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. January 27, 1984 Strictly Confidential (FR) Class I FOMC MONETARY POLICY ALTERNATIVES Prepared for the Federal Open Market Committee By the staff Board of Governors of the Federal Reserve System STRICTLY CONFIDENTIAL (FR) CLASS I - FOMC January 27, 1984 MONETARY POLICY ALTERNATIVES Recent developments 1 (1) 8-1/4 percent, M2 and M3 expanded at annual rates of about 7-1/4 and respectively, on average over December and January, based on preliminary estimates for January. Growth of M2 was somewhat below, and M3 a bit above, the 8 percent November-to-March paths specified by the FOMC last month. Expansion of the broad aggregates was bolstered by a pick-up in M1 growth from the reduced pace of late summer and autumn to about an 8-1/4 percent annual rate over the two-month period--a more rapid pace so far than the 6 percent November-to-March rate specified by the Committee. This accelerated growth in M1 partially offset, in terms of effects on M2 and M3, a marked slowing in growth of the nontransactions components of these broad aggregates. (2) Growth in the monetary and credit aggregates in 1983 relative to FOMC longer-run ranges for the period are shown in the table below. Annual benchmark and seasonal revisions have raised growth rates and redistributed growth during the year--in the case of M1 from the first half of the year into the second half. 1. All money stock data presented in the bluebook incorporate annual seasonal and benchmark revisions and, for M3, a definitional change to include term Eurodollars. Impacts of these revisions on money growth outcomes in 1983 relative to long-run targets are shown in More detail on the revisions is presented in the table on page 2. Appendix I. The revised data are STRICTLY CONFIDENTIAL until their official release. KEY MONETARY POLICY AGGREGATES (Seasonally adjusted annual rates of growth) Annual growth rates 1 1983 1982 1983 Nov. Dec. 1984 Nov.Jan.e Jan.e M1 3.2 5.0 12.1 8.6 10.0 8.7 M2 8.2 8.1 6.5 7.3 12.1 9.5 M3 14.2 8.5 8.3 8.4 9.7 10.5 Domestic nonfinancial debt 10.2 10.1 - 10.5 9.2 Bank Credit 13.7 13.1 13.9 13.8 10.8 7.9 -17.1 10.2 -2.5 3.8 3.9 7.1 -Total reserves -6.9 5.8 -4.5 0.7 4.8 6.5 Monetary base 6.1 6.4 14.4 10.4 9.2 7.8 899 772 721 747 666 882 529 561 680 621 489 362 Money and Credit Aggregates - Reserve Measures 2 Nonborrowed reserves 3 Memo: (Millions of dollars) Adjustment and seasonal borrowing Excess reserves e--Estimate based on partial data. Fourth quarter to fourth quarter growth rates except for the credit 1. aggregates which are measured from December to December, and borrowings and excess reserves, which are average levels for the year. 2. Growth rates of reserve measures are adjusted to remove the effects of discontinuities resulting from phased changes in reserve ratios under the Monetary Control Act. Includes special borrowing and other extended credit from the Federal 3. Reserve. N.B. Money stock data in this table are preliminary and reflect annual seasonal and benchmark revisions, as well as a definitional change affectSee Appendix I. ing M3. Ranges 1 1. 2. After Revision Before Revision M1 5 to 9 7.2 5.5 M2 7 to 10 8.3 7.8 M3 6-1/2 to 9-1/2 9.72 9.1 Debt 8-1/2 to 11-1/2 10.5 10.5 Base for M1 is QII '83 and for M2 is the February-March average. Only about one-tenth of a percentage point of the revision reflects the recent redefinition of M3 to include term Eurodollars. (3) Borrowing by domestic nonfinancial sectors in December, as in November, was above its average pace over the first three quarters of the year. Treasury borrowing, however, was at a slower pace, reflecting in part the timing of auctions in relation to year-end holidays. Consumer credit growth has advanced in recent months with stepped-up purchases of durables, especially automobiles, while financing needs of corporations rose as expansion in fixed investment and inventory accumulation evidently outstripped growth in internally generated funds. In December, bank credit growth was near the very brisk November pace, reflecting a further pickup in loans, led by the business and consumer categories, and financed in part by a deceleration of security acquisitions. (4) Nonborrowed reserves expanded modestly in December and January on average, but showed more growth than total reserves as the average level of borrowing dropped somewhat. Excluding the $1.3 billion that was borrowed in the year-end statement week, borrowing has averaged virtually $650 million since the last Comittee meeting. The monetary base over the past two months has increased at about a 10-1/2 percent annual rate, boosted in January by accelerated currency growth. -4- (5) The federal funds rate has averaged close to 9-1/2 percent over the intermeeting period, little different from the weeks just prior to the last FOMC meeting. Other market rates, however, have moved somewhat lower, as the market responded to signs of a slowing in economic expansion relative to expectations and, in the case of short rates, an unwinding of mid-December tax date pressures. Private short-term rates are off about 50 to 70 basis points, and corporate and municipal bond yields are down about 60 basis points. (6) Treasury yields also dropped, though by substantially less. The dollar has appreciated by about 1-1/4 percent on a weighted average basis since the last FOMC meeting, advancing mainly against European currencies while edging down against the yen. The dollar is currently only slightly below record peaks reached earlier in January. the United States sold $143 million, intervening on two days during the period. Exchange markets seemed particularly thin and volatile in early January reflecting, among other things, considerable uncertainty over the near-term pace of economic activity in the United States and the accompanying interest rate outlook. -5- Long-run ranges (7) The previous bluebook discussed issues that might be con- sidered in establishing long-run ranges for the monetary aggregates and credit for 1984--including consistency with continued economic recovery and progress toward reasonable price stability, the outlook for a return to more predictable velocity patterns, particularly for M1, encing credit growth. and factors influ- This bluebook presents three alternative sets of longer-term growth ranges for the fourth quarter of 1983 to the fourth quarter of 1984 for Committee consideration, and discusses in general terms possible implications for the economy. The set of ranges announced by the Committee last July as its tentative choices for 1984 are shown below as alternative II. Alternative I contemplates somewhat less rapid growth in money and credit, while alternative III--which continues the ranges set for 1983 into 1984--would allow for more rapid growth in the aggregates. Alt. I Alt. II M1 4 to 7 4 to 8 5 to 9 M2 5-1/2 to 8-1/2 6-1/2 to 9-1/2 7 to 10 M3 6 to 9 6 to 9 6-1/2 to 9-1/2 Debt 8 to 11 8 to 11 8-1/2 to 11-1/2 (8) Alt. III Alternative II includes growth ranges for the broad aggre- gates and credit that are 1/2 point lower than last year's ranges, and a range for M1 that is one point lower than the range adopted for the second half of last year. The 1/2 point reduction in the range for M2 may not represent an "effective" reduction, since last year's range had allowed for some residual shifting into MMDAs from assets outside M2--on the order of 1/2 to 1 percentage point at an annual rate, which is close to what actually developed, as nearly as can be estimated. On that reasoning, the Committee could consider whether to reduce the M2 range for 1984 by one percentage point from 1983 (rather than 1/2 point) so as to be more consistent with the effective reduction embodied in the other ranges shown in alternative II. That would make the M2 range under alternative II 6 to 9 percent, the same as for M3. (9) The staff's GNP projection for 1984 assumes growth in the money and credit aggregates generally in the upper half of the alternative II ranges (though in the case of M2 right around the midpoint of a 6-1/2 to 9-1/2 percent range). Such outcomes would represent a deceleration of - actual growth rates of the monetary aggregates in 1984 from their rates for 1983 as a whole, though the slowing, if any, would be much less marked for M1 and M2 when comparisons are made with growth in 1983 from their target base periods. Credit growth in 1984 is expected to be close to the 10-1/2 percent pace of 1983. (10) The staff anticipates that the behavior of money demand in 1984 will be roughly in conformance with historic norms, and that the velocities of the various aggregates will post moderate further increases, partly induced by an updrift of interest rates over the course of this year that is currently projected by the staff in the context of a rising structural budget deficit. Of course, projections of the behavior of the aggregates, not to mention projections of interest rates, remain uncertain. Nonetheless, the pickup in M1 velocity over recent quarters is suggestive of the emergence of somewhat more predictable behavior patterns for that aggregate. The growth in velocity of M1 for 1984, given the projected growth in nominal GNP of around 9 percent, would probably be on the order of 2-1/2 to 3 percent. In the second year of economic expansions since the early 1950s V1 has increased on average by about 3 percent cyclical interest rate increases). (some of which reflects the impact of -7- (11) The expected relationship between M2 and M3 next year may differ a bit from past patterns. Since the beginning of the 1970s, for the most part tended to grow a little more rapidly than M2. M3 has In 1984, there is more of a possibility that M3 growth may be about the same as M2 growth--given the expanded capacity of institutions to offer market interest rates on assets included in M2 and the likelihood that a substantial portion of bank credit expansion will be funded through the Euro-dollar market (as an aspect of large net inflows of funds from abroad that are the obverse of our current account deficit) rather than through CDs issued in the U.S. addition, slower growth in mortgage credit should hold back thrift In issuance of large CDs. (12) The specifications of alternative I would be consistent with a policy that exerts somewhat more restraint on demands for goods and services so as to provide greater assurance that inflationary pressures will be kept in check over time. Slower growth in money and a better price performance over 1984 and into 1985, through their impact on expectations, could improve the price-output tradeoff in subsequent stages of the transition to price stability. As growth in M2 and M1 is restrained to rates around the midpoints of the proposed 5-1/2 to 8-1/2 and 4 to 7 percent ranges, respectively, interest rates would probably be subject to more upward pressure this year than under alternative II. As those pressures come sooner, the odds would be reduced that interest rates would need to rise further in 1985 in association with continued deceleration in money growth targets, and by then might well begin to decline. alternative may be little M3 growth in this different than under alternative II as institu- tions attempt to sustain credit expansion by issuing more large-denomination time deposits, partly to finance a shift in business credit demands from -8bond markets to banks under conditions of temporarily rising long-term rates. (13) The more rapid growth of the aggregates contemplated by Alternative III may not involve any rise of short-term interest rates over the course of next year, but at the risk of being more accommodative to upward price pressures. In that process, the trade-off between output and price changes, for any given money growth, would begin to deteriorate if inflationary expectations worsened. Such expectational effects might tend to push longer-term rates up as the year progressed, and involve higher short-term rates in 1985 in the process of restraining inflation over time. (14) The preceding analysis of all of the alternatives assumed that underlying demands for goods and services would be about as strong as as in the staff's GNP forecast. Should such demands prove to be substan- tially weaker, growth of M1 might tend to be substantially stronger than indicated--given M2 growth around, say, the middle of the alternative II range--as falling market interest rates increase the demand for transactions accounts, especially fixed ceiling rate NOW accounts. In such a case, M1 growth toward the upper end of its alternative III range could evolve. This would be similar to the experience with M1 in the last half of 1982 and early 1983, and would be a consequence of a greater interest elasticity for M1 demand under current institutional conditions than for M2. A sym- metrical argument might be made if demands for goods and services proved to be substantially stronger than now anticipated--leading to the possibility of reduced M1 growth well below the top of its alternative I range in face of a marked rise in interest rates, although this effect could be muted by shifts of funds into super-NOW accounts from fixed-ceiling NOW accounts and demand deposits. -9- Prospective developments (15) The table below shows alternative specifications for the growth of the monetary aggregates for the November-to-March period, the interval used by the Committee in setting monetary growth rates at its December meeting; more detailed data are shown on the table and charts on ensuing pages. The associated federal funds rate ranges for the upcoming intermeeting period and implied growth rates for the aggregates from January to March are presented in the lower panels of the table. The speci- fications of alternative B retain the growth rate for the broad aggregates chosen by the Committee at its last meeting; however, they also include a somewhat higher growth for M1 in light of recent experience with the relationship between the narrow and broader aggregates. Alternative A calls for more rapid money growth, and alternative C involves slower growth, with M1 growing at the rate specified at the previous meeting. Alt. A Alt. B Alt. C 8-1/2 8-1/2 7-1/2 8 8 6-3/4 7-1/2 7-1/2 6 6 to 9-1/2 6 to 10 7 to 11 9-1/4 8-1/2 6-1/2 8-1/4 7-1/2 5 7-1/4 6-1/2 3-1/2 Growth from November to March M2 M3 M1 Federal funds rate ranges Implied growth from January to March M2 M3 M1 (16) The specifications of alternative B, which are expected to involve little change in money market conditions over the intermeeting period, would bring M2 growth to the middle of its alternative II range by Alternative Levels and Growth Rates for Key Monetary Aggregates Alt. A M2 Alt. B Alt. C Alt. A M3 Alt. B Alt. C Alt. A M1 Alt. B Alt. C 1983--October November December 2167.4 2182.3 2197.0 2167.4 2182.3 2197.0 2167.4 2182.3 2197.0 2657.2 2688.7 2707.7 2657.2 2688.7 2707.7 2657.2 2688.7 2707.7 521.7 523.1 525.3 521.7 523.1 525.3 521.7 523.1 525.3 1984--January February March 2208.9 2226.0 2243.2 2208.9 2224.2 2239.6 2208.9 2222.4 2235.9 2726.4 2745.6 2764.9 2726.4 2743.4 2760.4 2726.4 530.6 533.5 536.4 530.6 532.8 534.9 530.6 532.2 533.7 1983-October November December 10.9 8.2 8.1 10.9 8.2 8.1 10.9 8.2 8.1 9.4 14.2 8.5 9.4 14.2 8.5 9.4 14.2 8.5 1984--January February March 6.5 9.3 9.3 6.5 8.3 8.3 6.5 7.3 7.3 8.3 8.5 8.4 8.3 7.5 7.4 8.3 6.5 6.4 8.5 8.0 7.5 8.5 8.0 1983-01 02 03 04 20.4 10.6 6.9 8.5 20.4 10.6 6.9 8.5 20.4 10.6 6.9 8.5 1984--01 8.0 7.7 7.4 2741.2 2755.9 Growth Rates Monthly Nov. '83 to Mar. '84 6.5 3.2 5.0 6.5 3.2 5.0 6.5 3.2 5.0 12.1 6.6 6.5 12.1 5.0 4.7 12.1 3.6 3.4 7.5 7.6 6.8 6.1 10.7 9.3 7.4 10.0 10.7 9.3 7.4 10.0 12.7 11.7 9.4 4.9 8.8 8.4 7.7 Growth Rates Quarterly Average 10.7 9.3 7.4 10.0 9.1 12.7 11.7 9.4 4.9 7.2 12.7 11.7 9.4 4.9 6.7 CONFIDENTIAL FR Class II FOMC Chart 1 Actual and Targeted M2 1 30 84 Bilhons of dolln,: - 23D0 ACTUAL LEVEL SSHORT-RUN ALTERNATIVES 2220 218C 2140 2100 2060 2020 1980 1940 N D 1982 J F M A M J J 1983 A S O N D J F 1984 M Chart 2 Actual and Targeted M3 CONFIDENTIAL FR, Class II FOMC 1 30 84 M3 Billion - o' dc'' " ACTUAL LEVEL * SHOR' RUN ALTERNATIVES - 200 9' - - 2700 265: 6'200 2600 255C 2500 2450 240C 1982 1983 1984 CONFIDENTIAL (FR) Chart 3 Class FOMC II Actual and Targeted M1 130 84 Billions of dollars 5~~~ 5C SACTUAL LEVEL SSHORT-RUN ALTERNATIVES 5, 510 490 470 450 N D 1982 J F M A M J J 1983 A S O N D J 1984 -11- March, with M1 in the upper part of its range. M1 growth would be expected to moderate in February and March from the relatively rapid average pace of December and January, to about a 5 percent annual rate. On a quarterly average basis, M1 expansion in the first quarter would be around 7-1/4 percent, implying growth in velocity of around 2-1/2 percent, given projected first-quarter nominal GNP growth. Such a velocity rise would be somewhat less than in the fourth quarter--which was about 3-1/2 percent--and roughly in line with predictions of the money demand equations in the Board's quarterly and monthly models. While M1 growth may slow over the next two months, growth in the nontransactions component of M2 is expected to pick up from its depressed January pace and be more in line with growth in income, thereby sustaining M2 growth at around an 8 percent annual rate. (17) Borrowing at the discount window under alternative B would be expected to range around $650 million, and federal funds to remain in the 9-1/4 to 9-1/2 percent area. However, with contemporaneous reserve requirements being instituted on February 2, reserve paths will have to take account of transitional and more permanent adaptations by banks in their reserve management strategies that could affect, among other things, patterns of borrowing and excess reserves. Reserve paths in the initial stage of CRR implementation would probably need to allow for higher than average excess reserves. By March, however, excess reserves may be closer to "normal," and on that assumption growth in total reserves over the next two months is likely to be around 5 percent under alternative B. Nonborrowed reserve growth, assuming borrowing settles down around $650 million, would increase at a 6 percent annual rate. (18) Interest rates under alternative B would be expected to fluctuate in a narrow range around current levels over the intermeeting -12- period. The recent drop in short and long-term rates is not likely to carry further, given the continued growth expected in the monetary aggregates and expansion in credit demands at slightly more than the fourth-quarter pace. Treasury credit demands are likely to be larger this quarter than in the fourth, offsetting some tendency for private borrowing to slow. State and local government bond issuance is expected to be at a relatively reduced pace, given the legislative uncertainty about the status of some types of revenue bonds. The increase in household mortgage and consumer installment debt also is likely to moderate along with the slower growth of consumer durables purchases and the relatively flat pattern of housing starts and expenditures. Corporate borrowing, on the other hand, may be greater than in the fourth quarter as internal fund generation levels off while spending for capital and inventories continues to rise. (19) The less rapid growth of money under alternative C, though still leaving the aggregates well within the alternative II longer-run range by March, would also be consistent with the slower annual growth rates of longer-run alternative I. The November-to-March growth rates of 7-1/2 and 6 percent for M2 and M1, respectively, contemplated by this alternative would bring these aggregates to levels just above the midpoints of the alternative I ranges by March. Such growth rates would probably entail somewhat greater restraint on reserve positions over the weeks ahead, with borrowing rising to the neighborhood of $1 billion. Nonborrowed reserves might contract slightly over the next two months. (20) A funds rate of around 10 percent might evolve from these reserve conditions. Because market expectations of higher rates have be- come more muted in recent weeks, interest rates generally would also rise rather sharply, although interpretations of developments by market participants might for a time be made more difficult by uncertainties in connection -13- with CRR. The 3-month Treasury bill rate might move up to the area of 9-1/2 percent, bank CD rates to around 10 percent, and the dollar would rise further on foreign exchange markets. The tendency for bond yields to rise might be moderated--especially once the forthcoming Treasury refunding is distributed--as corporate bond offerings fall off and if expectations of a weakening in economic activity become more pervasive. (21) The more rapid growth of money under alternative A would bring M1 near the upper limit of, and M2 into the upper part of, their respective alternative II longer-run ranges. In that sense alternative A may be more consistent with the more expansive longer-run growth rates of alternative III. (22) Expansion of M1 and M2 at annual rates of 6-1/2 and 9-1/4 percent, respectively, from January to March, as contemplated by A, would probably involve a decline of interest rates over the next few weeks as borrowing at the discount window dropped to an average of around S400 million and nonborrowed reserve growth accelerated to about a 12 percent annual rate for the January to March period. The funds rate would drop to 9 percent or a little lower, and other short-term rates would fall by comparable amounts, with the Treasury bill rates moving to below 8-1/2 percent; and the dollar would decline-perhaps sharply--on foreign exchange markets. Such an easing of money market conditions would likely also set off a substantial rally in bond and stock markets, though a rally that could be reversed if market participants concluded that greater inflationary pressures would become more likely. -14- Directive language (23) Given below are two alternative approaches to the directive paragraphs that specify the long-run ranges for 1984 and the objectives for operations over the intermeeting period. The first alternative retains the present degree of emphasis on M1, while the second is suggested should the Committee wish to place additional weight on that aggregate. Alternative 1 (No change in M1 emphasis) The proposed language related to the long-term ranges is presented in paragraphs (a) and (b) and language related to operations is shown in paragraph (c). Paragraph (a) presents the long-run targets in the same order and with essentially the same language as in the current directive. The qualifying language in the current directive about the relationship of the aggregates to economic goals is shown in brackets at the end of paragraph (a)--with suggested modifications indicated--should the Committee still wish to emphasize particular uncertainties in that respect. Paragraph (b), taken without change from the present directive, indicates weights to the given to the various aggregates and other factors in policy implementation. Proposed Language for Long-term Ranges (a) The Federal Open Market Committee seeks to foster monetary and financial conditions that will help to reduce inflation further, promote growth in output on a sustainable basis, and contribute to a sustainable pattern of international transactions. In furtherance of these objectives the Committee established growth ranges for the broader aggregates of ____to ____ percent for M2 and ____ to ____ percent for M3 for the period from the fourth quarter of 1983 to the fourth quarter of 1984. The Committee considered that growth of M1 in a range of ____to____ percent from the fourth quarter of 1983 to -15- the fourth quarter of 1984 would be consistent with the ranges for the broader aggregates. The associated range for total domestic nonfinancial debt was set at ____ to ____ percent for 1984. [The Committee recognized that the relationships between such ranges and ultimate economic goals MAY have become less predictable; that the impact of {DEL: new] DEREGULATED deposit accounts on [DEL: growth]ONGOING BEHAVIOR of monetary aggregates cannot YET be determined with a high degree of confidence; and that the availability of interest on large portions of transaction accounts may be reflected in some changes in the historical trends in velocity.] (b) In implementing monetary policy, the Committee agreed that substantial weight would continue to be placed on the behavior of the broader monetary aggregates. The behavior of M1 and total domestic nonfinancial debt would be monitored, with the degree of weight placed on M1 over time dependent on evidence that velocity characteristics are resuming more predictable patterns. The Comittee understood that policy implementation would involve continuing appraisal of the relationships between the various measures of money and credit and nominal GNP, includ- ing evaluation of conditions in domestic credit and foreign exchange markets. Proposed Operational Paragraph (c) The Committee seeks in the short run to maintain at least (or MAINTAIN/INCREASE SLIGHTLY/DECREASE SLIGHTLY) the existing degree of reserve restraint, TAKING ACCOUNT OF EFFECTS OF THE SHIFT TO THE CONTEMPORANEOUS RESERVE REQUIREMENT SYSTEM, -16- PARTICULARLY IN THE PERIOD IMMEDIATELY FOLLOWING IMPLEMENTATION, ON RESERVE MANAGEMENT BY DEPOSITORY INSTITUTIONS. is The action is expected to be associated with growth of M2 and M3 at annual 8]____ AND ____ percent RESPECTIVELY from November to rates of around [DEL: March. The Committee anticipates that M1 growth at an annual rate of around [DEL: 6] ____ percent from November to March will be consistent with its objectives for the broader aggregates, and that expansion in total domestic nonfinancial debt WILL BE WITHIN THE RANGE ESTABLISHED FOR THE YEAR[DEL: would continue at Depending on evidence about the con- around pace]. recent its tinuing strength of economic recovery and other factors bearing on the business and inflation outlook, somewhat greater restraint would be acceptable should the aggregates expand more rapidly WHILE LESSER RESTRAINT MIGHT BE ACCEPTABLE IN THE CONTEXT OF A SIGNIFICANT SHORTFALL IN GROWTH OF THE AGGREGATES FROM CURRENT EXPECTATIONS. if it The Chairman may call for Committee consultation appears to the Manager for Domestic Operations that pursuit of the monetary objectives and related reserve paths during the period before the next meeting is likely to be associated with 6 to a federal funds rate persistently outside a range of [DEL: 10] ____TO ____ percent. Alternative 2 (Increased emphasis on M1) Paragraphs (d) and (e) below present alternative language that would give more emphasis to M1 as a long-run target, while paragraph (f) suggests conforming changes in the operational paragraph. Proposed Language for Long-term Ranges (d) The Federal Open Market Committee seeks to foster monetary and financial conditions that will help to reduce inflation further, promote growth in output on a sustainable basis, and contribute to a sustainable pattern of international transactions. In furtherance of these objectives the Committee established the following growth ranges for monetary and credit aggregates for the period from the fourth quarter of 1983 to the fourth quarter of 1984: ____ to ____ percent for M1, percent for M2, and ____ to ____ percent for M3. ____ ____ to The associated range for total domestic nonfinancial debt was set at ____ to ____ percent in 1984. (e) In implementing monetary policy the Committee agreed to increase somewhat the weight on M1 as behavior of its velocity has recently been broadly consistent with historical patterns. Still, uncertainties remain about the future behavior of M1 velocity, in view of the substantial changes in the composition of M1 and the characteristics of deposits in this aggregate; and the Committee will continue to place substantial weight on the behavior of the broader monetary aggregates and to monitor expansion in total domestic nonfinancial debt. In general, the Committee understood that policy implementation would involve continuing appraisal of the relationships between the various measures of money and credit and nominal GNP, including evaluation of conditions in domestic credit and foreign exchange markets. -18Proposed Operational Paragraph (f) The Committee seeks in the short run to main- tain at least (or MAINTAIN/INCREASE SLIGHTLY/DECREASE SLIGHTLY) the existing degree of reserve restraint, TAKING ACCOUNT OF EFFECTS OF THE SHIFT TO THE CONTEMPORANEOUS RESERVE REQUIREMENT SYSTEM, PARTICULARLY IN THE PERIOD IMMEDIATELY FOLLOWING ITS IMPLEMENTATION, ON RESERVE MANAGEMENT BY DEPOSITORY INSTITU- TIONS. THE ACTION IS EXPECTED TO BE ASSOCIATED WITH GROWTH OF Ml, AND M3 AT ANNUAL RATES OF AROUND ____ PERCENT, M2, AND ____ PERCENT RESPECTIVELY FROM NOVEMBER TO MARCH. ____ PERCENT, EXPANSION OF NONFINANCIAL DEBT IS EXPECTED TO BE WITHIN THE RANGE ESTABLISHED FOR THE YEAR. Depending on evidence about the continuing strength of economic recovery and other factors bearing on the business and inflation outlook, somewhat greater restraint would be acceptable should the aggregates expand more rapidly WHILE LESSER RESTRAINT MIGHT BE ACCEPTABLE IN THE CONTEXT OF A SIGNIFICANT SHORTFALL IN GROWTH OF THE AGGREGATES FROM CURRENT EXPECTATIONS. consultation if it The Chairman may call for Committee appears to the Manager for Domestic Opera- tions that pursuit of the monetary objectives and related reserve paths during the period before the next meeting is likely to be associated with a federal funds rate persist6 to 10]____TO ____ percent. istly outside a range of [DEL: Appendix I Money Stock Revisions Measures of the money stock have been revised to reflect annual seasonal and benchmark revisions, as well as a definitional change affecting M3. These revisions are preliminary and are to be regarded as strictly confidential until their release. This appendix discusses the revisions and presents tables comparing growth rates of the old series and estimates of the new series (which should still be considered preliminary). Definitional Change The definition of M3 has been changed to include term Eurodollars held by U.S. residents in Canada and the United Kingdom, and at foreign branches of U.S. banks elsewhere. A recent reporting change provides data on term Eurodollars at a panel of branches of large U.S. banks on a schedule similar to other M3 elements. The inclusion of term Eurodollars raised the level of M3 by about $90 billion but had a minimal effect on M3 growth in 1983. Benchmark Revisions Deposits have been benchmarked to recent call reports; further revisions to deposits stem from changes to System reporting procedures made in 1983, largely related to reduced reporting under the Garn-St Germain Act of 1982. In addition, the currency component was revised to reflect revisions to figures on the amount of coin in circulation. The net impact of these revisions was to raise the levels and boost the growth rates of each of the aggregates in 1983. Seasonal Revisions Seasonal factors have been updated using the X-ll ARIMA procedure adopted in 1982. Nontransactions M2 has been seasonally adjusted as a I-2 whole--instead of being built up from seasonally adjusted savings and small time deposits--in order to reduce distortions caused by portfolio shifts arising from financial change in recent years, especially shifts to MMDAs in 1983. A similar procedure has been used to seasonally adjust the non-M2 portion of M3. The effects of revisions to seasonal adjustment factors on M1 growth are larger than average while those for M2 and M3 are more typical of recent years. Seasonal revisions tended to boost growth in all of the aggregates in the latter part of 1983. I-3 Table I-1 COMPARISON OF REVISED AND OLD M1 GROWTH RATES (percent changes at annual rates) Revised Ml (1) Old M1 (2) Difference Difference due to (1-2) Benchmark Seasonals (5) (3) (4) Monthly 1982--Oct. Nov. Dec. 17.6 15.8 10.3 14.2 13.6 1983--Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. 11.0 15.1 13.2 3.4 9.8 22.4 15.9 -2.7 26.3 10.2 8.9 2.8 0.9 1.9 1984--Jan. 12.1 21.5 9.9 9.2 5.8 3.5 6.5 3.2 5.0 3.4 2.2 -0.3 0.9 0.6 -0.5 1.2 -7.3 -2.7 6.1 -4.8 3.9 -7.7 -2.9 4.3 -5.3 -1.5 6.5 0.3 3.0 2.6 4.6 2.3 -1.5 -2.7 0.4 0.2 1.8 0.5 1.2 0.9 0.1 0.4 1.7 0.2 -1.0 8.8 3.3 0.5 2.8 2.4 -1.4 -0.5 0.5 2.8 0.3 -0.8 0.9 0.7 0.6 10.6 0.9 -0.3 -0.6 2.9 2.2 2.9 2.1 -0.5 Quarterly 15.5 12.7 11.7 9.4 4.9 1982--QIV 1983--QI QII QIII QIV 13.1 14.1 12.2 8.9 2.1 2.1 -0.6 -1.4 -0.2 2.2 Annual 1983--QIV '82 to 10.0 QIV '83 0.4 0.0 -0.9 -0.9 Semi-Annual QIV '82 to QII '83 12.4 QII '83 to QIV '83 7.2 c 13.3 5.5 1.7 0.7 1.0 Table I-2 COMPARISON OF REVISED AND OLD M2 GROWTH RATES (percent changes at annual rates) Revised (1) M2 Old M2 (2) Difference (1-2) (3) Difference due to Benchmark Seasonal (4) (5) Monthly 1982--Oct. Nov. Dec. 9.3 10.5 12.1 7.9 9.5 8.9 1.4 1.0 3.2 -0.1 0.4 0.5 1.5 0.6 2.7 1983--Jan. Feb. Mar. Apr. May June July 31.6 21.9 7.9 8.3 11.8 8.4 5.3 30.9 24.4 11.2 2.8 12.4 10.4 6.8 0.7 -2.5 -3.3 5.5 -0.6 -2.0 -1.5 -0.7 -0.7 0.1 1.9 0.1 -0.1 0.0 1.4 -1.8 -3.4 3.6 -0.7 -1.9 -1.5 Aug. Sept. Oct. Nov. Dec. 1984--Jan. 5.0 6.0 -1.0 0.0 -1.0 7.1 10.9 8.2 8.1 4.8 9.1 7.2 5.5 2.3 1.8 1.0 2.6 0.6 0.8 0.1 0.3 1.7 1.0 0.9 2.3 6.5 6.8 -0.3 -0.4 0.1 10.6 20.4 10.6 6.9 8.6 9.3 20.3 10.1 7.8 7.0 1.3 0.1 0.5 -0.9 1.6 0.3 -0.3 0.6 0.1 0.5 1.0 0.4 -0.1 -1.0 1.1 12.1 11.8 0.3 0.2 0.1 8.3 7.8 0.5 0.5 0.0 Quarterly 1982--QIV 1983--QI QII QIII QIV Annual 1982--QIV '82 to QIV '83 Feb/Mar. '83 to QIV '83 Table I-3 COMPARISON OF REVISED AND OLD M3 GROWTH RATES 1 (percent changes at annual rates) Monthly 1982--Oct. Nov. Dec. 1983--Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. 1984--Jan. 11.7 7.8 5.7 9.3 9.3 3.7 14.2 13.3 7.3 8.6 9.6 10.3 5.0 6.1 8.8 9.4 14.2 8.5 2.4 -1.5 2.0 0.0 -0.7 -0.3 2.4 -0.8 2.3 13.0 13.7 8.1 3.3 10.9 11.0 5.5 8.6 7.4 8.3 11.6 6.4 1.2 -0.4 -0.8 5.3 -1.3 -0.7 -0.5 -2.5 1.4 1.1 2.6 2.1 -1.4 1.5 1.3 2.8 0.6 0.2 -0.2 0.1 -0.2 -0.6 3.2 0.2 2.6 -1.9 -2.1 2.5 -1.9 -0.9 -0.3 -2.6 1.6 1.7 -0.6 1.9 8.3 6.9 1.4 -0.5 10.0 10.7 9.3 7.4 10.0 9.5 10.2 8.1 8.3 8.7 0.5 0.5 1.2 -0.9 1.3 -0.4 -0.1 1.6 0.0 0.5 9.7 9.1 Quarterly 1982--QIV 1983--QI QII QIII QIV 0.9 0.6 -0.4 -0.9 0.8 Annual 1982--QIV '82 to QIV '83 1. Revised M3 includes term Eurodollars; the inclusion of Eurodollars boosted M3 growth in 1983 by no more than 0.1 percentage points. Selected Interest Rates Percent January 30, Shoit.Tern federal eondary make 11f6 -"ea &.monthI6mrl 1 3 1 4- Long-Tewat_________ COMM.auy " " nally W market I P mutual 3-ot 11mnh fn fund" Peid - 5 1984 bank ~ ~ vied loan 30.vw 1 6 Auiiy ia reenty ISand offere Buyer 11 1_ 1 12 1 1 1 FHNA c llng 6=1 $IS*~ 14 1 15 r i6 1982--High Low 15.61 8.69 14.41 7.43 14.23 7.84 13.51 8.12 15.84 8.53 15.56 8.19 13.89 8.09 16.86 11.50 15.01 9.81 14.81 10.46 14.63 10.42 17.47 12.58 14.32 9.78 17.66 13.57 16.50 12.00 17.41 11.07 1983--High Low 10.21 8.42 9.49 7.63 9.64 7.72 9.79 7.82 9.93 8.15 9.85 8.02 8.79 7.71 11.50 10.50 11.57 9.40 12.14 10.18 12.11 10.32 13.42 11.64 10.56 9.21 13.89 12.55 13.50 11.50 12.53 10.49 1982--Dec. 8.95 7.94 8.16 8.23 8.66 8.53 8.22 11.50 9.88 10.54 10.54 13.00 10.74 13.62 12.00 11.24 1983--Jan. Feb. March 8.68 8.51 8.77 7.86 8.11 8.35 7.93 8.23 8.37 8.01 8.28 8.36 8.36 8.54 8.69 8.19 8.30 8.56 7.06 7.79 7.77 11.16 10.98 10.50 9.64 9.91 9.84 10.46 10.72 10.51 10.63 10.88 10.63 12.74 12.88 12.47 10.24 10.13 9.78 13.31 13.04 12.80 12.00 12.00 12.00 10.89 11.16 10.71 April may June 8.80 8.63 8.98 8.21 8.19 6.79 8.30 8.22 8.89 8.29 8.23 8.87 8.63 8.49 9.20 8.58 8.36 8.97 7.96 7.83 8.01 10.50 10.50 10.50 9.76 9.66 10.32 10.40 10.38 10.85 10.48 10.53 10.93 12.05 11.92 12.39 9.40 9.56 10.07 12.78 12.63 12.87 12.00 11.63 11.88 11.04 10.68 11.36 July Aug. Sept. 9.37 9.56 9.45 9.08 9.34 9.00 9.26 9.51 9.15 9.34 9.60 9.27 9.50 9.77 9.39 9.15 9.41 9.19 8.34 8.69 8.77 10.50 10.89 11.00 10.90 11.30 11.07 11.38 11.85 11.65 11.40 11.82 11.63 12.78 13.16 12.98 10.06 10.25 10.20 13.42 13.81 13.73 12.30 13.38 13.00 11.93 12.16 11.86 Oct. 9.48 9.34 9.47 8.64 8.76 9.00 8.83 8.93 9.17 8.98 9.08 9.24 9.18 9.36 9.69 9.03 9.10 9.56 8.67 8.55 8.69 11.00 11.00 11.00 10.87 10.96 11.13 11.54 11.69 11.83 11.58 11.75 11.88 12.91 13.15 13.29 10.14 10.22 10.40 13.54 13.44 13.42 13.00 12.50 12.50 11.40 11.40 11.56 Nov. Dec. 1983--Nov. 2 9 16 23 30 9.40 9.36 9.42 9.26 9.27 8.55 8.75 8.78 8.81 8.85 8.77 8.91 8.94 8.97 9.02 9.00 9.13 9.05 9.08 9.11 9.24 9.40 9.38 9.39 9.32 9.03 9.14 9.14 9.10 9.04 8.59 8.52 8.56 8.54 8.49 11.00 11.00 11.00 11.00 11.00 10.96 11.08 10.94 10.92 10.93 11.69 11.82 11.70 11.65 11.60 11.75 11.88 11.74 11.71 11.66 13.21 13.10 13.15 13.13 13.07 10.28 10.18 10.19 10.22 10.39 13.42 13.47 13.42 13.43 13.41 12.50 12.50 12.50 12.50 12.50 11.40 11.40 11.4p 11.40 11.40 Dec. 7 14 21 28 9.49 9.52 9.62 8.96 8.92 9.04 9.08 8.94 9.11 9.21 9.24 9.14 9.19 9.27 9.27 9.23 9.42 9.71 9.91 9.73 9.20 9.51 9.85 9.68 8.55 8.61 8.73 8.71 11.00 11.00 11.00 11.00 J).05 11.18 11.18 11.10 11.74 11.92 11.88 11.78 11.78 11.97 11.94 11.84 13.30 13.42 13.32 13.33 10.45 10.56 10.38 10.23 13.38 13.42 13.46 13.43 12.50 12.50 12.50 12.50 11.60 11.60 11.60 11.60 4 11 18 25 10.06 9.53 9.54 9.53 8.98 8.91 8.84 8.93 9.15 9.08 8.94 9.00 9.22 9.14 9.01 9.06 9.64 9.47 9.36 9.40 9.55 9.26 9.17 9.23 8.94 8.81 8.78 8.75 11.00 11.00 11.00 11.00 11.09 11.00 10.87 10.89 11.81 11.74 11.62 11.63 11.87 11.82 11.69 11.70 13.16 12.95 12,88r 12.85 10.13 10.07 9.98 9.95 13.43 13.40 13.35 13.29 12.50 12.50 12.50 12.50 11.60 11.40 11.40 11.40 8.97 8.93 8.91 9.02 8.98 8.97 9.08 9.03 9.01. 9.36 9.40 9.36 9.23 9.18 9.15 ---- 11.00 11.00 11.00 10.91 10.90 8 10. 7p 11.64 11.61 1 1 .62p 11.71 11.70 11.69p 1984--Jan Daily--Jan. 20 26 27 9.48 9.48 9.32p Columns 12 and 13 are Data in column 7 are taken from Donoghue's Honey Fund Report. NOTE: Weekly data for columns I through 11 .ire statement week averages. Column 14 is an average Column 13 Is the Bond Buyer revenue index. 1-day quotes for Friday and Thursday, respectively, following the end of the sLatement week. at a sample of savings and loan associatione of contract interest rates on new commitments for conventional firbt mortgages with 80 percent loan-to-value ratles gross Column 16 is the Initial After November 30, 1983., column 15 refers only to VA-guaranteed loans. on the Friday following the end of the btatement week. purchase program for adjustable-rate home mortgages havii.g rate and payment yield posted by FNHA, on the Friday following tl't end of the statement week. in its adJustm, ita once a ye.t. . Security Dealer Positions Millions of dollars January 30, 1984 Cash Poltlone Forward and Futures Poeltlone coupons' Prd Net' Total Tresury bil under 1y over 1 yar 1982--H1gh Lo 49.437 -18.698 11.156 -2.151 679 -747 8.169 1.005 1983--High Low 20.857 -296 13.273 -3.461" 499 -687 8,700 -3.267* 1982--Dec. 18.876 8,732 428 TIreasu -ury coupons federal agency private shoal-term Treasury blll under 1 year over 1 year federal agency prvate shodrt-nr 6.281 1.955 16.213 6.758 7,674 -11.077 -687 -4,182 -526 -2.715 853 -6.455 12.022 4.013 17,006 8.839 1.654 -11.293 1,5164 -3,270 -907 -8,013 -4.411 -9.564 5.655 5,949 14,046 -5.519 -2.898 -2.443 -5.045 4.950 4.061 1.852 5.125 4.455 4.855 13,166 11,477 12,087 -7,782 -3.631 -1,734 -2,766 -1,807 -2,357 -2,654 -2,099 -1.990 -6,677 -5.886 -6.325 1983--Jan. Feb. herch 13,041 16.604 15.933 9.962 10.534 9,544 -232 -428 3 April May June 8.509 5,119 7.618 7.775 4.538 3.657 -371 31 63 1.610 1,818 157 5.278 5,694 5,631 11,753 10.914 9,787 -7,705 -7.288 -914 -2,479 -2,636 -722 -1,482 -1.666 -1,595 -5,860 -6.286 -8.423 July Aug. Sept. 3,235 7.515 9,788 416 877 1.779 126 -198 -558 9 2.573 6.279 6,859 7.995 9,170 10.275 10.360 13.137 -2.635 -1,861 -7.302 -1.302 -2.706 -2.613 -1,836 -3.623 -5.018 -8.673 -5.899 -5.084 Oct. Nov. Dec. 5.885 5,607 6,851* 2.144 1,598 -1.437* -464 -142 47" 3,317 216 -979* 10.152 9,364 11.518* 14.250 15.289 15,488* -9.132 -7.984 -5,539* -1.662 -1.039 670* -5,911 -5.399 -7.317* -6.798 -6.294 -5,598* 2 9 16 23 30 7,543 9.040 5,433 428 6.135 2,493 3.247 1.681 -336 536 -472 -375 -96 -24 45 1.632 -905 -178 -470 2.291 9,864 11,300 10,741 7,624 7.877 14,972 15,078 14.876 14,887 16.330 8.326 -5.396 -7,643 -9,250 -9,331 -1.074 -880 -986 -1.220 -1,146 -4.852 -6,175 -6,121 -4,696 -5,130 -6,692 -6,852 -6.838 -6.084 -5.335 Dec. 7 14 21 28 9.756 6,569 4,456 6.971 443 527 -3.461 -2.182 499 75 -112 -174 692 -2,264 -3.267 -482 10,065 12.022 12.006 11,787 17,006 15.638 14.710 14.552 -6.430 -6,599 -3.180 -5,455 -422 722 961 1,516 -6,410 -8.013 -7,118 -7.372 -5.684 -5.540 -5.182 -5.217 1984--Jan. 4 11 18 25 2.077* 4,499* 4.863* 1,005* -4.079' 1,569* 2.869* 5,822* -362* -272* 22* -182* 11.7584 11.235* 11,765a 10.890* 14.241' 12,668* 13.327* 11,808* -7,426' -7,386* -7.914* -7.476* -5.655* -5,789* -5.314* -6,109* 1983--Nov. 2.351" 1,286* 1.354* 706* NOTE: Government securlties deaer cash positions consIst of securites already delivered. commltmente to buy (sell) securitis on an outright basis for immediate delivery (5 business days or less), and certain "when-Isued" securities for delayed delivery (mor then business days). Futures and forward positions include all other commmllren Involving delayed dellvery; futures contracts are arranged on organized exchanges. 1. Cash plus lorward plus lutures poslllons in Treasury, ederal agency, securities. * Strictly confidential nd private short-term -6.799* -9,579* -10.855* -12,660* -1.941* 308* -390* -3784 Net Changes in System Holdings of Securities1 January 30, 1984 Millions of dollars, not seasonally adjusted 1 Change from end of period to end of period 2 Outright transactions in market and with foreign accounts, and redemptions (-) in bill auctions 3 Outright transactions in market and with foreign accounts, and short term notes acquired in ex change 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 the net purchases of securities, also reflects changes in System holdings of bankers' acceptances, direct Treasury borrowing from the System and redemptions ( ) of agency and Trea sury coupon issues 6 Includes changes in RPs (+), matched sale purchase transactions (-), and matched purchase sale transactions (+) FR 116 (7181) 

Federal Reserve (1984, January 30). Bluebook. Bluebooks, Federal Reserve. https://whenthefedspeaks.com/doc/bluebook_19840131

@misc{wtfs_bluebook_19840131,
  author = {Federal Reserve},
  title = {Bluebook},
  year = {1984},
  month = {Jan},
  howpublished = {Bluebooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/bluebook_19840131},
  note = {Retrieved via When the Fed Speaks corpus}
}