Bluebook

Prefatory Note The attached document represents the most complete and accurate version available based on original copies culled from the files of the FOMC Secretariat at the Board of Governors of the Federal Reserve System. This electronic document was created through a comprehensive digitization process which included identifying the bestpreserved paper copies, scanning those copies, 1 and then making the scanned versions text-searchable. 2 Though a stringent quality assurance process was employed, some imperfections may remain. Please note that some material may have been redacted from this document if that material was received on a confidential basis. Redacted material is indicated by occasional gaps in the text or by gray boxes around non-text content. All redacted passages are exempt from disclosure under applicable provisions of the Freedom of Information Act. 1 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 optical character recognition computer program (OCR) first created electronic text from the document image. Where the OCR results were inconclusive, staff checked and corrected the text as necessary. Please note that the numbers and text in charts and tables were not reliably recognized by the OCR process and were not checked or corrected by staff. Content last modified 6/05/2009. (CONFIDENTIAL FR) March 5, 1971 MONETARY AGGREGATES AND MONEY MARKET CONDITIONS Prepared for the Federal Open Market Committee By the Staff BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM CONFIDENTIAL (FR) March 5, 1971. MONETARY AGGREGATES AND MONEY MARKET CONDITIONS Recent developments (1) Following shortfalls in January, the key monetary aggregates in February all appear to have exceeded their targeted growth paths, although deposit data in the week ending March 3 are still partly estimated. The change from January to February was particularly dramatic in the narrowly defined money supply which is now estimated to have grown in February at an annual rate of 14 per cent. September,M 1 As a result, over the longer period since now appears to have grown at slightly more than a 5 per cent annual rate, with the February acceleration recapturing much of the fourth quarter and January shortfall. Recent Rates of Growth in Key Monetary Aggregates (Per cent Annual Rates of Change) January Bluebook Path Actual February Bluebook Latest Fstim;tes Path M1 2.8 1.1 9.0 14.0 M2 12.6 11.5 20.0 21.8 Adjusted proxy 10.9 10.5 8.5 12.9 (2) Following the February 9 Committee meeting, a substantial downward revision for the week ending February 3 and preliminary estimates for the week ended February 10 and 17 indicated that both narrow and broad measures of the money supply were averaging well below the Blue Book path adopted by the Committee, But data received in the past two weeks indicated that deposit measures were climbing back to well above path--as shown in the detailed table below--with the bulk of the pick-up appearing in the revised data for the -2statement week ending February 17. Since not all of the bulge in that holiday week has been reversed in subsequent weeks, it would appear that some of the stronger money supply performance recently has reflected the February acceleration of business loan activity at banks and other demands associated with the first quarter strengthening of economic activity. Recent Paths of the Key Monetary Aggregates (Seasonally adjusted, billions of dollars) Bluebook Paths Adjusted Credit Proxy M2 M1 Actual Bluebook Paths Actuals Bluebook Paths Actuals Month January February 215.1 216.7 214.8 217.3 423.4 430.4 423.0 430.7 334.2 336.6 334.1 337.7 Week ending February 3 10 17 24 216.1 216.4 217.1 216.8 214.7 216.2 218.6 217.9 427.4 428.9 430.6 431.3 425.3 428.6 432.0 432.5 335.9 336.2 336.3 337.3 335.6 337.4 337.4 338.4 3e 216.9 Estimated. 217.3 432.5 432.8 336.5 339.0 March e -- (3) In the week ending February 17, the Federal funds rate averaged a relatively high 4.14 per cent, as banks and the System both tended to underestimate reserve needs over the novel four day Lincoln-Washington's Birthday weekend. As the next statement week began, with available deposit data suggesting that the monetary aggregates had fallen well below path, the Desk lowered the Federal funds target to 3-1/2 per cent as specified. Thereafter, although fluctuating rather widely from day-to-day, the funds rate averaged just under 3-1/2 per cent. Except in the week immediately following the Committee meeting, the net reserve position of banks has been only slightly negative on average, average borrowings have been minimal (after allowance for special emergency advances). and -3(4) The further reduction of the Federal funds rate was accompanied by sizable additional declines in other short-term market rates. For example, the 3-month Treasury bill was most recently quoted at 3.34 per cent, down 30 basis points from its level at the time of the last Committee meeting, and over the same period most other short-term rates have declined by 30 to 50 basis points. Downward pressures on bill rates have also strongly reflected heavy sustained volume of foreign official purchases. Partly in an effort to minimize downward pressures on bill rates, the Treasury offered a $1.2 billion "strip" of 3- to 6-month bills on February 18, and the Desk has met some of the foreign demand through direct bill sales from System account. Also, in its own reserve supplying operations, the Desk has minimized outright acquisitions of bills in the market, placing greater stress on repurchase agreements with dealers and on purchases of coupon issues. (5) In contrast with the recent declines of short-term rates, yields in corporate and municipal security markets have turned sharply upward since the last meeting of the Committee. Rate advances have been largest in the corporate bond market, where changed interest rate expectations have been accompanied by a very large volume of offerings and a rapid the new issue calendar. build-up in In the market for Treasury securities--where System purchases of coupon issues have totaled nearly $620 million since the last meeting--yields on intermediate maturities have declined significantly, while those on longer maturities have increased somewhat. (6) The table on the next page summarizes seasonally adjusted annual rates of change in major financial aggregates for selected periods. Third Quarter (Sept. over June) Fourth Quarter (Dec. over Last 2 months (Feb. over Sept. ) Dec.) Last 5 months (Feb. over Sept.) Total Reserves 19.1 6.6 11.7 8.7 Nonborrowed Reserves 24.4 9.4 11.8 10.4 Concepts of Money M1 (Currency plus demand deposits 1/) 6. 1 7.5 5.1 M2 (M1 plus time deposits at commercial banks other than large CD's) 12.4 11.0 16.8 10.3 14.2 10.9 (Bank credit proxy adj.) 17.2 11.8 9.8 Loans and investments of commercial banks 2/ 13.9 14.2 9.4 M3 (M2 plus deposits at thrift institutions) 3/ Bank Credit Total member bank deposits Short-term market paper (actual $ change) Large CD's $ 8.5 $ 4.3 Bank-related commercial paper N.S.A. Nonbank commercial paper - 3.0 -1.2 -2.3 1.5 $ 5.7 $ 1.4 3/ - 0.3 -2.6 4/ 1.5- Other than interbank and U.S. Government. 1/ 2/ Based on month-end figures. Includes loans sold to affiliate and branches. 3/ January 1971 over December 1970. 4/ January 1971 over September 1970. End-of-month not available, last Wednesday data seasonally adjusted. 5/ e--Estimated N.S.A.--Not seasonally adjusted. NOTE: All items are based on averages of daily figures, except for data on total loans and investments of commercial banks, commercial paper and thrift institutions--which are either end-of-month or last Wednesday of month figures. Prospective developments (7) Assuming that existing money market conditions--typified by a Federal funds rate around 3-1/2 per cent--are maintained, the staff would now expect the narrow money supply (M1) to grow at about a 6 per cent annual rate in March and a 7 per cent rate over the first quarter. Although such a first quarter growth rate would be more rapid than the 6 per cent path for M1 adopted at the previous FOMC meeting, it would, if realized, just about make up for shortfalls relative to Committee targets earlier in the winter. For the fourth and first quarters combined, the growth rate of M 1 would be at about a 5-1/4 per cent annual rate. The table below shows the path of M 1 --and also M 2 --now expected to be consistent with a 3-1/2 per cent Federal funds rate, compared with the path adopted at the February 9 meeting (seasonally adjusted figures in $ bill.): M1 M2 Hat a of Feb. 9 Current Path Path as ot Feb. 9 Current Path January 215.1 214.8 423.4 423.0 February 216.7 217.3 430.4 430.7 March 217.9 218.4 435.2 435.5 First quarter growth rate (March over December) 6% 7% 15-1/2% 16% (8) Growth in other time and savings deposits has been about as rapid as expected, while bank issuance of large negotiable CD's have been running ahead of expectations. Offering rates on CD's have been dropping, though in recent weeks not quite as rapidly as declines in Treasury bill rates. -6The expansion in likely that large CD's since the first of the year makes it bank credit may grow slightly more rapidly than earlier expected in the first quarter. The following table shows the current estimate for the adjusted credit proxy and total reserves, assuming a 3-1/2 per cent Federal funds rate, as compared with the February 9 paths (seasonally adjusted figures in $ bill.). Total Reserves Current Path as of Path Feb. 9 Adj. Credit Proxy Current Path as of Path Feb. 9 January 334.2 334.1 30.2 30.2 February 336.6 337.7 30.6 30.5 March 340.1 341.1 30.8 31.0 First quarter growth rate (March over December) 10-1/2% (9) Attainment cf a 6 per cen 13-1/2% 11% 12% rate for M1 over the first growth quarter would require growth to fall of to 3 per cent in March. projections of money demand are correct, If the staff this would seem to necessitate a marked tightening of the money market in the last three weeks of March. Since the Committee expressed itself as willing to accept an overshoot for M 1 in the first quarter, the paths presented in the following paragraphs for FOMC con- sideration do not include a 3 per cent M1 growth target for March. course, anticipations the growth rate in M1 could well result a as either of because the behavior of banks revisions of and the differently from staff expectations. 1/ Fairly firm deposit data ending February 24. Of diverge fromcurrent bank deposit public over March data works or out quite 1/ are available only through the statement week -7(10) The table on the next page shows three alternative monthly paths extending throughout the second quarter for the major monetary aggregates. Alternative A assumes a Federal funds rate maintained at 3-1/2 per cent--that is, it assumes current money market conditions. Thus, it is an extension through June of the current paths described in the preceding paragraphs. While it is particularly difficult at this juncture to judge the implications for succeeding months of the recent sharp rise in the monetary aggregates, it is our best current judgment that the extension of these paths would lead to annual rates of growth in the second quarter of 9 per cent for M1, 14-1/2 per cent for M2, 11 per cent for the adjusted credit proxy, and 10 per cent for total reserves. The other two sets of paths presented are designed to indicate alternatives for the Committee that call for slower growth rates in the aggregates than now seem probable under unchanged money market conditions. Alternative B, for instance, shows a 7 per cent annual rate of growth for M1 A over the second quarter and alternative C a 6 per cent rate of increase. fourth alternative designed to focus on an objective of achieving somewhat easier over-all credit market conditions is presented in paragraphs (18) and (19). (11) Under all of the alternatives growth in money supply--whether M1 or M 2 --would be expected to slow over coming months from the unusually rapid February rates of increase. However, as indicated in the preceding paragraph, under alternative A, M 1 would be expected to grow more rapidly in the second quarter than in the first. With short-term interest rates persisting around current levels, the willingness of the public to hold cash seems likely to Alternative Monthly and Quarterly Paths of Key Monetary Aggregates (Seasonally Adjusted, Billions of Dollars) M1 Alt. 1971 February March April May June A 217.3 218.4 219.9 221.8 223.3 M2 B Alt. 217.3 218.3 219.5 221.1 222.2 Alt. C Alt. C Alt. A Alt. B 217.3 218.2 219.2 220.5 221.4 430.7 430.7 430.7 435.6 435.4 435.3 440.7 446.1 451.3 439.8 444.4 448.9 439.2 443.0 447.0 Per Cent Annual Rates of Growth 6.0 8.0 10.5 8.0 March April May June 1st Q. 1971 2nd Q. 1971 5.5 6.5 8.5 6.0 5.0 5.5 7.0 5.0 13.5 14.0 14.5 14.0 13.5 12.0 12.5 12.0 13.0 11.0 10.5 11.0 7.0 7.0 6.5 6.0 16.0 14.5 15.5 12.5 15.5 11.0 Total Reserves Adjusted Credit Proxy Alt. A Alt. B 337.7 341.1 346.8 348.3 350.5 337.7 341.1 346.5 347.5 349.4 Alt. C Alt. A Alt. B Alt. C 1971 February March April May June 337.7 341.0 346.2 347.1 348.7 30.5 31.0 31.4 31.8 31.7 30.5 31.0 31.3 31.7 31.5 30.5 30.9 31.2 31.5 31.3 Per Cent Annual Rates of Growth March April May June 1st Q. 1971 2nd Q. 1971 12.0 20.0 5.0 7.5 12.0 19 0 3.5 6.5 11.5 18.5 3.0 5.5 18.0 15.5 12.0 11.0 12.0 9.5 12.0 9.0 16.0 -2.0 17.5 13.5 14.0 -5.5 16.5 11.5 12.0 -8.0 13.5 10.0 13.5 7.5 13.0 5.0 increase, given transactions needs associated with staff GNP projections, an opportunity cost of holding money lower on average in the second quarter than in the first, and the probablity that expectations of rising interest rates (and falling capital values) would become more pervasive in an expanding economic situation. Growth in M 2 would be expected to moderate from the first quarter pace, even under alternative A, however, as the initial asset adjustment by the public to the sharp drop of late 1970 and early 1971 in market rates relative to time deposit offering rates runs it course. (12) The demand for bank credit is expected to be fairly strong over the coming months under any of the alternatives. Growth in outstanding business loans at banks may not be as rapid as in February, but it is likely to be fairly sizable, sustained as the second quarter progresses by some switching of borrowers from relatively high cost capital market financing to relatively low cost bank loans. In consequence, banks may not be as active in the market for State and local government securities as they had been in the latter part of 1970 and early 1971. They are likely to continue seeking CD funds on a modest scale under prevailing market conditions and to reduce Euro-dollar borrowings at about the recent pace. If money market conditions tighten--as may be required under alternatives B and C--expectations of rising shortterm interest rates will give banks an added incentive to issue CD's in the near-term, especially longer-term CD's, offsetting in part expected slower growth under these conditions in demand and other time deposits. (13) An effort to move onto growth paths for aggregates in the second quarter slower than shown for alternative A--given staff assumptions -10as to the strength of economic recovery and attendent credit demands--seems likely to require a rise in the Federal funds rate from current levels during The money market conditions now estimated to be con- the next four weeks. sistent with alternative A through C are shown in the table below, using the second quarter annual rate of growth in M1 as a convenient index of the collection of monetary aggregates. Difference in money market conditions of these would be expected to have only relatively minor effects on growth dimensions rates for the aggregates in March. Federal Funds Rate Member Bank Borrowings Net Reserves M1 Alternative A 3-1/2 250-350 + 50 to -150 9% Alternative B 3-3/4--4-1/4 400-500 -150 to -300 7% Alternative C 4-1/4--4-3/4 500-600 -250 to -400 6% (14) Weekly paths for key monetary aggregates are shown in the table on the next page. (15) Treasury financing plans will be an influence on interest rates over the next few weeks. A total of around $5 billion of new securities could be announced between now and the next meeting of the Committee, but the exact timing of announcements is quite uncertain. depending in part on the progress of debt ceiling legislation. The cash is likely to be raised through bills and also possibly a short note, with the latter announced, if at all, in late March or early April. (16) This additional supply in the short-term area may be no more than a modest offset to downward pressure on short rates from maturing -11Alternative Weekly Paths of Key Monetary Aggregates (Seasonally adjusted, in billions of dollars) M2 M1 Alt. A Alt. B Alt. C Alt. A Alt. B Alt. C 1971 February 24p 217.9 217.9 217.9 432.5 432.5 432.5 March 3 217.3 217.3 217.3 432.8 432.8 432.8 10 217.8 217.8 217.8 433.9 433.9 433.9 17 218.5 218.5 218.4 435.5 435.5 435.4 24 218.9 218.8 218.6 436.7 436.5 436.3 31 218.9 218.7 218.4 437.6 437.2 436.8 7 219.3 219.0 218.6 438.4 437.8 437.2 April e Adjusted Credit Proxy Total Reserves Alt. A Alt. B Alt. C 1971 February 338.4 338.4 338.4 30.6 30.6 30.6 March 338.9 338.9 338.9 30.6 30.6 30.6 340.4 340.4 340.4 30.9 30.9 30.9 341.5 341.5 341.4 31.0 31.0 31.0 341.7 341.6 341.5 31.0 30.9 30.9 341.3 341.1 340.9 31.2 31.2 31.1 344.7 344.4 344.1 31.1 31.1 31.0 April p -e -- Preliminary. Estimated from partial data. Alt. A Alt. B Alt. C -12tax bills, from continued foreign demand for bills, from reinvestment of the proceeds of the extremely large volume of long-term corporate bond offerings, and from paydowns of Federal agency debt. Thus, it is possible that bill rates will decline somewhat further, though maintenance of a Federal funds rate around 3-1/2 per cent would dampen further rate declines. funds rate is moved up, bill rates are likely to rise. If the Federal How rapidly the bill rate moves up would depend for the most part on the attitudes of market participants--how soon they come to believe a rise in the funds rate would stick and whether they come to think that it would presage a further rise. Under alternative B money market specifications, a 3-month bill rate in a 3-1/2--4-1/2 per cent range might be anticipated, and under alternative C a 4--4-3/4 per cent range. (17) If short-term rates do not rise over the next few weeks, the staff would expect long-term market yields to work down, given the present wide spread of long over short rates, once headway is made in absorbing the exceptionally large volume of corporate bonds in the immediate offing. In the corporate and municipal bond market the recent rise in yields has probably reflected some discounting of potential future rate increases. Thus, a rise in short-rates of about the magnitude indicated for alternative B might not be accompanied by any appreciable rise in long rates over the second quarter as a whole, although an initial market reaction would be likely; money market tightening of the degree contemplated under alternative C more lasting long-term rate advance. might well bring a -13(18) It is recognized that the Committee could regard the second quarter projections of the aggregatesasproblematical at this juncture and could be more concerned over the policy implications of the recent firming that has taken place in bond markets. If in these circumstances the Committee would wish to promote somewhat easier over-all credit conditions, including nearterm declines in long-term rates, it could consider a policy alternative-such as Alternative D--that would call for some further easing of money market conditions. A Federal funds rate consistently around 3--3-1/4 per cent would encourage lower dealer loan rates and would lead to a further drop in short-term market rates and perhaps the prime rate. The 3-month bill rate Such developments would tend in time to might fluctuate around 3 per cent. bring long-term rates down, as a widened spread of long- over short-term rates provided greater encouragement to private borrowers to take advantage of the lower short-term financing rates. Indications of a continuing easing trend in monetary policy would also make dealers more willing holders of, and underwriters more aggressive bidders for, long-term debt. -14(19) As nearly as can be judged, the expected effect on monetary aggregates of a policy consistent with the money market specifications of alternative D would be as shown in the table below. Paths of Key Monetary Aggregates-Monthly and Quarterly (alternative D) (Seasonally adjusted, billions of dollars) Concepts of Money M1 M2 Adj. Credit Proxy Total Reserves 337.7 341.2 347.4 349.4 352.2 30.5 31.0 31.5 31.9 31.9 1971 217.3 218.4 220.0 222.1 223.9 February March April May June 430.7 435.6 441.2 447.1 453.1 Per Cent Annual Rates of Growth March April May June 6.0 9.0 11.5 9.5 13.5 15.5 16.0 16.0 12.5 22.0 7.0 9.5 19.5 17.0 17.5 1st Q. 1971 2nd Q. 1971 7.0 10.0 16.0 16.0 12.0 13.0 14.0 11.5 Paths of Key Monetary Aggregates-Weekly (Alternative D) February March April 24 217.9 432.5 338.4 30.6 217.3 217.8 218.5 219.0 219.0 432.8 433.9 435.5 436.8 437.8 338.9 340.4 341.5 341.7 341.5 30.6 10 17 24 31 7 219.5 438.8 345.0 31.2 p 3e p--Preliminary. e--Estimated from partial data. 30.9 31.1 31.0 31.2 -15- Possible directive language (20) This section presents possible language for the second paragraph of the directive for the four alternative policy courses discussed above. (21) Alternative A. This language is proposed for possible use if the Committee decides to retain the structure of the present directive--involving a primary instruction concerned with money market conditions and long-term rates, and a proviso clause relating to the aggregates. "To implement this policy, System open market operations until the next meeting of the Committee shall be conducted with a view to maintaining prevailing money market conditions additional] downward movements in longwhile accommodating ANY[DEL: promptly] term rates; provided that money market conditions shall [DEL: further] somewhat eased be MODIFIED [DEL: if it appears that the monetary AND CREDIT aggregates are DEVIATING SIGNIFICANTLY FROM [DEL: of] short falling the growth paths [DEL: desired] EXPECTED." As will be noted, the primary instruction in alternative A is identical to that of the present directive, except that it is proposed--in view of the recent increases in long-term rates--to call for accommodating "any" rather than "additional" downward movements in changes are proposed in the proviso clause. such rates. These include: Certain (a) making it a two-way clause, on the assumption that, in light of the recent stronger performance of the aggregates, the Committee would wish the -16- Desk to react to sizable deviations in either direction; and (b) referring to "credit" as well as "monetary" aggregates, in order to explicitly include the bank credit proxy among the aggregates to be considered by the Manager. If the Committee adopts this alternative, it may wish to consider the money market conditions set forth in the first line of the table in paragraph (13) above as a description of "prevailing" conditions, and for purposes of the proviso clause, to adopt the aggregate growth paths discussed earlier in connection with alternative A as the "expected" paths. (22) Alternative B. This language is proposed for possible use if the Committee decides (a) to formulate its primary instruction in terms of desired growth rates for the aggregates, and (b) to adopt as targets the growth rates (including a 7 per cent second-quarter rise in M1) discussed earlier in connection with alternative B. "To implement this policy, THE COMMITTEE SEEKS TO PROMOTE SUSTAINED GROWTH IN MONETARY AND CREDIT AGGREGATES OVER THE MONTHS AHEAD. System open market operations until the next meeting of the Committee shall be conducted with a view to maintaining [DEL: prevailing] BANK RESERVES AND money market conditions CONSISTENT WITH THAT OBJECTIVE [DEL: accommodating while provided rates, long-term in movements downward additional somewhat eased be promptly shall conditions market money that further if it appears that the monetary aggregates are falling short desired]." path growth the of The phrase "sustained growth" is suggested as a description of the Committee's objective for the aggregates because the second-quarter growth rate for -17M 1 shown for this alternative is the same as the rate now expected for the first quarter. (23) use if Alternative C. This language is proposed for possible the Committee decides to adopt as targets the growth rates for the aggregates (including a 6 per cent second-quarter rise in M ) discussed earlier in connection with alternative C. "To implement this policy, THE COMMITTEE SEEKS TO PROMOTE MODERATE GROWTH IN MONETARY AND CREDIT AGGREGATES OVER THE MONTHS AHEAD. System open market operations until the next meeting of the Committee shall be conducted with a view to maintaining [DEL: prevailing] BANK RESERVES AND money market conditions CONSISTENT WITH THAT OBJECTIVE[DEL: accommodating while provided rates, long-term in movements downard additional that money somewhat eased be promptly shall conditions market falling are aggregates monetary the that ifitappears further short desired]." path growth the of This language differs from alternative B only in that the word "moderate" rather than "sustained" is suggested to describe the lower target growth rates for the aggregates. (24) use if Alternative D. This language is proposed for possible the Committee decides to place primary emphasis on achieving more accommodative credit market conditions at this time. "To implement this policy, System open market operations until the next meeting of the Committee shall be conducted with market] money prevailing maintaining a view to [DEL: ATTAINING SOMEWHAT -18downward additional accommodating while EASIER conditions [DEL: movements rates] long-term in IN MONEY AND CREDIT MARKETS; be promptly shall conditions market money provided that [DEL: furhter] eased somewhat OPERATIONS SHALL BE MODIFIED if it appears that the monetary AND CREDIT aggregates are [DEL: falling of] short DEVIATING SIGNIFICANTLY FROM the growth paths [DEL: desired] EXPECTED." If the Committee adopts this alternative, it may wish to consider the money market conditions described in paragraph (18) above as a description of the somewhat easier conditions to be attained. Paragraph (18) discusses the probable consequences of such money market conditions for credit market conditions generally, and paragraph (19) sets forth the staff expectations for growth rates in the aggregates under this alternative. CHART 1 STRICTLY CONFIDENTIAL (FR) 3/5/71 MONETARY AGGREGATES NARROW MONEY SUPPLY M1 BILLIONS OF DOLLARS 1230 (3/3/71) 1220 I I I BROADER MONEY SUPPLY M2 (3/3/71)- -430 420 -1 1969 1970 1971 N D J '70 --- Actual Currently Projected --- Wkly Path, Indicated at FOMC Meeting (2/9/71) .- F '71 Longer Run Path (FR) 3/5/71 CHART 1A STRICTLY CONFIDENTIAL MONETARY AGGREGATES ADJUSTED CREDIT PROXY BILLIONS OF DOLLARS 340 13/3/71) 330 10~/2% -320 j310 L1 II I 1 I I I S' I t I ' "- I I I I I TOTAL RESERVES 1969 1970 1971 I N I i i D J '70 - Actual - Currently Projected --- Wkly Path, Indicated at FOMC Meetng(2/9/71) Z- F 71 Longer Run Path 3/5/71 'CHART 2 INTEREST BEARING SOURCES OF BANK FUNDS BILLIONS OF DOLLARS -230 TOTAL TIME AND SAVINGS DEPOSITS -210 -190 TIME AND SAVINGS DEPOSITS OTHER THAN CD'S -30 NONDEPOSIT SOURCES I 1969 n' - 1970 1971 10 CHART 3 MONEY MARKET CONDITIONS AND INTEREST RATES IDITIONS INTEREST RATES Short-term INTEREST RATES Long-term Table 1 STRICTLY CONFIDENTIAL (FR) PATHS OF KEY MONETARY AGGREGATES Narrow Money Supply (M 1 ) 1/ Period Path as of Feb. 9 2 Actuals & Current Prol Broad Money Supply (M2 ) 2/ 3 3 Path as of Feb. 9 March 5, 1971 Adjusted Credit Proxy 4Actuals & Current Prol. Path as of Feb. 9 6 Total Reserves Actuals & Current Prol. Pathasof Feb. 9 8 Actuals & CurrentProj. Monthly Pattern in Billions of Dollars 1970. Oct. 213.0 213.5 214.6 Nov. Dec. 1971 Jan. Feb. Mar. 1970: 1st 2nd 3rd 4th 215 1 216.7 217.9 412.1 324.8 326.7 331.2 414.5 419.0 214.8 217.3 (218.4) 423.0 430.7 (435.5) 423.4 430.4 435,2 334.2 336.6 340.1 29.4 29.5 29.9 334.1 337.7 (341.1) 30.2 30.6 30.8 30.2 30.5 (31.0) Annual Percentage Rates of Change--Quarterly and Monthly 5.9 5.8 6.1 3.4 Qtr. Qtr. Qtr. Qtr. 1971- 1st Qtr. 1970: Oct 6.0 (7.0) 15.5 2.8 9.0 6.5 Jan. Feb. Mar. 10.5 (16.0) 1.1 2.8 6.2 Dec 1971: 3.4 8.4 11.0 9.2 10.9 8.5 12.5 11.5 21.8 (13.5) 12.6 20.0 13.5 -2.9 2.6 8.3 6.7 19.1 (12.0) (14.0) 11.0 -1.9 3.6 18.4 1.1 7.0 16.5 7.3 7.0 13.0 1.1 14,0 ( 6.0) 0.5 6.5 17.2 10.5 12.9 (12.0) 12.2 11.0 (18.5) 12.2 14.5 6.5 Weekly Pattern in Billions of Dollars 1971- NOTES Jan. 6 13 20 27 Feb. 3 10 17 24 Mar. 3 10 214.7 216.2 218.6 217.9 427.4 428.9 430.6 431.3 216.9 217.3 217.8 (217.8) 432.5 434.0 216.1 216.4 217.1 216.8 III T 425.3 428.6 432.0 432.5 . 30.5 29.8 30.4 30.2 333.3 332.5 334.1 335.3 422.2 422.1 423.2 423.4 215.4 215.2 214.9 213.8 432.8 (434.0) I . ¢ n 335.9 336.2 336.3 337.3 335.6 337.4 337.4 338.4 336.5 338.2 339.0 (340.4) Annual rates of change other than those for the past are rounded to the nearest half per cent. Data shown in parenthesis are current projections. 2/ Currency plus private demand deposits. M I/ plisstime deposits other than large CD's. 1 - pe 30.3 30.3 30.7 30.6 30.3 30.5 30.7 30.6 ~ - I 30.8 30.7 Partially estimated. . 30.6 (30.9) - FR712-D Rev2/16/71 Table 1-A STRICTLY CONFIDENTIAL (FR) March 5, 1971 PATHS OF KEY MONETARY AGGREGATES 1970: Oct. Nov Dec. 1971: Jan. Feb. Mar. 1970: 1st 2nd 3rd 4th 5.2 6.0 6.2 6.7 6.9 6.8 1st ( 1970: Oct. Nov. 235.4 240.6 244.4 208.3 213.7 217.3 24.0 (25.0) 25.5 28.0 (20.0) 23.2 23.9 26.0 14.2 12.7 11.6 208.2 213.5 (217.2) 27.1 27.4 (27.6) 10.1 8.6 (7.5) 0.9 25.0 (25.0) 14.0 12.1 19.7 20.3 15.1 28.8 Jan. Feb. Mar. 199.1 201.1 204.4 11.3 16.5 15.4 21.8 Dec. 1971: 235.3 240.8 (244.8) Annual Percentage Rates of Change--Quarterly and Monthl 1.4 14.1 32.2 ( ( ( ( 1971: 6.7 6.1 (5.7) 222.2 225.0 230.4 22.9 31.0 20.0 22.3 30-5 (21.0) Weekly Pattern in Billions of Dollars 1971: Jan. Feb 6.0 8.1 3 10 17 24 Mar. 3 pe 10 NOTES: 206.9 208.3 209.5 8.3 7.1 6.3 5.0 238.1 239.5 240.5 241.5 237.6 239.7 240.7 241.9 211.3 212.5 213.5 214.5 4.9 242,7 243.3 243.1 (243.6) 215.6 216.2 (6.2) Annual rates of change other than those for the past data shown in parenthesis are current projections. pe - Partially estimated. 206.8 233.6 234.2 235.7 236.6 5.3 5.3 6 13 20 27 210.6 212.3 213.4 214.5 215.5 (216.1) are rounded to the nearest half per cent. 26.8 27.3 27.4 27.0 10.2 10.5 10.5 10.0 27.6 27.4 27.3 27.4 8.8 9.1 8.7 8.2 27.6 (27.5) 7.9 (7.6) FR 712-K Rev2/16/71 Table 2 CONFIDENTIAL (FR) AGGREGATE RESERVES AND MONETARY VARIABLES RETROSPECTIVE CHANGES. SEASONALLY ADJUSTED (Annual rates in percent) _____________ Reserve Aggregates 1 2 3 Total Private Time Demand Deposits osd Deposits Adjusted Member Adjusted Reserves Bank Deposits Credit Proxy Total n.a. + 7.8 + 3.1 + 5.4 + 7.4 + 6.0 + 6.3 + 7.9 + 2.4 + 5.1 +11.1 n.a. + 8.3 n.a. - 1.2 + 5.1 + 1.2 + 6.5 + 5.4 + 4.7 + 0.1 - 3.5 -46 + 3.3 +20.0 + 3.5 +12.9 + 5.9 + 4.8 + 7.8 + 4.6 + 5.3 + 4.7 + + - + 6.4 + 9.5 +11.8 Serti-afnualY 1st Half 1969 2hd Half 1969 + 0.7 - - 1st Half 1970 2nd Half 1970 - 0.2 +13.0 + 1.9 +17.1 QuOarterly 3rd Qtr 1969 4th Qtr. 1969 - - + 1.4 1st 2nd 3rd 4th + 2.6 +19.1 + 6.6 + 4.1 +24.4 + 9.4 + 6.3 +12.1 Month . 1969: Dec. 7 9 Nonborrowed +7.8 -1.6 1970 1970 1970 1970 6 5 8 Total Annvally 1968 1969 1970 Qtr. Qtr. Qtr. Qtr. Monetary Variables Money Supply 4 Reserves Pertod - - 3.9 9.3 2.9 6.0 3.0 3.7 2.4 March 5, 1971 + - 9.0 4.0 3.5 Currency - 5.0 +18.4 - 6.6 7.8 +27.9 Addenda 10 Nonbank Thrift D sit. Comercial + 6.3 + 3.4 + 7.8 + 5.3 + 1.6 +28.3 + 4.7 +10.6 +12.8 +1.7 n.a. - 0.1 + 0.1 - 4.3 + 2.0 + 0.8 + 1.6 + 4.5 + 6.2 + 0.3 - 0.4 + 1.8 + 1.4 +31.6 +23.2 - + 0.6 + 6.0 +24.1 +15.1 + 0.5 + 6.5 +17.2 + 8.3 + + + + + + + + + + + + + 1.4 +14.1 +32.2 +21.8 + 2.5 + 7.0 + 9.3 +11.5 +17.8 +7.5 -16.2 +20.4 + 0.8 + 0.6 + 3.7 + 1.3 +27.4 - - 2.5 + 3.1 + 6.7 +12.6 +26.2 4.8 0.4 - 9.4 -- 5.9 5.8 6.1 3.4 6.1 9.4 3.3 5.8 -12.7 5.3 5.3 6.7 2.7 + 2.6 + 0.8 2 3.5 + 9.4 + 5.2 + 9.9 - 5.5 +10.7 - 4.1 +12.3 + - + 7.8 +12.9 + 1.2 +11.2 4,5 +13.7 - 1.2 + 9.9 + 5.2 + 5.8 + 7.0 + 2.3 +10.3 +15.3 + 2.5 +10.5 + 3.0 + 2.2 +19.7 +10.9 +11.4 + 8.1 + 5.3 + 7.3 +34.4 +18.9 -30.0 +18.1 +23.2 + 9.7 + 5.7 + 6.8 + 5.7 + 7.5 + 4.4 + 2.5 + 8.9 +35.6 +28.8 +29.8 +11.9 + 5.9 +40.1 +22.7 +29.2 +19.0 -87.5 -7.2 +49.6 + 1.1 + 7.0 +16.5 + 1.1 + 2.8 + 6.2 + 7.5 - 0.7 + 4.9 + 4.9 + 2.2 + 6.6 +20.3 +15.1 +28.8 +10.6 + 4.4 +22.8 +10.1 +13.1 +21.4 +14.2 +32.4 -28.7 +58.0 + 8.8 +16.1 +10.5 + 1.1 + 7.4 - 1.4 +25.5 +25.3 - 9.0 - 8.0 + 3.1 -12.0 + April May June +21.3 -13.9 + 0.5 +25.4 -19.0 + 6.2 +16.8 July Aug. Sept. + 6.0 +23.3 +27.5 -16.1 +48.8 Oct. Nov. Dec. - 1.9 + 3.6 +18.4 1971: Jan. +12.2 NOTE. Aggregate reserve series have been adjusted to elitinate changes in percentage reserve requiremfents against deposits, but reserve requireebts FA Z on Eurodollar borrowings are included beginning October 16, 1969, and requirements on bank-related cofamercial paper are inclu4ed beginning October 1, 1970 Jan. Feb. March 7.2 -15.6 + 7.5 - 4.2 8.0 +14.0 - 5.2 -- 6.8 +6.6 +10.0 + 9.4 +13.8 2 1970. CONFIDENTIAL(FR) March 5, 1971 Table 3 AGGREGATE RESERVES AND MONETARY VARIABLES SEASONALLY ADJUSTED (In billions of dollars) (In millions of dollars) 1969- July Aug Sept. 27,530 27,401 27 402 20,275 26,214 26 383 27,334 27,161 27,144 288.0 285.3 285.7 2.4 2.9 4.4 203.1 202.6 202.8 45.0 45.2 45.3 158.1 157.4 157.6 198.1 195.4 194.8 14.1 12.5 12.0 184.0 182.9 182.8 305.7 303.8 304.2 Oct. 26.210 26 538 26,806 27,129 27.548 27,707 283.5 285.8 285.8 3.1 5.6 4.9 203.2 203.5 203.6 45.6 45.9 46.0 157.6 157.6 157.7 194.2 Dec. 27 354 27 783 27,928 194.6 11.5 11.1 11.2 182.6 182.9 183.4 302.2 305.5 305.7 Jan. Feb. March 28,001 27,722 27.723 26.966 26,615 26,782 27,823 27,523 27,536 284.8 282.9 286.2 5.3 5.6 5.9 205.2 204.5 206.6 46.2 46.4 46.7 159.0 158.1 159.8 193.3 193.5 195.3 10.6 10.6 11.5 182.7 182.9 183.8 304.8 303.4 306.1 April May June 28.216 27.890 27,902 27,350 26,916 27,056 28,046 27,692 27,713 290.2 289.1 290.5 5.2 3.0 4.8 208.3 209.2 209.6 47.1 47.7 47.8 161.2 161.6 161.9 198.5 200.3 202.2 12.9 13.2 13.2 185.6 187.1 189.0 309.6 309.3 311.1 July Aug. Sept. 28,041 28 585 29,240 26.694 27,780 28,708 27,896 28,408 29,024 296.0 303.2 210.6 211.8 212.8 48.1 48.2 48.2 162.5 163.7 164.6 208.2 213.2 218.5 16.9 19.0 21.7 191.3 194.2 308.6 4.4 6.4 6.2 315.8 321.9 324.5 Oct. NOv. Dec. 29,385 29,474 29.925 28,928 29,033 29.584 29,134 29,233 29.703 310.6 314.0 319.6 5.2 6.0 6.2 213.0 213.5 214.6 48.5 222.2 225.0 230.4 23.2 23.9 26.6 199.1 201.1 48.9 164.5 164.8 165.7 204.4 324.8 326.7 331.2 Jan. 30,229 29,801 30,029 323.9 6.7 214.8 49.2 165.5 235.3 27.1 208.2 334.1 Nov. 1970- 1971* 1971: N6TES 48.7 194,0 196.8 Jan. 6 13 20 27 30,524 29,812 30,402 30,206 30,052 29,610 29,830 29,702 29,939 30,005 30,306 29,874 323.1 322.0 323.5 325.3 215.4 215.2 214.9 213.8 49.2 49.1 49.2 49.3 166.2 166.1 165.7 164.6 233.6 234.2 235.7 236.6 206.8 206.9 208.3 209.5 333.3 332.5 334.1 335.3 Feb. 3 10 17 p 24 p 30,250 30,293 30,658 30 616 29,880 30,096 30,044 30 457 29,990 30,080 30,369 30,384 326.8 328.3 328.7 330.2 214.7 216.2 218.6 217.9 49.5 49.5 49.9 49.5 165.3 166.8 168.7 168.5 237.6 239.7 240.7 241.9 210.6 212.3 213.4 214.5 335.6 337.4 337.4 338.4 Aggregate reserve series have been adjusted to eliminate changes in percentage reserve requirements against deposits, but reserve requirements on Eurodollar borrowings are included beginning October 16, 1969, and requirements on bank-related cofmercial paper are included beginning October 1 1970. Adjusted credit proxy includes mainly total member bank deposits subject to reserve requirements, bank-related cominercial paper, and Euro-dollar Weekly data are daily averages for statement weeks. Monthly data are daily averages except for flonbank commercial borrowings of U.S. banks. FR712-F paper figures which are for last day of month. Table 4 MARGINAL RESERVE MEASURES (Dollar amounts in millions, based on period averages of daily figures) Member Period Free reserves Excess reserves Banks Borrowi Total 8 N.Y. nRs C I t y Other Reserve R e Maaor banks Country Outside N.Y. Monthly (reserves weeks ending in): 1969--July August September October November December -1,045 997 744 995 975 - 849 266 214 282 195 238 278 1,311 1,211 1,026 1,190 1,213 1,127 89 81 83 106 120 268 250 253 236 327 387 310 364 256 222 293 250 220 608 621 465 464 456 329 1970--January February March April May June July August September October November December 759 916 751 - 687 - 765 736 -1,134 - 706 374 - 274 199 84 169 210 129 178 159 171 183 175 235 193 210 264 928 1,126 880 865 924 907 1,317 881 609 467 409 348 148 106 90 227 165 140 218 143 101 12 42 36 287 317 225 331 241 269 460 278 115 40 17 16 232 289 287 119 228 217 348 273 274 313 294 265 261 414 278 188 290 261 291 187 119 102 57 30 1971--January February p - 140 75 238 261 378 336 45 29 36 30 262 248 35 29 2 9 16 23 30 - 482 348 144 507 389 178 415 356 -47 272 660 763 500 460 661 79 160 89 75 103 181 143 93 77 79 221 343 224 258 325 179 117 94 50 154 Oct. 7 14 21 28 - 46 409 397 242 352 41 189 191 398 450 586 433 -71 16 11 4 46 97 13 304 312 342 292 90 71 131 117 Nov. 4 11 18 25 - 105 163 166 360 318 282 164 76 423 445 330 436 11 69 -86 15 29 1 22 311 282 295 287 86 65 34 41 Dec. 2 - 38 417 455 86 22 300 47 9 - 154 136 290 -- -- 263 27 16 23 30 - 279 114 164 120 211 434 399 325 270 55 39 -- 48 11 -- 268 250 245 28 25 £5 138 245 380 72 545 32 92 282 407 277 472 354 71 -82 26 60 -63 20 250 249 284 266 26 28 43 42 1970--Sept. 1971--Jan. 6 13 20 27 - Feb. 3 10 17 p 24 p - 46 42 285 73 237 205 279 322 283 247 564 249 --114 -- --121 -- 253 229 281 228 30 18 48 21 Mar. 3 p - 146 114 260 - 1 £42 17 p - prel4mlnary. Table 5 SOURCE OF FEDERAL RESERVE CREDIT Retrospective Changes (Dollar amounts in millions of dollars, based on weekly averages of daily figures) PerTod Total Federal Reserve credit (Excl. float) U.S. Government securities Total holdings Bills I/ Other +4,279 ( -) 43,220 (- 143) + 707 +1,180 Repurchase agreements Year- 1969 (12/25/68 - 12/31/69) 1970 (12/31/69 - 12/30/70) 45,530 +3,351 +5,192 +4,276 2 9 16 23 30 + 189 + + 473 + 248 982 689 + + 7 14 21 28 - Federal Agency Securities Bankers' . acceptances + 206 + 67 - 124 - 63 + - 35 28 + + + 133 123 250 - 506 + 196 + + + 13 37 12 38 49 + + + + 12 17 13 40 21 - S 18 56 + 25 4 + 83 + 16 Member banks borrowings + 245 - 834 + 103 - 263 Weekly 9 1 70--Sept. Oct. Nov. Dec. 1971--Jan Feb. 193 ( -- - 320 372 ((- + 210 (+ 346) - 183 - 238 - + - S 56 + 67 268 - 4 + 692 + 610 + 11 18 25 - 48 - + 671 + - 141 S 75 711 93 + 986 - 303 + - 697 122 143 6 13 20 + 938 - 534 + 64 27 - 204 3 + 8 + 61 - 236 - 171 2 9 16 23 30 3 P - + + 4 ( -- ) ) 90) 256) (-( -(-( -- ) ) ) ) 241 ( -- + + (509 (+ 273 (- ) 214) 214) 150) 853 145 586 + + 475 (+ 82 (328 (+ 150) 244) 244) 35 3 + ) 134 ( -95 (- 143) 4 152 + 137 722 - 308 + + - (1- 97) (+ 46) (- 159) (+ 85) + 109 -153 81 - 16 63 94 428 19 236 - 65 - 205 - 44 + 369 + 63 + 19 + 134 + - + 41 -114 +1,525 +1,082 - 932 - 518 + 282 + 286 + 120 (+ 367) ~-_-- Figures in parenthesis reflect reserve effect of match sale-purchase agreement. -1 - 40 + 201 - 263 + + 52 136 -153 202 500 6 + 62 - 107 + - 10 22 115 + 106 + 337 + 73 + 19 - 177 + 258 + + - 321 45 30 24 - 7 64 165 109 - 74 S 55 + - 185 327 + 137 - 130 + 83 + 195 + + 51 59 13 S 16 S 26 (+ 74) S 61 (- 412) + 333 (+ 412) 218 (- 367) -- 1/ 31 + 482 5 224 479 10 17 p 24 p Mar. + + 164 316 14 864 418 118 - + 87 + 6 - 71 - 110 - 16 - + 106 + 209 + 643 + 85 - 509 - 68 + - 36 317 315 + 207 - 41 - 9 + 11 Table 6 (Dollar F a c t o r Federal Reserve credit (excl. credit (excl. 1 float) Period Gold Gold MAJOR SOURCES AND USES OF RESERVES Retrospective and Prospective Changes amounts in millions, based on weekly averages of daily figures) r e s e r v es s a f f e c t i n g sU p p 1 y of Other nonmember Foreign y Currency deposits and er Float deposits pera n outside ( Year 1969 (12/25/68 - 12/31/69 1970 (12/11/69 - 12/30/70 +5,539 43,351 +1,150 i g n icat i -2,676 -3,122 2/ effect - 813 + 773 + 15 Change in i total = Bank use of reserves reserves F.R. accounts and gold loans perations banks stock = Required Excess reserves reserves r e s e r v e s) on + 241 + 667 + + 54 1 - 217 + 379 + + + + + 20 4 6 21 4 898 +1,448 -1,655 +1,363 - +1,340 +1,257 + 108 - 94 + + + + 153 324 49 124 321 + 40 + 80 - 311 Weekly 1970--Sept Oct. Nov. 2 9 + + 189 473 16 23 30 + 248 982 689 7 14 21 28 + - A + 4 11 18 25 Dec. 1971--Jan. Feb. Mar. - 78 + 154 - 124 + 35 + 214 - 163 63 71 692 48 671 141 + 46 - 353 - 545 - 298 + 146 + 81 + + 88 153 986 + 303 697 - 122 143 6 13 20 27 + + 938 534 64 - 204 3 10 17 p 24 p + 8 - 236 p - 260 S329 S549 + 432 - 3 36 -214 196 -170 205 -124 861 482 5 224 479 + 2 9 16 23 30 - 13 - 85 - 263 - 688 - 264 + 34 + 103 - 107 + 1 - 376 + - 319 601 450 544 3 237 577 108 209 4 - 385 f + - 932 + - + 282 + +1,526 I I For retrospective details, see Table 5. 1/ Includes $400 million in special drawing account. 2/ p - Preliminary. I .L + 183 + 552 - 833 - + 20 + 174 + 576 - 311 10 4 + 100 + 169 + 95 + 193 561 10 527 640 + 271 + 1 + 230 + 1 + - 248 322 426 443 + - 328 11 278 445 - 271 86 16 + 205 73 + + + + - 78 109 156 302 + 127 + + + + + + 161 124 336 169 322 + 341 657 144 + 111 - 513 + 237 - 59 - 403 + 319 + 148 + 2 9 15 382 - 24 + 482 - 210 + 275 + + 1 17 18 - 397 - 38 390 + 5 - 187 39 + 502 - 157 3 + 75 + 206 + + + 320 260 545 + + 768 369 787 857 + + + -1,047 + 60 + 190 - 168 - - 167 - 32 + 358 + 74 - 515 213 199 432 - 297 - 340 + 43 - - 378 - 170 - 208 - 349 + 174 - 85 + 873 - - + - 8 - 19 + 188 - 250 + 8 - - 673 + 191 - 275 - + 289 - 256 - 50 - 402 + 542 - 553 + 418 + 839 16 S4 10 + 2 - - 745 + - 889 1 + I - 24 - 50 + 305 4 + 108 I- + + - + 843 99 14 45 + - 63 - - 26 34 - 130 - 7 97 + 17 I - + 40 aI L 727 36 - 118 -88 - 281 16 + 91 + 223 45 

Federal Reserve (1971, March 8). Bluebook. Bluebooks, Federal Reserve. https://whenthefedspeaks.com/doc/bluebook_19710309

@misc{wtfs_bluebook_19710309,
  author = {Federal Reserve},
  title = {Bluebook},
  year = {1971},
  month = {Mar},
  howpublished = {Bluebooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/bluebook_19710309},
  note = {Retrieved via When the Fed Speaks corpus}
}