinancial sectors slowed in recent months, held down by retirements of state and local obligations from the proceeds of earlier advance refundings.

Moreover, federal borrowing has moderated a

bit from earlier in the year on a seasonally adjusted basis.

On net,

nonfinancial debt is estimated to have expanded in recent months at less than a 5 percent annual rate, down from earlier this year, keeping it well in the lower half of its 4 to 8 percent monitoring range.

MONEY, CREDIT, AND RESERVE AGGREGATES

(Seasonally adjusted annual rates of growth)

June

July

Aug.

QIV to Aug. 1

3.7

7.5

-1.9

3.6

-2.2

4.5

-2.1

1.4

0.0

6.1

-1.9

0.7

3.4 4.9 2.9

2.5 1.2 3.0

----

4.9 5.6 4.6

3.2

12.8

5.0

7.1

Nonborrowed reserves 2

-6.7

-0.3

-6.3

-2.8

Total reserves

-4.0

2.2

-6.0

-1.5

Monetary base

7.7

8.1

6.3

8.8

333

458

469

1105

1107

1005

Money and credit aggregates

Domestic nonfinancial debt Federal Nonfederal

Bank credit Reserve measures

Memo:

(Millions of dollars) Adjustment plus seasonal borrowing Excess reserves

QIV to July for debt aggregates. Includes "other extended credit" from the Federal Reserve.

NOTE:

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.

Monetary Policy Alternatives (6)

Three monetary policy alternatives are presented below

for consideration by the Committee.

Under alternative B, the federal

funds rate would continue to trade around 4-3/4 percent, consistent with retaining an allowance of $475 million for adjustment plus seasonal borrowing.5

Alternative C envisages raising the federal

funds rate 1/4 percentage point, to 5 percent, in conjunction with an increase in the borrowing allowance to $500 million.

Under alterna-

tive D, the federal funds rate would be moved up to 5-1/4 percent, achieved either by an increase in the initial borrowing allowance to $525 million or by an unchanged borrowing allowance and a hike in the discount rate to 4-1/2 percent. (7)

In the Greenbook forecast, the policy restraint now in

place is not viewed as adequate to slow spending sufficiently to forestall a buildup of inflation pressures, given the apparent underlying strength of aggregate demand and the likely absence of any margin of economic slack.

The policy firming built into the staff forecast

would push the federal funds rate up around one percentage point before next spring.

A tightening of about this magnitude over the next

few quarters seems to be built into the structure of market interest rates; in contrast to the staff assumption, that structure also can be read as implying further increases subsequently.

The firming assumed

by the staff keeps short- and longer-term real interest rates high enough to rein in output to the neighborhood of potential; core inflation picks up a bit late this year, but edges down over 1995 to a rate slightly above its recent pace.

5. Over the intermeeting period, seasonal borrowing should trend down, as is the norm for this time of year, necessitating technical reductions in the borrowing assumption.

(8) Alternative B, which would retain current reserve conditions, is not inconsistent with the staff assumption of policy firming, provided that firming resumes some time soon.

Inaction might be

deemed particularly appropriate if the Committee believed that strains on capacity could be less pressing than in the staff forecast, either because potential output might be greater than assumed by the staff or because more restraint on spending could be in the pipeline in view of the substantial increases in interest rates over the past year.

More-

over, slow growth of a broad array of monetary and credit aggregates might be seen as suggesting that financial conditions are not conducive to a pickup in underlying inflation.

A pause would allow the

Committee to accumulate more evidence on these questions.

Such a

wait-and-see posture would accord with the tone of the press statement announcing the policy action taken at the August meeting. (9)

Market opinions on what the Committee might do at this

meeting are split.

Some analysts have interpreted the recent economic

news as implying sufficiently greater inflation potential to overcome any presumption of a policy pause; they expect a firming action, perhaps of 50 basis points.

Others still anticipate a hiatus in the

process of policy tightening; however, even many of those in the latter camp seem to expect some action no later than the November meeting.

While few actually foresee a 25 basis point increase, the

composite effect of these different views has produced a federal funds futures rate for October that is 25 basis points above the current funds rate.

Nonetheless, maintenance of existing reserve conditions

under alternative B might elicit little reaction in rates beyond the very shortest maturities because market participants would assume that

tightening had simply been postponed.

In these circumstances, longer-

term instruments might trade in their current ranges at least for a time, although security prices probably will remain quite sensitive to news bearing on inflation pressures as market participants attempt to gauge the extent of future policy restraint.

In that regard, under

the staff forecast, economic releases over the next few months would suggest that inflation is on a slightly higher track and that final demand remains fairly vigorous.

Absent unanticipated changes in

policy abroad, the foreign exchange value of the dollar most likely would remain around its current level, though it could come under some downward pressure if inflation expectations began to deteriorate further. (10)

A tightening in reserve conditions at this meeting

might be favored if the Committee saw a significant risk that output is in the process of surpassing its long-run potential.

Waiting in

these circumstances might risk the development of a degree of inflation momentum--partly through expectations channels--that could make it more difficult to contain inflation at recent rates, much less achieve the long-run goal of price stability.

The 50 basis point

firming of alternative D is the most likely of the three policy options to keep the Federal Reserve "ahead of the curve" of inflation pressures and consequently to limit the extent to which policy might later need to tighten.

If the Committee were uncertain about how much

tightening would be required but wanted to respond to recent data, the more modest 25 basis point move of alternative C might be considered appropriate. (11)

The 25 basis point tightening of alternative C is con-

sistent with the current structure of market rates, and this policy

action might well trigger only muted interest rate reactions.

How-

ever, since most market participants expect either no action or a 50

basis point tightening, alternative C could raise questions about System intentions, potentially unsettling markets.

A considerable

portion of the 50 basis point increase in the federal funds rate under alternative D would pass through to other short-term rates.

In light

of recent experience and the split in market expectations, it's difficult to say what immediate impact this alternative would have on interest rates in capital markets.

Eventually, assuming economic and

price data consistent with the staff forecast, intermediate-term yields could tend to work their way a bit higher, as market participants raised their expected path for Federal Reserve tightening in this phase of the business cycle.

But the System's evident willing-

ness to deal with inflation pressures through a 50 basis point move should alleviate longer-run concerns in this regard, limiting any increases in bond yields.

With the rise in real interest rates, the

dollar would likely appreciate somewhat on exchange markets. (12)

Under all three alternatives outlined above, the debt

of the domestic nonfinancial sectors should expand at about a 5 percent rate over the balance of the year, placing the annual growth of this aggregate also at 5 percent, in the lower half of its 4 to 8 percent monitoring range.

With capital spending by nonfinancial

corporations anticipated to outpace their internally generated funds by a widening margin and merger activity continuing at its more elevated pace, business borrowing could strengthen some over the balance of the year.

Commercial banks are anticipated to remain aggressive

lenders to this sector, including for merger-related activity.

In the

household sector, consumer credit growth is expected to remain near a

-10-

double-digit rate even as borrowing costs continue to edge up, supporting solid expansion of consumer durables spending.

Despite some-

what faster expansion of federal debt late in 1994, growth for the year--projected at 5-1/2 percent--would be the slowest in fifteen years. (13)

Growth of the monetary aggregates over the September-

to-December period is presented below for alternatives B and D.

Any

action taken this late in the year is unlikely to have much of an impact on the annual growth rates of the aggregates for 1994, shown in the lower panel of the table.

For illustrative purposes, the path

under alternative B was derived assuming that the funds rate would hold at its current level for the remainder of the year.

The path for

the aggregates under alternative D assumes that the funds rate moves up to 5-1/4 percent at this meeting and stays there for the balance of the year.

Thus, neither alternative matches the assumption in the

Greenbook forecast.

(The response of the aggregates under alternative

C would lie midway between the two alternatives.) Alt. B

Alt. D

Growth from September to December M2

1-1/2

1/2

M3 M1

1-1/4 2-1/2

3/4 1-1/2

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

Implied growth from 93:Q4 to 94:Q4 M2 M3 M1

(14)

3/4 3

Over the September-to-December period, M2 would expand

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

The staff has assumed

that deposit rates will continue to adjust sluggishly to market rates.

Alternative Levels and Growth Rates for Key Monetary Aggregates

Levels in Billions May-94 Jun-94 Jul-94 Aug-94 Sep-94 Oct-94 Nov-94 Dec-94

M2 Alt. B

Alt. D

Alt. B

Alt. D

Alt. B

Alt. D

3596.1 3589.4 3603.0 3596.8 3596.6 3599.6 3603.9 3609.5

3596.1 3589.4 3603.0 3596.8 3596.6 3597.7 3598.8 3601.8

4226.4 4226.4 4247.8 4240.9 4243.0 4246.6 4251.5 4256.2

4226.4 4226.4 4247.8 4240.9 4243.0 4245.5 4248.8 4251.5

1142.9 1146.4 1153.6 1151.8 1152.7 1154.5 1156.9 1159.6

1142.9 1146.4 1153.6 1151.8 1152.7 1154.0 1155.2 1156.8

-2.2 4.5

0.0 6.1

3.7 7.5

-2.1 -0.1 1.0 1.4 1.9

-2.1 -0.1 0.4 0.3 1.0

-1.9 0.6 1.0 1.4 1.3

-1.9 0.6 0.7 1.0 0.8

-1.9 0.9 1.9 2.5 2.8

-1.9 0.9 1.3 1.3 1.6

1.9 1.9 0.7 0.6

1.9 1.9 0.7 0.1

0.3 0.5 1.6 0.7

0.3 0.5 1.6 0.4

6.0 1.9 3.2 1.5

6.0 1.9 3.2 0.9

Monthly Growth Rates Jun-94 Jul-94

Aug-94 Sep-94 Oct-94 Nov-94 Dec-94 Quarterly Averages 94 Q1 94 Q2 94 Q3 94 Q4 Growth Rate From Dec-93

To Sep-94

1.1

0.3

2.9

Sep-94

Dec-94

1.4

0.6

1.2

0.8

2.4

1.4

93 Q4

Sep-94

1.3

0.7

3.3

91 Q4

92 Q4

1.9

0.5

14.3

92 Q4 93 Q4

93 Q4 94 Q4

1.4 1.3

1.4 1.1

0.7 0.8

0.7 0.7

10.5 3.2

10.5 3.0

1994 Target Ranges:

1.0 to 5.0

0.0 to 4.0

Chart 2

ACTUAL AND TARGETED M2 Billions of Dollars

3800

Actual Level

Short-Run Alternatives

-H 3750

-- 3700

-- 3650

SB a

-- 3600

3550

3500

ND 1993

J 1994

II D

3450

Chart 3

ACTUAL AND TARGETED M3 Billions of Dollars

4450

Actual Level Short-Run Alternatives

-- 4400

-1 4350

-- 4300

H 4250 4250

DS-

-- 4200

'''

-1

4150

-H 4100

I O

I N

1993

I D

I M

I J

1994

I A

I SO

I N

4050

Chart 4

M1 Billions of Dollars

1 1320

Actual Level

Short-Run Alternatives

1300 S15%

1280

1260

1240 S10%

1220

1200

1180 .

..-

1160

1140

1120

11111111

1I 11111 O

N D 1993

J 1994

1100

Chart 5

DEBT Billions of Dollars

1 13400

Actual Level

Projected Level

13200

13000

12800

12600

12400

12200

N D 1993

J 1994

12000

-12-

In addition, declines in mortgage prepayments will continue to depress demand deposits.

These factors will place a particular drag on liquid

accounts, and M1 will expand at only a 2-1/2 percent rate over the period. 6

While the growth of small time deposits should remain

robust, not all the funds lost from liquid deposits will remain in M2. Direct purchases of securities, including noncompetitive tenders at Treasury auctions, are anticipated to continue at a healthy clip.

a result, M2 velocity is expected to continue increasing rapidly in the fourth quarter--at a rate near 5 percent.

M3 growth should pick

up a bit over the remainder of 1994, reflecting somewhat reduced reliance of banks on nondeposit sources of funding. (15)

Under alternative D, M2 would grow at a 1/2 percent

rate over the September-to-December period.

The sluggish adjustment

of deposit rates to the rise in market rates would further widen opportunity costs, depressing M1 and savings deposits even more. However, should policy firming be accompanied by some price declines in capital markets, outflows from bond mutual funds could intensify, some of the outflows might find their way into deposits and money market mutual funds, partly offsetting the effects on M2 of the higher cost of holding deposits.

M3 would grow at a 3/4 percent rate over

the remaining months of the year, pulled down by a runoff of institution-only money funds as their yields lag behind the increase in money market rates that would be in train under alternative D.

6. Rapid currency growth should continue to bolster M1 over the balance of the year. As a result, under alternative B, the monetary base should expand at about a 8-1/4 percent rate, while total reserves should grow at a 1-3/4 percent rate over the September-to-December period.

-13-

Directive Language (17)

Presented below is draft wording for the operational

paragraph that includes the usual options for Committee consideration. OPERATIONAL PARAGRAPH

In the implementation of policy for the immediate future, the Committee seeks to DECREASE SOMEWHAT (SLIGHTLY)/MAINTAIN/increase somewhat (SLIGHTLY) the existing degree of pressure on reserve positions-, [DEL: taking account of a possible increase in

the discount

rate.] In the context of the Committee's long-run objectives for price stability and sustainable economic growth, and giving careful consideration to economic, financial, and monetary developments, slightly (SOMEWHAT) greater reserve restraint (WOULD/MIGHT) or slightly (SOMEWHAT) lesser reserve restraint would (MIGHT) be acceptable in the intermeeting period.

The contemplated reserve

conditions are expected to be consistent with modest growth in M2 and M3 over THE BALANCE OF THE YEAR [DEL:coming months.]

September 23, 1994

Table 1 SELECTED INTEREST RATES (percent) Short-Term federal funds 1

Treasury bills secondary market S3-month 6-month I 1-year 2 _ 3 4

Long-Term CDs secondary market 3-month 5

comm. paper 1-month 6

money market mutual fund 7

bank prime loan 8

U.S. government constant maturity yields 3-year 10-year 30-year 9 10 1 11

corporate conventional home mortgages A-utility municipal secondary primary recently Bond market market fixed-rate fixed-rate ARM offered Buyer 12 13 14 15 1 16

93 -- High -- Low

3.24 2.87

3.12 2.82

3.27 2.94

3.48 3.07

3.36 3.06

3.44 3.07

2.92 2.59

6.00 6.00

5.06 4.07

6.73 5.24

7.46 5.83

8.28 6.79

6.44 5.41

8.17 6.72

8.14 6.74

.5.36 4.14

94 -- High -- Low Monthly Sep 93 Oct 93 Nov 93 Dec 93

4.74 2.97

4.64 2.94

5.06 3.12

5.47 3.35

5.00 3.11

4.89 3.11

4.17 2.68

7.75 6.00

6.71 4.44

7.49 5.70

7.75 6.25

8.69 7.16

6.66 5.49

9.02 7.02

8.77 6.97

5.58 4.12

3.09 2.99 3.02 2.96

2.95 3.02 3.10 3.06

3.06 3.12 3.26 3.23

3.22 3.25 3.42 3.45

3.12 3.24 3.35 3.26

3.14 3.14 3.15 3.35

2.65 2.65 2.66 2.70

6.00 6.00 6.00 6.00

4.17 4.18 4.50 4.54

5.36 5.33 5.72 5.77

6.00 5.94 6.21 6.25

6.94 6.91 7.25 7.28

5.50 5.48 5.71 5.59

6.89 6.85 7.32 7.27

6.92 6.83 7.16 7.17

4.36 4.25 4.24 4.23

Jan Feb Mar Apr May Jun Jul Aug Weekly Jun Jun Jun Jun

3.05 3.25 3.34 3.56 4.01 4.25 4.26 4.47

2.98 3.25 3.50 3.68 4.14 4.14 4.33 4.48

3.15 3.43 3.78 4.09 4.60 4.55 4.75 4.88

3.39 3.69 4.11 4.57 5.03 4.98 5.17 5.25

3.15 3.43 3.77 4.01 4.51 4.52 4.73 4.81

3.14 3.39 3.63 3.81 4.28 4.36 4.49 4.65

2.71 2.73 2.86 3.03 3.29 3.61 3.75 3.95

6.00 6.00 6.06 6.45 6.99 7.25 7.25 7.51

4.48 4.83 5.40 5.99 6.34 6.27 6.48 6.50

5.75 5.97 6.48 6.97 7.18 7.10 7.30 7.24

6.29 6.49 6.91 7.27 7.41 7.40 7.58 7.49

7.24 7.45 7.82 8.20 8.37 8.30 8.45 8.36

5.54 5.65 6.16 6.48 6.46 6.38 6.48 6.44

7.12 7.35 7.96 8.55 8.78 8.62 8.82 8.82

7.06 7.15 7.68 8.32 8.60 8.40 8.61 8.51

4.21 4.20 4.55 4.96 5.46 5.45 5.52 5.53

94 94 94 94 94 94 94 94 8 15 22 29

94 94 94 94

4.13 4.21 4.19 4.19

4.11 4.12 4.15 4.16

4.52 4.51 4.53 4.58

4.92 4.90 4.94 5.11

4.47 4.44 4.49 4.62

4.35 4.32 4.35 4.41

3.57 3.59 3.63 3.64

7.25 7.25 7.25 7.25

6.16 6.19 6.28 6.38

6.97 7.04 7.14 7.20

7.27 7.34 7.44 7.48

8.21 8.32 8.41 8.49

6.20 6.34 6.43 6.56

8.49 8.61 8.68 8.89

8.25 8.33 8.46 8.57

5.45 5.43 5.41 5.48

Jul Jul Jul Jul

6 13 20 27

94 94 94 94

4.38 4.30 4.30 4.28

4.21 4.38 4.27 4.39

4.67 4.83 4.67 4.79

5.19 5.23 5.06 5.23

4.78 4.79 4.66 4.69

4.52 4.55 4.47 4.46

3.70 3.75 3.78 3.80

7.25 7.25 7.25 7.25

6.50 6.57 6.37 6.49

7.33 7.41 7.22 7.29

7.62 7.68 7.52 7.56

8.57 8.42 8.45 8.27

6.52 6.47 6.46 6.47

8.91 8.79 8.82 8.71

8.68 8.72 8.52 8.57

5.56 5.58 5.46 5.54

Aug Aug Aug Aug Aug

3 10 17 24 31

94 94 94 94 94

4.28 4.26 4.35 4.66 4.72

4.33 4.42 4.47 4.56 4.57

4.74 4.87 4.93 4.93 4.88

5.12 5.24 5.29 5.32 5.27

4.68 4.75 4.82 4.88 4.87

4.45 4.50 4.66 4.80 4.79

3.83 3.85 3.88 4.03 4.08

7.25 7.25 7.39 7.75 7.75

6.36 6.52 6.55 6.54 6.48

7.15 7.26 7.25 7.27 7.23

7.43 7.52 7.47 7.51 7.49

8.37 8.35 8.39 8.36 8.38

6.37 6.49 6.45 6.46 6.43

8.82 8.84 8.87 8.74 8.69

8.38 8.57 8.54 8.56 8.48

5.50 5.56 5.52 5.54 5.49

Sep Sep Sep

7 94 14 94 21 94

4.74 4.70 4.73

4.55 4.58 4.64

4.84 4.95 5.06

5.26 5.34 5.47

4.87 4.94 5.00

4.81 4.85 4.89

4.12 4.14 4.17

7.75 7.75 7.75

6.48 6.62 6.71

7.24 7.41

7.52 7.68

8.59 8.69

7.49

7.75

6.46 6.51 6.66

8.90 8.93 9.02

8.51 8.66 8.73

5.47 5.49 5.56

Sep Sep Sep

16 94 21 94 22 94

4.68 4.87 4.78

4.61 4.79 4.79

5.03 5.19 5.19

5.48 5.57 5.55

4.98 5.04 5.18

4.88 4.91 4.98

----

7.75 7.75 7.75

6.72 6.81 6.80

7.52 7.56 7.56

7.78 7.80 7.79

Daily

NOTE: Weekly data for columns 1 through 11 are statement week averages. Data in column 7 are taken from Donoghue's Money Fund Report. Columns 12,13 and 14 are 1-day quotes for Friday, Thursday or Friday, respectively, following the end of the statement week. Column 13 is the Bond Buyer revenue index. Column 14 is the FNMA purchase yield, plus loan servicing fee, on 30-day mandatory delivery commitments. Column 15 is the average contract rate on new commitments for fixed-rate mortgages (FRMs) with 80 percent loan-to-value ratios at major institutional lenders. Column 16 is the average initial contract rate on new commitments for 1-year, adjustablerate mortgages (ARMs) at major institutional lenders offering both FRMs and ARMs with the same number of discount points.

Strictly Confidential (FR)-

Table 1

Money and Credit Aggregate Measures Seasonally adjusted

Period

Annual growth rates(s): Annually (Q4 to Q4) 1991

Money stock measures and liquid assets

Bank credit

nontransactions components

total loans lotal loans

In M2

In M3 only

FOMC

SEPTEMBER 2. 1994

Seasonally adjusted

Domestic nonfinancial debt'

investments'

and

U. S. 2 government

other'

total2 10

7.9

2.9

1.2

-6.0

1.2

0.4

3.5

11.3

2.5

4.5

1992

14.3

1.9

-2.4

-6.3

0.5

1.4

3.7

10.7

2.7

4.7

1993

10.5

1.4

-2.3

-3.3

0.7

1.1

4.9

8.4

4.0

5.2

Quarterly Average 1993-3rd QTR. 1993-4th QTR. 1994-let QTR. 1994-2nd QTR.

12.0 9.4 6.0 1.9

2.5 2.3 1.9 1.9

-1.6 -0.8 -0.0 2.0

-6.6 4.0 -8.4 -7.2

1.1 2.6 0.3 0.5

1.0 2.0 2.4 1.0

6.8 3.1 6.9 7.2

8.2 6.1 7.3 5.5

4.7 4.5 4.6 5.3

5.6 4.9 5.3 5.4

Monthly 1993-AUG. SEP. OCT. NOV. DEC.

9.4 10.7 9.0 9.7 6.4

0.8 2.8 1.3 4.2 2.6

-3.0 -0.8 -2.2 1.6 0.8

-4.2 1.8 7.3 2.4 10.0

0.0 2.6 2.2 3.9 3.7

2.1 -1.6 2.5 3.2 4.8

1.7 3.1 0.9 6.3 5.2

7.9 7.0 0.7 9.2 11.9

4.7 4.7 4.6 3.9 4.6

5.6 5.3 3.6 5.3 6.6

1994-JAN.

5.4

1.8

0.0

-1.8

1.2

4.7

7.7

3.8

4.4

4.2

5.4 4.0 -1.4 1.9 3.7 7.5 -1.9

-1.3 4.7 2.9 1.3 -2.2 4.5 -2.1

-4.3 5.0 4.9 1.1 -5.0 3.1 -2.2

-41.3 -10.3 1.9 -10.6 13.1 14.5 -1.3

-7.5 2.4 2.7 -0.4 0.0 6.1 -1.9

-2.7 0.1 4.6 0.0 -1.9 7.2

5.6 10.9 10.2 1.6 3.2 12.8 5.0

6.0 8.9 3.9 4.2 4.9 1.2

4.4 5.8 6.1 5.2 2.9 3.0

4.8 6.7 5.5 4.9 3.4 2.5

1141.1 1142.9 1146.4 1153.6 1151.8

3592.1 3596.1 3589.4 3603.0 3596.8

2451.0 2453.3 2443.0 2449.4 2445.0

635.8 630.2 637.1 644.8 644.1

4227.9 4226.4 4226.4 4247.8 4240.9

5163.0 5163.2 5155.0 5186.0

3194.6 3198.9 3207.5 3241.6 3255.0

3390.6 3402.5 3416.3 3419.8

9149.7 9189.1 9211.4 9234.5

1 8 15

1158.6 1147.7 1148.3

3608.2 3590.7 3596.9

2449.6 2443.0 2448.6

645.2 644.6 641.3

4253.4 4235.3 4238.2

1154.2

3600.5

2446.4

645.1

4245.6

1154.4

3597.5

2443.2

645.1

4242.6

5 p 12 p

1155.4 1152.0

3594.0 3595.4

2438.6 2443.4

644.6 648.6

4238.6 4243.9

FEB. MAR. APR. MAY JUNE JULY AUG. p Levels ($Billions): Monthly 1994-APR. MAY JUNE JULY AUG. p

Weekly 1994-AUG.

SEP..

1. 2.

Adjusted for breaks caused by redassifications. Debt data are on a monthly average basis, derived by averaging end-of-month levels of adjacent months, and have been adjusted to remove discontnuities.

p pe

preliminary preliminary estimate

12540.2 12591.5 12627.7 12654.3

Strictly Confidential (FR)Class II FOMC

Appendix Table 2

Components of Money Stock and Related Measures

SEPTEMBER 26,1994

Seasonally adjusted unless otherwise noted

Period

urrency

Demand deposits

Other checkable deposits

Overnight RPs and Eurodollars

Savings2 deposits

deposits

NSA' 1

Levels (Billions): Annually (4th Qtr.) 1991 1992 1993

265.6 289.7 319.5

286.3 337.1 382.1

328.8 380.1 411.9

77.5 81.2 90.8

1027.8 1177.9 1212.1

312.4 315.4

370.9 375.4

404.2 406.6

82.2 85.6

DEC.

317.6 319.5 321.4

378.4 383.2 384.8

409.5 411.8 414.3

1994-JAN. FEB. MAR.

325.2 329.2 332.4

388.3 390.3 390.0

APR. MAY JUNE

334.8 337.6 340.3

JULY AUG. p

343.2

Monthly 1993-AUG. SEP.

OCT. NOV.

345.4

Small denomination time 3

Money market mutual funds general purpose Institutions and only broker de1aler 7 8

Large denomiation

Term P's NSAbd

deposits 9

Term Eurodi lae NSA's

Savings

preliminary

rs cesan

1082.8 883.0 790.4

369.7 354.0 346.7

174.4 206.5 195.4

433.1 365.3 340.0

74.7 80.9 96.1

137.0 154.4 170.9

321.1 327.7 325.9

334.0 366.3 385.2

24.5 20.5 15.4

1205.9 1208.4

806.6 799.9

345.5 345.0

190.1 190.8

341.6 340.4

97.6 97.3

168.2 169.2

343.8 328.0

379.5 378.4

16.5 16.4

89.6 90.6 92.3

1208.8 1211.9 1215.5

794.9 790.6 785.6

344.4 347.0 348.8

194.3 194.8 197.0

341.6 339.4 339.0

96.0 95.6 96.8

170.1 170.8 171.7

323.7 324.6 329.3

384.7 384.1 386.8

16.4 15.3 14.6

412.0 411.2 411.9

95.1 93.5 98.5

1220.3 1220.9 1221.9

779.5 774.5 771.1

347.8 343.7 348.4

192.7 176.9 177.4

341.5 335.7 330.9

92.9 91.5 94.1

172.7 173.4 174.1

339.1 341.6 345.8

391.6 403.0 389.6

14.9 15.3 15.7

388.9 385.8 386.6

409.3 411.2 411.4

96.8 99.9 104.4

1220.7 1215.9 1207.2

768.6 769.1 770.4

361.5 365.1

177.0 169.3 169.5

330.5 333.5 333.9

97.9

359.3

101.4

174.8 175.7 176.6

361.2 358.7 348.9

384.9 391.0 392.6

14.1 11.4 10.5

389.4 387.9

412.7 410.2

108.5 109.3

1202.4 1194.8

772.5 777.6

363.5 362.9

170.9 169.3

336.6 340.0

103.2 100.6

177.5

357.2

392.7

10.7

97.0

1. Net of money market mutual fund holdings of these items. 2. Includes money market deposit accounts. 3. Includes retail repurchase agreements. All IRA and Keogh accounts at commercial banks and thrift institutions are subtracted from small time deposits. 4. Excludes IRA and Keogh accounts. 5. Net of large denomination time deposits held by money market mutual funds, depository Institutions, U.S. government and foreign banks and official institutions. p

Short-term Tre r Commeral putis

September 23, 1994

Treasury bills Period

Net

Redeptions

purchases

7,749 1,268 8,700

--- 02

2,164 6,639

Treasurycoupons 3 Ne purchases

Net w n

change

(-)

20,038 13,086 17,717

1994 ---Q1

STRICTLY CONFIDENTIAL (FR) CLASS II-FOMC

NET CHANGES IN SYSTEM HOLDINGS OF SECURITES 1 Millions of dollars, not seasonally adjusted

----168 -----

1-5

over 10

5-10

Federal Spursagendes redemptions

Redemptions

Net

(.)

Change

total 4

Net RPs

19,038 11,486 17,249

3,043 1,096 1,223

6,583 13,118 10,350

1,280 2,818 4,168

375 2,333 3,457

--- 11,282 --- 19,365 19,198

292 632 1,072

27,726 30,219 35,374

-1,614 -13,215 5,974

279 244 511 189

1,441 2,490 3,700 2,719

716

7,749 1,268 8,232

1,147 1,297 1,008

705 1,110 817 826

-----

3,141 4,990 6,326 4,742

289 91 526 166

2,851 12,648 7,067 12,807

-461 10,624 -8,644 4,455

2,164 6,639

147 364

1,413 2,817

1,103 1,117

618 896

2,665 4,754

411 307

4,418 11,086

-11,663 17,719

366

411

2,400

797

4,326

189

100 2,619

1,008

100 4,642

35 70 15 81

4,656 857 5,996 5,954

1,262 -6,723 7,232 3,947

202 102 108 180 70 58 322 63

-817 1,163 4,073 5,520 1,480 4,085 -322 1,547

-7,757 -3,946 40 8,208 5.441 4,070 -5,023 3,335

3,750 -26

-5,396 2,127 435 94 2,042 1,009 -864 -3,057 2,321 144 -5,421 4,056 4,298 -4,550 -1,916 -1,400

1993 September October November December

366 1,396 5,911 1,394

1994 January February March April May June

1,264 900 1,101 1,395 4,143

1,264

1,610

3,750

--616 440

927 5,911 1,394

-616 900 1,101

147 209

1,395

155

1,413 2,817

1,103 1,117

3,281 4,599 155

4,143

July August

Net change outright holdings

Weekly June 8 15 22 29 July 6 13 20 27 August 3 10 17 24 31 September 7 14 21

151 207.0 ... -..

246 147

214 147

302 20

-302 -20

_.~ .. ~ -. .. ~ 151

184 517 409 501

184 517 409 501 .-.

Memo: LEVEL (bil. $) 6 September 21

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 exchange for maturing bills. Excludes maturity shifts and rollovers of maturing issues.

.. ~

184 512 409 443 4,459 -20

-07.0

58 2,530

938 .--.

4,459 20

87.1

26.1

34.3

365.4

354.5

6.5

4. Reflects net change in redemptions (-) of Treasury and agency securities. 5. Includes change in RPs (+), matched sale-purchase transactions (-),and matched purchase sale transactions (+). 6. The levels of agency issues were as follows: within 10 September 21

1 year 1.5

1-5 1.7

5-10 0.6

over 10 0.0

total 3.8

Cite this document

APA

Federal Reserve (1994, September 26). Bluebook. Bluebooks, Federal Reserve. https://whenthefedspeaks.com/doc/bluebook_19940927

BibTeX

@misc{wtfs_bluebook_19940927,
  author = {Federal Reserve},
  title = {Bluebook},
  year = {1994},
  month = {Sep},
  howpublished = {Bluebooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/bluebook_19940927},
  note = {Retrieved via When the Fed Speaks corpus}
}