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. 1 In some cases, original copies needed to be photocopied before being scanned into electronic format. 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Please note that the numbers and text in charts and tables were not reliably recognized by the OCR process and were not checked or corrected by staff. Strictly Confidential (FR) Class I FOMC July 14, 1978 MONETARY AGGREGATES AND MONEY MARKET CONDITIONS Prepared for the Federal Open Market Committee By the staff Board of Governors of the Federal Reserve System STRICTLY CONFIDENTIAL (FR) CLASS I - FOMC July 14, 1978 MONETARY AGGREGATES AND MONEY MARKET CONDITIONS Recent developments (1) Growth in M-1 slowed to an annual rate of about 6 per cent in June, but appears to be accelerating again in July. For June-July, M-1 is expected to expand at about a 7½ per cent annual rate, just above the mid-point of the Committee's range, and M-2 is projected to increase at about a 9 per cent rate, in the upper half of its range. Growth in the interest-bearing component of M-2 in June was bolstered by the rapid expansion of large-denomination time deposits and the introduction of the new six-month "money market" certificate. Banks are estimated to have issued $2 billion of the latter instruments during the month, resulting in a strengthening of the growth of small-denomination time deposits that about offset a decline in savings deposits of individuals. At thrift institutions, growth of the six-month certificate contributed to a strengthening of total deposit inflows in June. By the end billion of the new certificates of the month, an estimated $6 were outstanding at thrifts. Growth in Monetary Aggregates over June-July Period Ranges Memo: Latest Estimates M-1 5 to 10 7.6 M-2 6 to 10 9.1 Federal funds rate (per cent per annum) 7 to 8 Avg. for statement week ending June 21 7.53 July 28 7.78 5 12 7.72 7.72 (2) Following the June meeting the Account Management, in accordance with the Committee's instructions, adopted operating policies to raise the Federal funds rate by a ¼ of a percentage point to 7¾ per cent. This target has been maintained in subsequent weeks as incoming data have suggested that growth in the monetary aggregates in the June-July period would be well within the Committee's ranges. The rise in the Federal funds rate contributed to a marked increase in member bank borrowing at Federal Reserve Banks in late June. However, the level of borrowing then declined following the mid-year increase in the discount rate to 7-1/4 per cent. Reflecting in part the decrease in member bank borrowing and a rise in reserves required to support Government deposits after the mid-June tax date, growth in nonborrowed reserves is expected to accelerate to around a 20 per cent annual rate over the June-July period. (3) Both long- and short-term interest rates generally have risen 1/8 to 3/8 of a percentage point since the June FOMC meeting, reflecting for the most part the somewhat tighter monetary policy stance. During June, demands in credit markets from a number of nonfinancial sectors appear to have moderated. Public bond offerings by corporations picked up somewhat and commercial paper issuance increased sharply, but borrowing by businesses from banks slowed markedly from the extraordinarily rapid pace in May. In addi- tion, a fall-off in advance refunding operations led to a decline in long-term borrowing by State and local governments. As expected, the Treasury redeemed $6 billion of short-dated cash management bills in late June, but it has since raised $3.5 billion through sales of 1-year bills, 2-year notes and 15-year bonds. Conditions in primary mortgage markets appear to have stabilized somewhat in recent weeks, perhaps reflecting improved funds availability at thrift institutions. Both interest rates on commitments to make new mortgages and the percentage of associations reporting funds in short supply have changed little since mid-June. (4) Bank credit growth slowed markedly in June, following unusually rapid increases in the preceding two months. Not only was the increase in business loans much smaller than in any previous month this year, but the increase in other lending also moderated somewhat. Given the reduced pace of loan growth, banks augmented portfolios of investment securities and reduced outstanding negotiable CDs, while only moderately increasing their use of nondeposit funds. (5) The table on the next page shows percentage annual rates of change in related monetary and financial flows over various time periods. 1976 & 1977 Average Past Twelve Months June '78 over June '77 Past Six Months June '78 over Dec. '77 Past Three Months June '78 over Mar. '78 Past Month June '78 over May '78 Nonborrowed reserves 2.5 6.1 6.2 3.7 20.7 Total reserves 3.2 8.5 9.0 12.1 16.3 Monetary Base 7.7 9.6 9.3 10.5 11.5 6.8 8.0 7.8 11.1 6.2 10.4 8.6 8.0 9.1 7.9 12.3 9.8 7.9 8.6 8.4 M-4 (M-2 plus CD's) 8.6 10.7 10.2 10.4 6.6 M-5 (M-3 plus CD's) 11.1 11.1 9.3 9.4 7.6 Concepts of Money M-1 (Currency plus demand deposits) 1/ M-2 (M-1 plus time deposits at commercial banks other than large CD's) M-3 (M-2 plus deposits at thrift institutions) Bank Credit Loans and investments of all commercial banks 2/ Month-end basis 9.8 11.2 11.7 13.5 6.0 Monthly average 9.5 11.2 11.8 11.3 9.6 Short-term Market Paper (Monthly average change in billions) Large CD's Nonbank commercial paper -0.4 2.0 2.1 1.6 0.2 0.2 0.2 0.4 -0.4 0.1 1/ Other than interbank and U.S. Government. 2/ Includes loans sold to affiliates and branches. NOTE: All items are based on averages of daily figures, except for data on total loans and investments of commercial banks, commercial paper, and thrift institutions--which are derived from either end-of-month or Wednesday statement date figures. Growth rates for reserve measures in this and subsequent tables are adjusted to remove the effect of discontinuities from breaks in the series when reserve requirements are changed. Prospective developments (6) Alternative longer-run growth ranges for the monetary aggregates over the QII '78 to QII '79 period are shown below for Committee consideration. Alternative B continues the ranges for M-1, M-2, and M-3 adopted by the Committee in April for the QI '78QI '79 period, but specifies a somewhat higher range for bank credit. Alternatives A and C represent, respectively, more and less expansive policies. Alt. A Alt. B Alt. C Current Ranges M-1 5 to 7½ 4 to 6½ 3 to 5½ 4 to 6½ M-2 7 to 9½ M-3 Bank Credit 6½ to 9 6 to 8½ 6½ to 9 8 to 10½ 7½ to 10 7 to 9½ 7½ to 10 9 to 12 8½ to 11½ 8 to 11 7½ to 10½ (7) All alternatives assume a shift in the relationship among the monetary and credit aggregates, as follows: (a) In view of the strength in demand for M-1 in recent quarters, growth of M-1 is expected to be near the upper end of the ranges shown-i.e., 7¼, 6¼, and 5¼ per cent for alternatives A, B, and C, respectively. (b) However, if the regulation authorizing automatic transfers from savings to demand deposits becomes effective November 1, M-1 growth would probably fall into the lower half of the ranges shown as the public shifts demand balances to savings accounts. (c) Growth in M-2 and M-3 in any event is expected to be near the mid-points of the respective ranges. (d) Given -6aggregate credit demands associated with the staff's GNP projection, growth in bank credit is likely to be near the upper end of the revised ranges shown for this aggregate. (8) The demand for M-1 is expected to remain quite strong over the new QII '78 to QII '79 policy period, when nominal GNP is projected to rise about 11 per cent. Thus, over the next several months a further substantial rise in short-term rates appears needed to restrain M-1 growth even to the high end of the ranges shown. As indicated in Appendix I, the staff anticipates that the Federal funds rate would have to rise to the 8¾ to 9¾ per cent range by fall under alternative B. Interest rates in the fourth quarter would be about one percentage point lower under alternative A and threequarters of a percentage point higher under alternative C. (9) Even with the assumption that M-1 grows near the upper end of its ranges, the GNP projection implies relatively rapid increases in the velocity of M-1. Under alternative B, V-1 is projected to rise by 4½ per cent over the QII '78-QII '79 period,1/ as compared with an increase of 3¼ per cent over the preceding four quarters. Efforts by the public to economize on cash as interest rates rise would contribute to an increase in velocity, but--given the interest rates assumed--the 4 per cent rise that is projected also presupposes a further modest downward shift in the demand for money. 1/ Such a shift could develop as higher interest rates Projected velocity changes are shown in Appendix II. -7induce more intensive marketing of earlier innovations and cash management services. Over recent quarters, however, the demand for money has been about as strong as would be expected from historical relationships. If that tendency continues, efforts to constrain M-1 to the upper end of the ranges presented will require higher interest rates and/or lower GNP growth than projected. (10) While growth in M-1 is anticipated to be in the upper end of its ranges, growth in M-2 and M-3 over the QII '78 to QII '79 period is expected to be near the mid-points of their respective ranges. The initial success of both banks and thrifts with the new six-month certificate suggests that these institutions may be better able to maintain interest-bearing deposit inflows than the staff previously assumed. However, as interest rates rise, depository institutions may become less aggressive in their offerings of the new certificate. In addition, the projected rise in rates can be expected to slow growth of interest-bearing deposits subject to a fixed rate ceiling. As in other recent Bluebooks, the projected high level of interest rates has led the staff to assume another increase in deposit rate ceilings this fall;1/ without such an increase, M-2 growth would be near the low end of its longer-run range. (11) In view of the persistent tendency for M-1 to grow above its longer-run ranges over the past several quarters on 1/ We have assumed a 25 basis point increase in ceiling rates on all deposits with maturities of four years or more. -8average, a considerable moderation of M-1 growth over the next year would be required to compensate for such overshoots and bring M-1 growth to within a 4 to 6¼ per cent range over periods longer than one year ending in QII '79. As can be seen from the lower panel of appendix table III-1, the 6¼ per cent M-1 growth contemplated under alternative B implies annual rates of expansion of about 7 per cent for periods beginning as far back as the fourth quarter of 1975. However, constraining M-1 growth over QII '78 to QII '79 to a 5¼ per cent rate, as under alternative C, would produce M-1 growth close to the 6½ per cent upper end of April longer-run range for periods beginning with the second quarter of 1977. As shown in the lower panels of appendix tables III-2 and III-3, under all alternatives M-2 and M-3 would grow within their current 6½ to 9 and 7½ to 10 per cent longer-run ranges for periods starting with the fourth quarter of 1976 and ending in QII '79. (12) If the regulation authorizing automatic transfers from savings to demand deposits for commercial banks becomes effective as scheduled on November 1, measured M-1 growth may be reduced by 1 to 3 percentage points over the QII '78 to QII '79 period.1/ However, there is great uncertainty about such estimates since we do not know the pricing policies that commercial banks will 1/ A suit to delay the effective date of the regulation, brought by the Savings and Loan League, is now before the courts. No decision is likely before October. -9adopt; these policies, of course, will affect the attractiveness of the service to households and the willingness of individuals to transfer demand balances to savings accounts. A lower growth of M-1 resulting solely from such shifts to savings accounts would have the same policy implications as a higher growth before automatic transfers. Although M-2 might expand a bit more rapidly with automatic transfers if the new service attracted savings deposits from thrift institutions, staff believes such shifts would probably be relatively modest. In any event, M-3 growth would be virtually unchanged since that aggregate would be unaffected by shifts of funds between commercial banks and thrift institutions. Appendix IV discusses automatic transfers, and their possible affect on the monetary aggregates, in more detail. (13) Shorter-term specifications for the monetary aggregates and the Federal funds rate believed to be generally consistent with the longer-run alternatives are summarized below for Committee consideration. Two short-run alternatives are shown, one calling for no change in the funds rate over the intermeeting period--which might be associated with either long-run alternatives A or B--and the other contemplating a ¼ point rise in the rate. An easing alternative for the short-run is not presented since all proposed longer-run ranges involve either stable or rising rates over the next several months. (More detailed and longer- term data are shown in the tables on pp. 10 and 11.) -10Alternative Levels and Growth Rates for Key Monetary Aggregates M-1 M-2 Alt. A Alt. B Alt. C Alt. A Alt. B Alt. C 1978 June July August 350.4 353.0 354.6 350.4 353.0 354.5 350.4 352.9 354.2 840.6 847.6 853.2 840.6 847.6 853.0 840.6 847.3 852.3 1978 QII QIII QIV 348.4 354.9 361.5 348.4 354.7 359.6 348.4 354.3 358.3 835.1 853.5 872.2 835.1 853.1 869.2 835.1 852.3 866.9 1979 QI QII 367.8 373.8 364.7 370.2 362.1 366.7 890.5 908.6 885.4 902.2 880.9 895.9 8.9 5.4 8.9 5.1 8.6 4.4 10.0 7.9 10.0 7.6 9.6 7.1 Growth Rates Monthly: 1978 July August Quarterly Average: 1978 QIII QIV 7.5 7.4 7.2 5.5 6.8 4.5 8.8 8.8 8.6 7.5 8.2 6.9 1979 QI QII 7.0 6.5 5.7 6.0 4.2 5.1 8.4 8.1 7.5 7.6 6.5 6.8 7.5 6.8 6.4 5.9 5.7 4.7 8.9 8.3 8.2 7.6 7.6 6.7 7.3 6.3 5.3 8.8 8.0 7.3 Semi-Annual: QII '78-QIV '78 QIV '78-QII '79 Annual: QII '78-QII '79 -11Alternative Levels and Growth Rates for Key Monetary Aggregates (cont'd) Bank Credit M-3 Alt. A Alt. B Alt. C Alt. A Alt. B Alt. C 1978 June July August 1429.6 1441.3 1451.5 1429.6 1441.2 1450.9 1429.6 1440.8 1449.9 924.0 932.4 939.7 924.0 932.4 939.2 924.0 932.2 938.6 1978 QII QIII QIV 1420.1 1451.7 1483.8 1420.1 1450.9 1479.3 1420.1 1449.9 1475.7 916.3 940.4 963.0 916.3 939.7 960.8 916.3 938.8 958.5 1979 QI QII 1514.7 1545.3 1506.7 1534.7 1499.5 1524.4 985.0 1007.0 981.7 1002.8 978.2 997.9 Growth Rates Monthly: 1978 July August 9.4 7.6 10.9 9.4 10.9 8.8 10.6 8.2 10.2 9.0 9.8 8.4 Quarterly Average: 1978 QIII QIV 8.9 8.8 8.7 7.8 8.4 7.1 10.5 9.6 1979 QI QII 8.3 8.1 7.4 7.4 6.5 6.6 9.1 8.9 9.0 8.3 8.3 7.5 7.8 6.6 10.2 9.1 8.8 8.1 7.3 Semi-Annual: QII '78-QIV '78 QIV '78-QII '79 9.2 8.2 Annual: QII '78-QII '79 9.9 9.4 8.9 -12Alt. A or B Alt. C Ranges for July-August M-1 5 to 9 4½ to 8½ M-2 7 to 11 6½ to 10½ Federal funds rate (Intermeeting period) (14) 7½ to 8 7¾ to 8¼ Alternative B contemplates a Federal funds rate centered on the prevailing 7¾ per cent level between now and the next FOMC meeting. Growth of M-1 in the July-August period is expected to be in a 5 to 9 per cent annual rate range under this alternative, largely in consequence of the step-up in M-1 growth that appears in train for July. With growth at the mid-point of that range, the level of M-1 will remain well above that implied by the upper end of the FOMC's current longer-run range, as indicated in Chart 1 on the following page. And for the third quarter as a whole M-1 growth may be around a 7-1/4 to 7-1/2 per cent annual rate-high relative to the longer-run range but slower than in the second quarter, mainly reflecting the current deceleration in economic activity and a lagged response to the appreciable increase in shortterm rates this spring. (15) Expansion in M-2 under alternative B is likely to be in a 7 to 11 per cent annual rate range over the July-August period. Growth at the mid-point of this range would maintain M-2 in the upper half of its longer-run range, as shown in Chart 2. Chart 1 RECENTLY ESTABLISHED M-1 GROWTH RANGES AND ACTUAL M-1 BILLIONS OF DOLLARS 6%% -- Projection -Q1 '79 , ---- - 360 4 - 350 6V2% S340 Q4 '77-Q4 '78 S350 4% S340 320 350 '78 340 310 320 -1350 310 Q2 '77- Q2 '78 340 320 330 310 320 320 310 1977 1978 Chart 2 RECENTLY ESTABLISHED M-2 GROWTH RANGES AND ACTUAL M-2 BILLIONS OF DOLLARS 9% 890 Q1'78-Q1'79 -*- Projection 875 S- 1/ r" - - - % - 8 60 845 - -/ 830 SQ4'77-Q4'78 815 845 S- 830 9% Q3'77-Q3'78 755 - -815 - 845 - 830 740 S815 770 - 845 9'4 755 740 S7/ 7 ^ - 830 - 815 Q2'77-Q2'78 7% 800 755 - 785 740 770 755 I 740 1977 I 1978 -13(16) The strength of M-2 relative to M-1 over July-August reflects the expectation of both continued large inflows from the new six-month money market certificate and rapid growth in large denomination time deposits included in M-2. With strong business loan growth anticipated to resume this summer, it is likely that banks will return to the negotiable CD market and aggressively offer other large denomination time deposits. In addition, while savings deposits can be expected to decline, as they did in June, further success of commercial banks in marketing the new six-month certificate is likely to enable them to sustain net inflows of interest-bearing deposits subject to regulatory ceilings at near recent rates. (17) Inflows of deposits to thrift institutions this summer are also likely to be maintained at near the increased June pace, as these institutions continue aggressively to offer six-month certificates at rates 25 basis points above what banks can pay. Savings deposits are expected to contract as depositors shift to the new instrument, but the ceiling rate advantage at thrifts is likely to permit these institutions to continue to attract more new money than commercial banks. (18) If the Federal funds rate were maintained at the currently prevailing 7% per cent level, as envisioned under alternative B, most other short-term rates would likely show little net change over the intermeeting period. The recent rise in short-term rates as a whole has brought them roughly into line with the prevailing funds rate. Moreover, short-term credit demands are not -14likely to add significantly to market rate pressures in the weeks immediately ahead. While the short-term credit demands of financial and nonfinancial businesses and of Federal agencies are likely to be strong over this period, the Treasury is not expected to add substantially to the net supply of bills. (19) Interest rates on longer term securities are also likely to be little changed under alternative B. Corporate bond offerings are expected to increase in July, but the forward calendar for August is seasonally light. In the municipal sector, new bond issuance is anticipated to fall further over the summer, as the normal seasonal lull is reinforced by a continued lack of advance refunding operations, recently discouraged by changes in IRS regulations and the previous rise in bond yields. Over the intermeeting period, the Treasury is likely to obtain a sizable amount of new cash in conjunction with a regular issue of two-year notes and with its mid-August refunding.- The market is in a good technical position, however, with security dealers carrying large net short positions in coupon issues. As bond yields remain little changed, while thrift deposit flows are sustained at around current levels, mortgage rates are also likely to stay fairly stable. I/ The terms of this refunding are to be announced in late July. The staff expects the Treasury to sell $6 to $6 billion of new securities in this operation, rolling over $4k billion of publicly-held debt issues maturing on August 15, and raising about $14 to $2 billion of new money. -15- (20) Alternative C involves an increase in the Federal funds rate to around the mid-point of a 7% to 8k per cent range by mid-August. M-l growth would likely be in a 4 to 8 per cent annual rate range over July-August and M-2 growth in a 6k to 10k per cent range. Some additional upward pressure on short-term interest rates in general likely would be associated with such an upward adjustment in the Federal funds rate. With business loan demands strong, the prime rate would likely rise further, and banks and other lenders would be expected to continue to firm non-rate terms of lending. The current level of borrowing from the Federal Reserve discount window would probably increase back to the $14 billion area, intensifying pressures for another adjustment in the discount rate. At the same time, the higher short-term rates would tend to provide support for the dollar in international exchange markets. (21) Only a small part of an increase in money market rates is likely to be transmitted to the bond market, since the current level of long-term market yields already anticipates a further tightening of monetary policy. However, further upward rate pressures could be expected to occur in mortgage markets, as rising short-term rates slow thrift deposit flows and increase the cost of funds to thrift institutions. (22) Under either alternative, both short- and long-term interest rates are likely to be under considerable upward -16pressure from late surmer into 1979 if longer-run growth in the monetary aggregates is to be contained within the proposed ranges, given the staff's GNP projection. High private credit demands and agency borrow- ing to support housing, as well as rising interest rates, will be accompanied by further erosion in liquidity positions and balance sheet distortions associated with short-term borrowing by banks, thrift institutions, and businesses. Banks and thrifts can be expected, therefore, to become less willing lenders, while nonfinancial businesses reassess their expenditure programs. -17Directive language (23) the directive. Given below are suggested operational paragraphs for Alternative language consistent with the short-run specifications discussed in the preceding section is shown for the Committee's initial Federal funds rate objective. At a later point in the operational paragraph, alternative language is also provided that enables the Committee to place main emphasis on monetary aggregates or on money market conditions. The specifications adopted at the last meeting are shown in strike-through form. In the short run, the Committee seeks to achieve bank reserve and money market conditions that are broadly consistent with the longer-run ranges for monetary aggregates cited above, while giving due regard to developing conditions in financial markets more generally. During the period until the next regular meeting, System open market operations shall be directed initially at attaining a weekly-average Federal funds rate (A) or (B) AT ABOUT the current level. (C) slightly (OR SOMEWHAT) above the current level. Subsequently, operations shall be directed at maintinaing the weekly-average Federal funds rate within the range of 7 -ee-8 TO per cent. In deciding on the specific objective for the Federal funds rate the Manager shall be guided mainly -18by the relationship between the latest estimates of annual rates of growth in the June-Javy JULY-AUGUST period of M-l and M-2 and the following ranges of tolerance: 5-te-l9 per cent for M-l and 6-ee-19 TO TO per cent for M-2. If, giving approximately equal weight to M-l and M-2, their rates of growth appear to be Monetary aggregates emphasis significantly above or below the mid-points Money market emphasis CLOSE TO OR BEYOND THE UPPER OR LOWER LIMITS of the indicated ranges, the objective for the funds rate shall be raised or lowered in an orderly fashion within its range. If the rates of growth in the aggregates appear to be above the upper limit or below the lower limit of the indicated ranges at a time when the objective for the funds rate has already been moved to the corresponding limit of its range, the Manager is promptly to notify the Chairman who will then decide whether the situation calls for supplementary instructions from the Committee. Chart 3 RECENTLY ESTABLISHED M-3 GROWTH RANGES AND ACTUAL M-3 BILLIONS OF DOLLARS - Q1'78-Q1'79 Q-8-Q1- -Projection 1530 1500 Oe , %- e0 ,- .. 1470 10% - S. _ 1410 Q4'77-Q4'78 .*1380 , S1440 - % 1290 -10 % - 1410 - 1380 12 0 Q3'77-03'78 1260 -* 1440 1230L - 0ei 1380 1290 1260 - 10%% 1230 -1440 Q277-278 1290 1410 12901380 e 1260 - 1410 1350 e 1230 - - 1320 1290 1260 1230 1977 18 1 1978 1979 Chart 4 RECENTLY ESTABLISHED BANK CREDIT GROWTH RANGES AND ACTUAL BANK CREDIT BILLIONS OF DOILLARS o10% -- -- Projection Q1 '78-01 '7S -970 -950 -930 -910 10% -890 - 930 S77 Q4 '77-Q4 '78 910 -890 10% - 930 -910 -890 10% 890 I, 1977 277% O''2 '77-Q2 '78 -870 Appendix I Proiected Federal Funds Rates 1978 QIII QIV 1979 QI QII Alt. A Alt. B 7 8 to 8k 8s to 8% 7% to 8% 8% to 9% 9k to 10 8% to 9 8% to 9% 9% to 10 8k to 9k 8% to 9% 9k to 10k to 8 Alt. C Appendix II Implied Velocity Growth Rates V-1 (GNP/M-1) 1978 1979 Alt. A Alt. B Alt. C II 7.8 7.8 7.8 III 2.7 2.9 3.3 IV 2.9 4.8 5.8 I 4.2 5.5 6.9 II 3.9 4.3 5.3 II 9.0 9.0 9.0 III 1.3 1.4 1.9 IV 1.6 2.9 3.5 I 2.9 3.8 4.7 II 2.2 2.8 3.6 V-2 (GNP/M-2) 1978 1979 Appendix Table III-1 MONEY STOCK--M-1 (Annual rates of growth, compounded quarterly)Base Period Ending Period 1975 1976 1977 1978 741V 751 7511 75IV 761 7611 76111 76 IV 771 7711 77111 77IV I 2.3 II 4.3 6.4 III 5.0 6.3 6.3 IV 4.4 5.1 4.5 2.8 I 4.5 5.0 4.6 3.7 4.7 II 4.9 5.4 5.2 4.8 5.9 7.0 III 4.7 5.1 4.9 4.6 5.2 5.4 3.8 IV 5.1 5.5 5.3 5.1 5.7 6.1 5.6 7.4 I 5.3 5.7 5.6 5.5 6.0 6.3 6.1 7.3 7.1 5.6 6.0 5.9 5.9 6.4 6.7 6.6 7.6 7.7 8.3 III 5.8 6.2 6.2 6.2 6.7 7.0 7.0 7.8 7.9 8.3 8.3 IV 6.0 6.3 6.3 6.3 6.8 7.1 7.1 7.8 7.9 8.1 8.0 7.7 I 6.0 6.3 6.3 6.3 6.7 6.9 6.9 7.4 7.4 7.5 7.3 6.7 5.7 II 6.2 6.6 6.6 6.6 7.0 7.2 7.3 7.8 7.8 8.0 7.9 7.8 7.8 7.6 7.2 6.8 7.7 7.2 6.8 * * * *k * ** 1979 7511 781 7811 ** II Alt. Alt. 6.5 6.2 6.7 6.5 6.7 6.5 Alt. C 6.0 6.2 6.2 I/ Rased on quarterly average data. 6.8 6.5 6.2 7.1 7.3 7.3 7.6 6.8 6.9 6.9 7.2 6.5 6.6 6.6 6.9 7.6 7.1 6.6 7.5 6.9 6.3 7.5 6.8 6.1 7.8 7.0 6.2 7.3 6.3 5.3 Appendix Table III-2 MONEY STOCK--M-2 (Annual rates of growth, compounded quarterly)! / Base Period Ending Period '1975 1976 1977 1978 751 74IV 11 75III 75ZV 76 7611 7611 76IV 771 7711 77111 I 6.4 II 8.3 10.2 III 8.8 10.1 IV 8.3 9.0 8.4 6.9 I 8.9 9.5 9.3 8.9 11.0 1I 9.1 9.7 9.5 9.4 10.7 III 9.1 9.5 9.4 9.3 10.1 IV 9.6 10.1 10.0 10.1 10.9 10.8 11.1 13.2 I 9.8 10.2 10.2 10.3 11.0 10.9 11.1 12.3 11.3 II 9.7 10.1 10.1 10.1 10.7 10.6 10.7 11.3 10.3 9.4 III 9.8 10.1 10.1 10.2 10.6 10.6 10.6 11.0 10.3 9.8 IV 9.7 10.0 10.0 10.0 10.4 10.3 10.2 10.5 9.8 9.3 9.3 8.4 I 9.5 9.7 9.7 9.7 10.0 II 9.4 9.6 * 1979 7511 II Alt. Alt. Alt. 9.3 9.1 8.9 * 9.4 9.3 9.1 9.6 * * 9.4 9.2 9.0 Based on quarterly average data. 77IV 781 7811 10.4 9.6 8.9 10.3 9,9 9.8 9.9 9.3 8.8 8.6 7.8 7.1 7.8 9.6 9.8 9.7 9.6 9.7 9.2 8.7 8.6 8.0 9.4 9.2 9.0 9.5 9.3 9.1 9.4 9.2 9.0 9.4 9.1 8.8 9,4 9.1 8.8 9.0 8.7 8.4 8.8 8.4 8.1 8.7 8.3 7.9 8.5 8.0 7.6 8.5 8.0 7.5 8.5 8.8 8.1 7.5 8.8 8.0 7.3 Appendix Table III-3 MONEY STOCK-M3 (Annual rates of growth, compounded quarterly)Base period Ending Period 1975 1976 74IV 751V 761 7611 761 76IV 771 7711 77111 77IV 781 II 10.6 13.0 III 11.5 13.1 13.2 IV 11.1 12.0 11.5 I 11.4 12.2 11.9 11.2 12.7 II 11.5 12.2 12.0 11.6 12.5 12.2 III 11.5 12.0 11.8 11.5 12.1 11.8 11.3 11.9 12.5 12.4 12.2 12.8 12.8 13.1 15.0 12.0 12.5 12.4 12.3 12.8 12.8 13.0 13.9 12.7 11.9 12.3 12.2 12.0 12.4 12.4 12.4 12.8 11.7 10.6 11.9 12.3 12.2 12.1 12.4 12.4 12.4 12.7 11.9 11.5 12.5 11.9 12.2 12.1 12.0 12.2 12.2 12.2 12.4 11.7 11.4 11.8 11.2 I 11.6 11.8 11.7 11.6 11.8 11.7 11.6 11.6 11.0 10.5 10.5 9.6 8.0 II 11.3 11.6 11.4 11.3 11.4 11.3 11.2 11.1 10.5 10.1 9.1 8.1 8.2 10.7 10.4 10.2 10.5 10.3 10.0 10.4 10.1 9.9 10.3 10.0 9.8 9.5 9.2 9.5 9.2 8.8 * * * * * * * * * 7811 9.8 9.9 .* II Alt. Alt. Alt. C 1/ 751 8.3 * 1979 7511 I IV III 1978 751 10.8 10.6 10.4 10.9 10.7 10.5 10.8 10.6 10.4 Based on quarterly average data. 10.6 10.4 10.2 9.7 9.4 9.0 8.6 8.9 8.5 8.1 8.6 8.1 7.6 8.7 8.1 7.5 8.8 8.1 7.3 APPENDIX IV Effects of Automatic Transfers from Savings Accounts on the Rates of Growth of the Monetary Aggregates If the Federal Reserve-FDIC regulations permitting household depositors to make automatic transfers from savings to demand accounts become effective November 1, M-1 growth is likely to be depressed as depositors shift balances from demand to savings accounts. On the other hand, M-2 growth may be augmented slightly as savings accounts at commercial banks become somewhat more attractive relative to accounts at thrifts. Since funds shifting into bank savings accounts will be primarily from bank demand deposits and thrift sav2/ ings accounts, the effect on M-3 growth should be negligible. The impact of automatic transfers on the quarterly growth pattern of the monetary aggregates depends importantly on the pricing and promotion strategies adopted by banks as they offer this new service to depositors. If banks choose to offer automatic transfers with minimal service charges, then the characteristic of such accounts will resemble those of NOW accounts in their introductory stage, so that the NOW account experience in New England can be used to infer 1/ FDIC regulations also will permit insured mutual savings banks (MSBs) with third party payment powers to offer automatic transfer services. Such MSBs may then be able to attract some additional transactions balances from commercial banks because they can offer a 1/4 percentage point greater return on savings accounts. However, the total number of MSBs offering checking accounts or NOW accounts is relatively small, and this effect on the aggregates has been ignored. 2/ It is conceivable that funds could flow into commercial bank savings accounts from other sources--say, Treasury securities or money market mutual funds--and therefore boost M-2 and M-3 growth. However, such flows are likely to be too small to significantly alter the anticipated growth of these aggregates. IV-2 reasonable limits on the timing and magnitude of the shift of deposits. Based on this experience, as much as $1.4 billion per month could be converted from demand to savings accounts in the first year the automatic transfer service is offered. High service charges, on the other hand, could reduce such conversion sharply, perhaps to a rate of $450 million 1/ In addition, Board staff estimates suggest that shifts per month.- from thrift accounts to commercial bank savings accounts may average around $250 million per month in the first year. Based on these rough estimates of the deposit'shifts among accounts, projected levels and rates of growth of the monetary aggregates with and without automatic transfers are shown in Table IV-1. It is apparent that the potential impact on the quarterly rates of growth of M-1 could be substantial. Over the QII '78 to QII '78 period, M-1 growth may be reduced by around 1 to 3 percentage points, while the rate of expansion of M-2 is projected to be little changed. However, it should be emphasized that there is considerable uncertainty surrounding the projections of M-E growth during the initial period after introduction of automatic transfers. 1/ In the four New England states where NOWs were offered by both commercial banks and thrift beginning in February 1976, an estimated 17 per cent of household demand deposits shifted to NOWs in the first year, or about 1-1/2 per cent per month. With automatic transfers, competitive pressures in some areas likely will be less intense because only banks will be offering this service in conjunction with checking accounts. In these areas banks may charge more for such services and discourage some depositors from utilizing this service. Table IV-1 Possible Growth Rates for M-l and M-2 Without and With Automatic Transfers from Savings Accounts (per cent at an annual rate) Alternative A Without y With! Without With!- Without 1978 QIV 7.2 5.6 - 6.6 5.3 3.8 - 4.7 4.3 1979 QI qll 7.0 6.5 2.4 - 5,5 1.9 - 4,9 5.7 6.0 1.1 - 4,2 1,3 - 4,5 4.2 5.1 -0.3 - 2,7 0.4 - 3.6 QII '78 - QII '79 7.3 4.5 - 6.3 6.3 3.5 - 5.3 5.3 2.5 - 4.3 M-2 1/ Alternative C Alternative B 4 1978 QIV 9.0 7.6 7.8 6.9 1979 QI QII 8.8 8.5 7.6 7.8 7.9 8.0 6.6 6.9 QII '78 - QII '79 9.1 8.2 8.3 7.4 Range for M-l growthassumes 1/2 to 1-1/2 per cent of eligible household demand deposits transfer to savings accounts each month, beginning November 1978. With 2.8 - 3.8 Chart I Money Market Conditions and Interest Rates MONEY MARKET CONDITIONS Per cent INTEREST RATES Short-term Percent 10 10 Weekly Averages Weekly Averages - INTEREST RATES Long-term cent 11 11 - 10 FHA MORTGAGES FNMA Monday Aucti 7 FEDERAL FUNDS RATE Per Weekly 8 New Issue ,- -i 5 / . GOV T. BONDS S10-Yr. Averages TREASURY BILLS S3-Month Billions of dollars -2 . - PRIME COMMERCIAL PAPER 4-6 Month 54 Net Borrowed 2 I I I 1 I I 1977 I I I I I I I I I 1978 I I I I I 1977 I I I I II I I I 1978 I I1 I1 I I 3 I I I I 1977 I I I I I I97 I I I I 1II 1976 I I I 1 4 CONFIDENTIAL (FRI Class I-FOMC 7/14/78 Chart Actual and Projected Reserves / / I / I I I Billions of dollars 38 I I / TOTAL I I I I NONBORROWED I I I I I I i l I I I l i Annual rate, per cent MONTHLY GROWTH RATES TOTAL n n I J 20 I II L ~1I~ii El 39 + NONBORROWED 20 J F MA M J J 1977 A S N D J F M A M J J 1978 A SO N D Teble 1 CONFIDENTIAL (FR) CLASS 1-FOMC MONETARY AGGREGATES JULY 14, 1978 ACTUAL AND CURRENT PROJECTIONS. SEASONALLY ADJUSTED Money Supply Broad Narrow (2) Period Period) 1 Total Govt U.S. Deposits 3 2 tala 4 Time & Savings Deposits thr ThansCD's Other l s 1 1 CD's Non deposit Sources of ources of unds 7 8 9 261.7 264.5 268.4 (273.0) 83.4 87.1 86.7 t 88.5) MONTHLY LEVELS-$BIL X ANNUAL 829.7 835.1 840.6 (847.61 346.3 348.6 1978--APR. MAY JUNE JULY 350.4 (353.0) ( 8.3 7.3 11.3 13.91 566.8 573.6 576.9 S583.1) 483.4 486.5 490.2 1494.6) 221.6 222.0 221.7 (221.6) 68.1 68.2 69.7 GROWTH QUARTERLY 6.8 7.4 14.7 7.9 1.5 13.6 64.0 4.4 11.1 6.6 9.2 13.0 9.9 8.2 7.7 2.6 1.3 13.2 13.1 43.2 22.9 1977--47H QTR. 7.5 8.2 13.1 8.6 5.4 11.6 44.9 1978--IST QTR. 2ND QTR. 5.6 9.5 6.9 8.3 13.4 11.0 7.9 7.4 2.6 1.6 12.7 12.3 50.0 32.8 1 19.0 8.0 6.2 8.9) 1 11.5 7.8 7.9 10.0) 6.2 7.7 9.1 10.8) 3.3 2.2 -1.6 -0.51 8.3 12.8 17.7 20.61 20.5 53.2 -5.5 24.9) 1 7.6) 1 9.0) 10.0) -1.1) 19.3) 1977--4TH QTR. 1978--1ST QTR. 2ND QTR. QUARTERLY-AV MONTHLY 1978--APR. MAY JUNE JULY JUNE-JULY 8.3 14.4 6.9 12.9) 9.9) 9.6) WEEKLY LEVELS-$BIL 1978-JUNE 7 14 21 P 28 P 351.7 351.1 349.2 349.9 841.u 840.7 839.4 841.4 6.6 7.6 15.3 11.1 576.7 576.9 576.4 577.3 489.3 489.6 490.2 491.4 222.2 222.0 221.6 221.5 267.1 267.6 266.6 269.9 JULY 5 P 354.1 846.5 12.5 579.4 492.5 221.2 271.2 I NOTE: 1/ 2/ 68.5 69.0 69.9 70.3 I DATA SHOWN IN PARENTHESES ARE CURRENT PROJECTIONS. P - PRELIMINARY INCLUDES TREASURY DEPOSITS AT MEMBER BANKS AND FEDERAL RESERVE BANKS. SECURITIES SOLD UNDER AGREEINCLUDES BORROWINGS FROM OTHER THAN COMMRCLIAL BANKS IN THE FORM OF FEDERAL FUNDS PURCHASED, MENTS TO REPURCHASE, AND OTHER LIABILITIES FOR BORROWED MONEY, PLUS GROSS LIABILITIES TD OWN FOREIGN BRANCHES (EURODOLLAR BORROWINGS), LOANS SOLD 10 AFFILIATES, LOAN RPS, AND OTHER MINOR ITEMS. Table 1-A TIME AND SAVINGS DEPOSITS AT ALL COMMERCIAL BANKS SEASONALLY ADJUSTED EXCEPT AS NOTED Total and Savings ($ Total indvual Nonprofit _ Nonprofit 1978 Time Deposits Large Business ((NSA) Government NSA) Total Large Small Negotiable CD's Denomination Denomination 4 BILLIONS) 1977-OCT. NOV. DEC. 1978-JAN. FEB. MAR. APR. MAY JUNE CHANGES (S 14, IMemo: 2 OUTSTANDING JULY Savings Deposits Time Period CONFIDENTIAL (FR) CLASS l-FOMC 531.9 540.2 545.2 551.0 557.5 562.9 566.8 573.6 576.9 219.6 219.4 219.6 220.7 220.9 221.0 221.6 222.0 221.7 55.5 17.7 204.1 204.2 204.2 205.2 205.4 205.6 206.4 206.7 206.3 10.5 10.8 10.8 10.5 10.4 10.4 10.4 10.5 10.6 5.0 4.5 4.5 5.0 5.2 5.0 4.9 4.7 4.8 312.3 320.7 325.7 330.3 336.6 342.0 345.2 351.6 355.1 147.9 156.8 160.6 164.1 170.1 173.7 175.4 180.5 182.0 164.5 164.0 165.0 166.2 166.5 168.2 169.7 171.1 173.1 66.4 70.9 74.0 76.3 16.9 2.3 -1.6 37.9 23.9 13.9 11.3 0.8 0.4 0.3 -0.2 -1.2 -0.6 5.7 9.2 14.2 -0.7 5.9 12.7 6.6 3.3 1.4 -0.3 0.7 7.1 0.4 -0.3 16.7 14.3 14.2 10.0 2.5 4.3 8.8 6.5 -0.5 0.0 0.5 0.2 -0.2 8.4 5.0 4.6 6.3 5.4 3.2 6.4 3.5 8.9 3.8 3.5 6.0 3.6 1.7 5.1 1.5 -0.5 1.0 1.2 0.3 1.7 1.5 1.4 2.0 4.5 3.1 2.3 3.1 2.6 1.4 3.7 -0.4 79.4 82.0 83.4 87.1 86.7 BILLIONS) 1977 YEAR QUARTERLY AVERAGE: 1977--11 III IV 10.4 13.1 17.1 4.6 3.9 2.9 4.1 4.7 3.3 1978--I 18.0 15.3 1.4 0.9 1.2 1.1 -0.2 0.2 1.1 0.2 0.1 0.6 0.4 -0.3 0.1 0.0 1.0 0.2 0.2 0.8 0.3 -0.4 II -0.3 0.1 MONTHLY AVERAGEs 1977-NOV. DEC. 1978-JAN. FEB. MAR. APR. MAY JUNE 8.3 5.0 5.8 6.5 5.4 3.9 6.8 3.3 0.3 0.0 -0.3 -0.1 0.0 0.0 0.1 0.1 -0.1 -0.2 0.1 AND 18), RESPECTIVELY, ON TABLE 1-MONETARY NOTE: COLUMNS (11, 12)t AND (9) ON THIS TABLE CORRESPOND TO COLUMNS (4), (6). (2), AND (6) REFLECT DAILY DATA REPORTED BY MEMBER BANKS, WITH ESTIMATES FOR NONMEMBER BANKS AGGREGATES. FIGURES IN COLUMNS (II) DERIVED FROM DATA REPORTED BY SMALL MEMBER BANKS, BENCHMARKED TO NONMEMBER CALL REPORT FIGURES. SAVINGS DEPOSITS OF BUSINESS AND GOVERNMENTAL UNITS-COLUMNS (4) AND (5)-- AND LARGE DENOMINATION TIME DEPOSITS -- COLUMN (7)-REFLECT BREAKDOWNS REPORTbO EACH WEDNESDAY BY LARGE COMMERCIAL BANKS BLOMN UP TO REPRESENT DEPOSITS AT ALL COMMERCIAL BANKS ON THE BASIS OF CALL REPORT RELATIONSHIPS. CONFIDENTIAL (F.R.) CLASS l-FOMC TABLE 2 BANK RESERVES ACTUAL AND CURRENT PROJECTIONS, SEASONALLY ADJUSTED BANK RESERVES Period MONTHLY JJLY 14, 1978 REQUIRED RESERVES Total Non borrowed Monetary Total Private Total Time Gov't. and Reserves Reserves Base Required Demand Deposits Interbank 1 2 3 4 5 6 7 LEVELS-SMILLIONS 36.954 37.268 37,773 138,304) 1978--APR. MAY JUNE JULY PERCENT ANNUAL 36,397 36,056 36,679 (37,325) 131,337 132,655 133,922 1135,204) 36,806 37,049 37.556 (38,126) 21,598 21,883 22,151 (22,242) 13,293 13,428 13,575 9 (13,64 ) ( 1,915 1,738 1,830 2,234) GROWTH QUARTERLY 1977-41H QTR. 7.1 7.6 9.6 7.3 5.2 13.5 1978-1ST 2ND QTR. QTR. 5.8 12.1 8.6 3.7 7.9 10.5 5.7 11.9 -1.1 13.7 12.9 10.1 QUARTERLY-AV 1977-4TH OTR. 6.1 3.5 9.1 6.3 6.1 9.1 1978--IST 2NU QTR. QTR. 8.5 6.5 14.5 0.5 9.6 8.1 8.3 7.0 3.6 5.0 12.8 11.5 ( ( 9.10.2 16.3) 16.9) I 1.9 -11.2 20.7) 21.1) ( 1 7.8 12.0 11.5) 11.5) ( 1 11.1 7.9 16.4) 18.2) ( ( 10.0 15.8 14.71 4.9) 1 16.7) ( 21.1) ( 11.5) ( 17.41 ( 9.81 MONTHLY 1978-APR. MAY JUNE JULY JUNE-JULY 1 4 4.7 12.2 13.11 6.5) 4 9.9) ( WEEKLY LEVELS-$MILLIONS NOTE! 1978-JUNE 7 14 21 28 37,093 38,092 37,968 37,620 36,448 37,299 36,774 35,904 133,018 134,068 134,122 134,139 37,044 37,979 37,671 371376 21,778 22,282 22,285 22,293 13,566 13,600 13,582 13,565 1,699 2,097 1,803 1,517 JULY 5 12 38,895 37,257 37,701 36,353 135,117 133,839 38,095 37449 22,024 22,002 13,529 13,557 2,541 1890 RESERVE SERIES HAVE BEEN ADJUSTED TO REMOVE DISCONTINUITIES ASSOCIATED WITH CHANGES DATA SHOWN IN PARENTHESES ARE CURRENT PROJECTIONS. IN RESERVE REQUIREMENT RATIO. TABLE 3 1 NET CHANGES IN SYSTEM HOLDINGS OF SECURITIES($ million, not seasonally adjusted) Treasury Coupons Net Purchases 3/ Treasury Ne/ Bills sChange Change V Within W1 year 5 - 10 Over 10 Total -468 863 4,361 789 579 797 3,284 3,025 2,833 539 500 434 1,510 1,048 758 167 129 196 1,070 642 553 1,582 1,415 1,747 6,202 5,187 4,660 2,126 886 186 526 681 628 171 96 166 152 128 108 959 1,021 1,001 1,280 1977--Qtr. II Qtr. III Qtr. IV Federal Agencies Purchases 4/ _Net 1 - 5 -490 7,232 STRICTLY CONFIDENTIAL (FR) CLASS II - FOMC JULY 14, 1978 I Within t 1 year 5 - 10 - 5 Net Change Outright Over 10 592 400 1,665 824 469 792 -2,655 5,444 345 288 1,123 1,156 459 468 247 334 2,175 2,246 1978--Jan. Feb. Mar. -627 -2,695 668 56 311 89 100 556 288 813 370 147 1,618 S - - - Apr. May June 1,670 -620 4,395 100 53 135 235 290 631 191 101 176 145 74 115 671 519 1,057 S - - - - -290 -- -101 --- - June 3 10 17 24 31 7 14 21 28 July LEVEL--July 5 12 19 26 12 238 -141 -291 -426 53 S 74 --- 253 361 2,349 199 963 -196 519 --- 1,059 864 3,082 1,613 891 1,433 1,631 9,273 6,303 7,267 6,227 10,035 -1,358 -46 -154 1,272 3,607 -2,892 726 3,666 4,273 -643 4,175 -2,331 34 ---555 -1,133 1,224 --- 1978--Qtr. I Qtr. II 1978--May Holdings olig6/5/ Total 707 ---- 46 46 ------ 127 104 -- -- 127 104 --- --- 24 -- -- 301 7,930 -71 -- ----------2,717 2,233 24 --- --- 2,341 -------135 301 5,724 --- - - -- -- - 30.8 11.8 S - 12.2 9.0 46 - 63.8 127 104 - - - 1.8 3.9 1.6 24 -- .9 8.2 -1,026 -699 2,950 253 333 3,406 199 -3,973 -3,060 11,835 161 1,263 -10,119 7,080 -196 117.2 I(n h4llionc Change from end-of-period to end-of-period Outright transactions in market and with foreign accounts, and redemptions (-) in bill auctions. Outright transactions in market and with foreign accounts, and short-term notes acquired in exchange for maturing bills. Excludes redemptions, maturity shifts, rollovers of maturing coupon issues, and direct Treasury borrowing from the System. 4/ Outright transactions in market and with foreign accounts only. Excludes redemptions and maturity shifts. 5/ In addition to net purchases of securities, also reflects changes in System holdings of bankers' acceptances, direct Treasury borrowings from the System, and redemptions (-) of Agency and Treasury coupon issues. 6/ Includes changes in both RP's (+) and matched sale-purchase transactions (-). I/ 2/ 3/ -7,149 4,141 1,874 426 -291 301 / 2,284 -415 -7,568 4,507 16 238 344 1,057 - et TotalRPs Total TABLE 4 SECURITY DEALER POSITIONS AND BANK POSITIONS (millions of dollars) Member Bank Reserve Positions Borrowing at FRB** Basic Reserve Deficit** Underwriting Syndicate Positions U.S. Govt. Security Dealer Positions Muniipal BondsMunicipalExcess** Reserves BondsLT Bills BillsCoupon CoIssues Issues 1977--High Low 7,234 1,729 3,017 -1,445 487 116 1978--High Low 5,625 278 2,043 -739 349 151 399 -57 1977--June 4,752 206 217 July Aug. Sept. 3,899 2,533 4,812 -309 -933 -313 209 199 230 Oct. Nov. Dec. 4,142 3,617 4,257 -360 610 804 1978--Jan. Feb. Mar. 4,127 3,418 2,713 Apr. May June 1978--May 3 10 17 24 31 June July Corporate Bonds STRICTLY CONFIDENTIAL (FR) CLASS II - FOMC JULY 14, 1978 To t a l al 8 ew Yo r k 38 38 Others 1,861 20 -9,151 -4,234 -13,975 - 8,206 1,688 172 -8,224 -2,922 -14,602 154 262 -5,341 -10,332 275 200 209 323 1,084 626 -6,391 -5,581 -7,333 -11,012 -11,452 -11,120 186 210 367 210 251 193 1,305 863 570 -6,480 -6,971 -7,403 -11,511 -11,825 -11,350 327 1,492 740 293 197 268 268 243 200 484 406 328 -6,047 -4,980 -6,778 -12,299 -12,603 -11,060 3,183 1,023 *2,847 -183 202 264 188 149 219 2171 557 1,212 1,094p -6,196 -4,038 4 510 - , p -12,998 -11,653 -12,155p 1,624 1,249 278 531 1,929 -287 189 -739 -641 51 281 191 290 294 213 315 183 6 247 399 1,664 1,688 866 701 1,399 -3,641 -4,884 -4,357 -3,602 -3,480 -12,215 -12,180 -11,933 -11,731 -10,529 752 81 174 177 49 113 -6,400 -5,075 -3,905 -2,922 -13,273 -13,857 -12,784 -10,016 -3,596p -5,072p - 7,569 -11,900p 5 *78 7 14 21 28 3,835 3,918 *2,930 *1,554 *-470 *-47 5 12 *730 *1,038 *-661 *-96 45 40p 513 -111 211 29 163 244p 645 794 1,194 1,716p 800t -192p 1,19 p 904p 156 115p 7p 4 Seasonal - 8,533 NOTE: Government security dealer trading positions are on a commitment basis. Trading positions, which exclude Treasury securities financed by repurchase agreements maturing in 16 days or more, are indicators of dealer holdings available for sale over the near-term. Underwriting syndicate positions consist of issues still in syndicate, excluding trading positions. The basic reserve deficit is excess reserves less borrowing at Federal Reserve less net Federal funds purchases. Weekly data are daily averages for statement weeks, except for corporate and municipal issues in syndicate which are Friday figures. * ** r 8 New York Total Strictly confidential Monthly averages for excess reserves and borrowings are weighted averages of statement week figures. TABLE 5 SELECTED INTEREST RATES (per cent) STRICTLY CONFIDENTIAL Short-Term Federal Funds (1) CD's New Comm. Treasury Bills y B IssuePaper Auction NYC 90-119 Market 3-mo 1-yr 6-mo 90-Day Day (0) (5) (3) Bank rime pme Ra U.S. Govt.-Constant Maturity Yields 3-yr (FR) CLASS II - FOMC JULY 14, 1978 7-yr 20-yr (7) (8) (9) (10) Long-Term Corp.-Aaa Home Mortgages Utility Municipalr Secondary Market Byerond Primary Recently New GNMA FNMA Con. OBuyer e Issue Offered Auc. Sec. (11) (12) (13) (14) (15) (16) 1977--High Low 6.65 4.47 6,62 4.67 6.70 4.50 6.66 4.63 7.75 6.25 7.39 5.83 7.70 6.59 7.99 7.26 8.36 7.90 8.48 7.95 5.93 5.45 9.00 8.65 8.98 8.46 8.39 7.56 1978--High Low 7.78 6.58 7,79 6.55 8.00 6.65 7.84 6,68 9.00 7.75 8.56 8.57 8.73 9.18 9.20 6.31 9.73 10.02 9.20 7.40 7.72 8.01 8.61 8.48 5.58 8.98 9.13 8.43 1977--June 5.39 5.41 5.35 5.42 6.75 6.39 7.05 7.64 8.08 8,12 5.62 8.86 8.75 7.95 July Aug. Sept. 5.42 5.90 6.14 5.57 5.97 6.13 5.28 6.75 6.83 6.51 7.12 7.60 8.15 8.12 5.63 8.95 8.72 7.96 6.01 5.38 5.75 6.09 6.79 6.84 7.24 7.21 7.64 7.57 8.04 8.07 8.05 8.07 5.62 5.51 8.94 8.90 8.76 8.74 8.03 8.02 Oct. Nov. Dec. 6.47 6.51 6.56 6.52 6.52 6.52 6.53 6.56 6.65 6.51 6.54 6.61 7.19 7.22 7.30 7.44 7.46 7.59 7.71 7.76 7.87 8.23 8.28 8.34 8.22 8.25 8.38 5.64 5.49 5.57 8.92 8.92 8.96 8.82 8.86 8.94 8.16 8.19 8.27 1978--Jan. Feb. Mar. 6.70 6.78 6.79 6.80 6.86 6.82 6.82 6.77 6.73 6.75 6.76 Apr. May June 6.89 7.36 7.60 6.96 7.28 7.53 6.84 7.20 7.66 7.27 7.32 7.34 7.43 7.36 7.16 7.21 7.28 7.37 7.40 7.05 7.13 6.82 7.06 7.59 6.91 6.96 7.06 7.28 7.36 7.14 7.35 7.58 7.70 8.00 1978--May 3 10 17 24 31 June 7 14 21 28 7.47 7.49 7.53 7,78 7.35 7.41 7.56 7.71 July 5 12 19 26 7.72 7.72 7.74 7.79 6 13 7.72 2 7.7 p Daily--July 7.06 7.18 7.73 7.84 5.78 7.52 7.75 7.75 7.93 8.00 8.00 8.00 8.27 8.63 7.61 7.67 7.70 7.86 7.94 7.95 8.14 8.22 8.21 8.68 8.69 8.71 8.60 8.67 8.67 5.71 5.62 5.61 9.02 9.15 9.20 9.17 9.31 9.35 8.56 8.64 8.60 7.85 8.07 8.30 8.06 8.25 8.40 8.32 8.44 8.53 8.90 8.95 9.09 8.85 8.98 9.07 5.80 6.03 6.22 9.36 9.57 9.70 9.44 9.66 9.91 8.71 8.90 9.05 7.19 8,00 8.21 8.25 8.25 8.46 7.99 8.06 8.07 8,15 8.19 8.16 8.25 8.26 8.30 8.34 8.40 8.44 8.44 8.47 8.49 -8.87 8.95 9.02 -- 8.90 8.92 8.98 9.10 9.05 5.98 5.99 5.98 6.16 6.19 9.48 9.55 9.58 9.68 9.68 9.52 -9.63 -9.83 8.80 8.86 8.85 8.96 9.04 7.34 7.54 7.66 7.75 8.50 8.50 8.71 8,75 8.16 8.19 8.40 8.51 8.30 8.35 8.46 8.50 8.47 8.47 8.55 8.63 9.04 9.03 9.13 9.16 9.06 8.96 9.10 9.18 6.18 6.16 6.26 6.29 9.70 9.73 9.70 9.73 -9.86 -9.96 9.02 8.95 9.05 9.16 8.00 8.00 7.78 7.84 8.96 9.00 8.51 8 6 .5 p 8.52 8.57p 8.68 8 3 .7 p 9.18 9.19p 9 9.20 22 . p 6.31 6.32 9.73 n.a. -10.02 9.14 9.20 --- 7.84 7.87 9.00 9.00 8.50 8.57p 8.52 8,58p 8.67 8 74 . p 7.20 --- 7.13 6.75 NOTE: Weekly data for columns 1, 2, 3, 6, and 7 are statement week averages of daily data. Weekly data in column 4 are average rates set in the auctions of 6-month bills that will be issued on the Thursday following the end of the statement week. Data in column 5 are 1-day Wednesday quotes. For columns 8 through 11, the weekly date is the mid-point of the calendar week over which data are averaged. Columns 12 and 13 are 1-day quotes for Friday and Thursday, respectively, following the end of the statement week. Column 14 is an average of contract interest rates on commitments for conventional first mortgages with 80 per cent loan-to-value ratios made by a sample of insured savings and loan associations on the Friday following the end of the statement week. Column 15 gives FNMA auction data for Monday preceding the end of the statement week. Column 16 is a 1-day quote for Monday preceding the end of the statement week. The FNMA auction yield is the average yield in bi-weekly auction for short-term forward commitments for Government underwritten mortgages. GNMA yields are average net yields to investors on mortgage-backed securities for immediate delivery, assuming prepayment in 12 years on pools of 30-year FHA/VA mortgages carrying the coupon rate 50 basis points below the current FHA/VA ceiling. JULY 14. 1978 Appendix Table I-A MONEY AND CREDIT AGGREGATE MEASURES lak Rrervs Money Stock Measures dit Total Period Totll Nonborrowed Monetary Base ....... 1 2/ 2 ANNUALLY: -0.3 1.0 5.2 1975 1976 1977 Loans and MI M2 M3 M4 Investmonts ns.. 4 5 * 7 B (PER CENT ANNUAL RATES OF GROWTH) M5 M6 9 10 M7 7 . 3.2 1.2 2.7 5.9 7.0 8.3 3.9 8.0 11.3 4.4 5.7 7.9 6.5 7.1 10.1 9.6 10.3 11.8 10.0 10.0 11.9 10.8 12.1 10.7 12.6 2/ SEMI-ANNUALLY: 1ST HALF 1977 2ND HALF 1977 3.5 6.8 2.9 2.6 7.3 9.0 11.3 10.7 7.6 7.9 9.3 10.3 15T HALF 1978 7.6 7.5 9.0 11.4 7.6 10.6 9.7 11.7 8.0 7.1 3.9 9.2 9.6 10.3 9.0 7.8 9.5 6.8 9.6 11.6 12.3 11.8 12.5 13.6 8.6 7.9 3.7 10.5 9.5 13.5 11.1 9.7 10.4 9.0 9.4 11.2 10.6 1.7 8.8 9.1 11.1 9.9 8.1 7.5 9.5 10.9 QUARTERLYz 3R0 QTK. 1977 4TH QTR. 1977 1ST QTR. 2ND QTR. 1978 1978 6.8 12.1 4.4 OUARTEKLY-AV: 3RD QTR. 1977 4TH QTR. 1977 7.3 1ST QIR. 1978 2ND QTR. 1978 8.5 6.5 14.5 9.6 8.1 9.6 13.0 5.6 9.5 10.4 10.4 9.8 0.5 9.3 12.1 10.9 1977-JUNE JULY AUG. SEPT. OCT. NUV. DEC. 0.6 15.5 7.8 0.5 9.8 5.3 5.9 -1.4 13.5 -17.4 15.7 -13.4 20.9 16.1 7.1 11.1 8.4 8.0 10.0 8.1 10.4 9.6 12.8 10.5 7.2 12.9 9.2 6.3 7.1 11.8 6.2 8.9 11.9 7.5 9.2 12.7 11.6 10.0 10.2 12.9 11.5 12.2 13.5 11.6 10.1 9.1 13.0 12.1 12.1 14.5 13.3 12.5 1978-JAN. FEB. MAR. APR. MAY JUNE P 15.2 10.9 -8.6 9.4 10.2 16.3 18.3 13.5 7.0 3.0 13.6 7.9 6.9 3.5 7.8 18.5 15.6 6.0 19.0 8.0 6.2 11.8 8.5 8.7 12.3 11.8 6.6 10.5 7.9 6.3 10.4 10.0 7.6 13.4 9.5 10.5 12.3 10.6 6.3 .1l 3.5 11.6 12.3 11.4 13.3 MONTHLY: 1/ 2/ P - 13.7 -6.2 1.9 -11.2 20.7 12.0 11.5 8.7 11.2 0.7 8.2 10.3 -0.7 BASED ON DATA ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS. BASED ON QUARTERLY AVERAGE DATA. PRELIMINARY Appendix Table 1.- JULY 14, 1978 MONEY AND CREDIT AGGREGATE MEASURES SEASONALLY ADJUSTED. BILLIONS OF DOLLARS Period Total Money Stock Measures Bank Credit Bank Reserves I Non- Monetary borrowed Base Total Loans and Invest- M1 M2 ments - M3 i M4 M5 M6 M7 -. ANNUALLY: 1975 1976 1977 33.969 34,441 36,143 33,839 34.388 35,573 110,345 118,062 127,971 726.2 788.9 875.5 294.5 312.6 337.2 664.1 739.6 808.4 1091.8 1235.6 1375.0 745.4 802.3 882.4 1173.2 1298.3 1449.0 1307.3 1436.7 1602.0 1350.3 1484.0 1664.9 1977--JUNE 34,821 34,559 122,163 833.7 324.3 774.2 1302.0 837.5 1365.3 1506.6 1561.4 JULY AUG. SEPT. 35,271 35,501 35,517 34,948 34,440 34,892 123,294 124,155 124,984 842.6 850.0 855.1 327.5 329.2 331.6 782.9 787.9 793.8 1317.2 1330.0 1343.5 845.8 851.1 857.6 1380.0 1393.2 1407.4 1523.0 1539.0 1555.1 1578.3 1594.2 1610.3 OCT. NOV. DEC. 35,808 35,965 36,143 34,503 35,103 35,573 126,025 126,872 127,971 864.3 870.9 875.5 334.7 334.9 337.2 800.3 804.2 808.4 1356.8 1366.0 1375.0 866.7 875.1 882.4 1423.2 1436.9 1449.0 1573.0 1588.3 1602.0 1629.8 1647.8 1664.9 1978--JAN. FEB. MAR. 36,600 36,933 36,667 36,116 36,528 36,339 129,409 130,159 130,484 885.4 891.2 896.7 340.1 339.9 340.9 814.8 818.0 821.8 1385.4 1392.0 1399.5 891.1 897.4 903.9 1461.7 1471.3 1481.5 1617.8 1629.0 1642.0 1683.5 1696.8 1711.7 APR. MAY JUNE P 36,954 37,268 37,773 36,397 36,056 36,679 131,337 132,655 133,922 910.5 922.3 926.9 346.3 348.6 350.4 829.7 835.1 840.6 1410.9 1419.7 1429.6 913.2 922.2 927.3 1494.3 1506.8 1516.3 1658.7 1674.0 1685.3 1729.3 1744.9 1757.0 10 17 24 31 37,218 37,484 37,022 37,340 35,530 36,618 36,321 35,941 132*170 132,857 132,547 133,188 347.3 347.5 347.4 351.5 832.4 833.9 834.7 840.3 919.1 920.8 922.3 928.1 JUNE 7 14 21P 2BP 37,093 38,092 37,968 37,620 36,448 37,299 36,774 35,904 133,018 134,068 134,122 134.139 351.7 351.1 349.2 349.9 841.0 840.7 839.4 841.4 928.4 928.0 925.6 927.2 JULY 5P 36,895 37,701 135,117 354.1 846.5 933.5 MONTHLY: WEEKLYt 1978-MAY NOTES: WEEKLY DATA ARE DAILY AVERAGES FOR STATEMENT WEEKS. MONTHLY DATA ARE DAILY AVERAGES. WEEKLY DATA ARE NOT AVAILABLE M3, M5, M6, MT, TOTAL LOANS AND INVESTMENTS AND THRIFT INSTITUTION DEPOSITS. 1/ BASED ON DATA ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS. DATA SHOWN IN MILLIONS OF DOLLARS. P - PRELIMINARY FOR JULY 14, APPENDIX TABLE 2-A 197 COMPONENTS OF MONEY STOCK AND RELATED MEASURES mmmmmmmmm I Period (Per cent annual rates of growth) 2/ ANNUALLY 12.8 15.3 15.5 14.2 19.5 18.8 19.4 33.8 5.5 11.2 -0.7 13.9 25.4 8.9 13.3 0.6 24.9 12.9 14.5 16,6 20.6 2.1 20.2 25.6 22.3 8.0 11.5 11.7 15.0 11.3 17.5 25.0 11.1 7.8 7.4 11.4 7.2 7.2 10.4 11.9 11.9 10.0 15.3 6.4 1975 1976 1977 -6.4 -23.4 2 SEMI-ANNUALLY: 8.7 9.8 1ST HALF 1977 2ND HALF 1977 1978 10.0 6.9 12.4 7.7 2.1 12.7 43.5 7.5 17.4 34.5 38.2 1977 1977 10.0 8.7 5.4 9.9 14.7 10.8 7.9 10.9 1.5 10.8 13.6 3.2 64.0 16.2 11.6 21.7 18.8 31.0 22.7 2.9 55.1 151 QTR. 1978 ZND QTR. 1978 QUARTERLY-AVI 10.1 9.5 2.6 11.7 13.0 9.9 2.6 1.3 13.2 13.1 43.2 22.9 6.9 7.3 17.9 14.7 33.0 35.3 43.3 12.1 3RD OTR. 4TH QTR. 1977 1977 9.1 10.3 7.7 6.6 10.3 13.1 11.2 8.6 7.3 5.4 14.6 11.6 44.9 14.6 13.9 20.1 20.0 11.7 27,8 11.2 32.6 1ST QTR. 1978 2NU QTR. 1978 10.5 9.3 3.9 9.8 13.4 11.0 7.9 7.4 2.6 1.6 12.7 12.3 50.0 32.6 8.1 18.2 15.8 28.7 37.7 53.6 20.1 5.1 12.4 b.6 7.5 11.0 6.9 -9.5 7.6 11.4 48.9 81.3 52.5 19.8 11.3 -1.9 6.8 20.1 22.8 1.5 7.9 13.3 18.5 8.6 17.2 11.1 8.3 12.3 0.0 6.2 16.3 10.0 4.4 -1.1 1.1 14.3 7.9 10.5 14.9 8.4 8.9 9.1 9.5 4.9 12,0 11.2 10.1 11.9 8.3 9.2 13.7 18.7 11.1 17.1 16.6 14.0 11.0 9.5 19.5 24.7 21.5 15.8 18.2 -21.1 19.7 44.0 21.2 29.9 17.5 22.3 10.9 -2.2 0.0 34.8 54.9 68.7 12.8 14.2 11.6 U.3 14.4 6.9 8.9 8.6 7.0 6.2 7.7 9.1 6.0 1.1 0.5 3.3 2.2 -1.6 11.4 15.1 12.6 8.3 12.8 17.7 37.3 48.8 39.3 20.5 53.2 -5.5 7.8 6.2 6.6 6.6 6.5 8.5 17.9 15.2 20.0 42.4 18.2 35.9 50.8 33.4 19.0 55.4 38.4 31.9 19.0 5.1 11.6 1ST HALF QUARTERLY: 3RD QTR. 4TH QTR. 8.2 7.7 4.5 MONTHLYI 1977-JUNE JULY AUG. SEPT. OC1. NOV. DEC. 1978--JAN. FEB. MAR. APR. MAY JUNE 10.1 -4.3 1.9 23.5 6.1 5.1 10.8 9.4 8.0 7.9 11.8 10.4 P ri u . I a 1/ GROWTH RATES ARE BASED ON ESTIMATED MONTHLY PREVIOUS MONTH REPORTED DATA. 2/ BASED ON QUARTERLY AVERAGE DATA. P - PRELIMINARY. a AVERAGE i 1.6 a 19.4 14.7 12.1 16.8 _.. a LEVELS DERIVED BY AVERAGING END OF I CURRENT MONTH AND END OF APPENDIX TABLE 2-B JULY 14, 1978 COMPONENTS OF MONEY STOCK AND RELATED MEASURES Time and Savings Deposits Currency Demand Deposits Period Other Thn CD's Total o t I 1 2 3 Mutual Bank & S&L Savings otal Savings Other Total Savings Other 4 5 6 Shares I 7 8 Credit Union Saving Shares Bonds 9 10 ShortTerm U.S Govt Other Private Gov'Sec As Sec i Asets 1 11 Short term 12 Total Non- Deposit Gov't Funds Demand Depos j/ 13 14 ANNUALLY: 450.9 489.7 545.2 369.6 427.0 471.2 160.5 201.9 219.6 209.1 225.1 251.6 81.3 62.7 74.0 394.8 456.9 519.8 33.0 68.6 220.8 231.9 248.6 1977--JUNE 84.2 240.1 513.2 449.9 213.0 236.9 63.3 JULY AUG. SEPT. 85.1 85.5 86.3 242.3 243.7 245.3 518.3 521.9 525.9 455.5 458.7 214.1 217.0 218.8 241.4 241.7 243.3 OCT. NOV. DEC. 87.1 87.7 247.6 247.2 248.6 465.6 469.3 471.2 219.6 219.4 219.6 66.4 70.9 74.0 511.0 515.7 519.8 45.5 88.6 531.9 540.2 545.2 246.0 249.8 251.6 220.7 220.9 221.0 254.0 257.2 259.9 76.3 79.4 82.0 523.2 525.9 528.8 47.5 48.1 83.4 87.1 86.7 531.7 534.6 538.4 49.5 1975 1976 1977 73.7 80.7 46.8 67.2 71.9 76.6 66.9 66.6 76.4 43.0 47.3 62.8 34.4 51.0 62.0 11.2 11.4 485.4 42.4 74.2 67.1 54.8 53.0 10.1 62.8 63.2 491.2 498.2 43.1 43..8 11.8 55.2 55.2 55.7 10.2 44.7 68.2 70.7 72.3 53.5 505.1 74.7 75.1 75.4 55.3 63.8 57.5 10.7 75.8 76.2 76.6 74.1 75.3 76.4 56.8 59.4 62.8 58.1 60.1 62.0 10.3 6.7 11.4 77.0 77.4 77.8 79.1 80.3 82.7 65.7 65.3 67.8 69.6 66.6 78.2 78.6 79.0 86.2 88.6 90.0 70.7 71.0 71.7 68.1 68.2 39.1 6.3 MONTHLY: 462.1 90.7 250.7 249.8 250.2 91.3 92.2 93.0 255.1 256.4 257.5 566.8 573.6 576.9 483.4 486.5 490.2 10 17 24 31 92.0 92.2 92.6 255.3 255.2 255.0 258.9 571.8 573.3 574.9 576.6 485.1 486.5 487.3 488.8 221.8 221.8 222.2 222.3 263.3 264.7 265.2 266.5 86.9 87.6 87.8 7 14 21P 28P 92.9 92.8 92.9 93.2 258.9 258.3 256.3 256.7 576.7 576.9 576.4 577.3 489.3 489.6 490.2 491.4 222.2 222.0 221.6 221.5 267.1 267.6 268.6 269.9 87.4 87.4 86.2 85.8 SP 93.1 260.9 579.4 492.5 221.2 271.2 86.9 1978-JAN. FEB. MAR. 89.4 90.1 APR. MAY JUNE P 551.0 557.5 562.9 474.7 478.1 480.9 221.6 222.0 221.7 261.7 264.5 268.4 46.1 46.0 48.9 50.0 50.7 67.0 9.7 7.5 7.9 69.7 8.3 7.3 11.3 68.8 68.1 68.3 68.1 8.9 7.4 6.5 5.7 68.5 69.0 8.6 7.6 69.9 15.3 70.3 11.1 WEEKLYt 1976-MAY JUNE JULY 1/ 2/ 3/ 4/ 92.3 86.7 ESTIMATED MONTHLY AVERAGE LEVELS DERIVED BY AVERAGING END OF CURRENT MONTH AND END OF PREVIOUS MONTH REPORTED DATA. INCLUDES PRIVATE DOMESTIC NONFINANCIAL INVESTORS' HOLDINGS OF COMMERCIAL PAPER, BANKERS ACCEPTANCES, SECURITY RP'S AND MONEY MARKET MUTUAL FUND SHARES. BORROWINGS BY BANKS FROM OTHER THAN COMMERCIAL BANKS IN THE FORM OF FEDERAL FUNDS PURCHASED, SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE, AND OTHER LIABILITIES FOR BORROWED MONEY, PLUS GROSS LIABILITIES TO OWN FOREIGN BRANCHES (EURODOLLAR BORROWINGS,) LOANS SOLD TO AFFILIATES, LOAN RPS, AND OTHER MINOR ITEMS. INCLUDES TREASURY DEPOSITS AT MEMBER BANKS AND FEDERAL RESERVE BANKS. 12.5 STRICTLY CONFIDENTIAL CLASS I - FOMC TO: Federal Open Market Committee FROM: Arthur L. Broida DATE: July 17, 1978 SUBJECT: Corrected version of bluebook Appendix II Given below is a corrected version of Appendix II for the blue book dated July 14, 1978. Appendix II Implied Velocity Growth Rates V-1 (GNP/M-1) 1978 1979 Alt. A Alt. B Alt. C II 7.8 7.8 7.8 III 3.0 2.9 3.1 IV 3.8 4.8 5.2 I 5.3 5.5 6.0 II 5.1 4.3 4.2 V-2 (GNP/M-2) 1978 1979 II 9.0 9.0 III 1.8 1.8 IV 2.4 2.9 I 3.8 3.8 II 3.5 2.4 

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

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