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. All scanned images were deskewed (to remove the effects of printer- and scanner-introduced tilting) and lightly cleaned (to remove dark spots caused by staple holes, hole punches, and other blemishes caused after initial printing). 2 A two-step process was used. An advanced optimal character recognition computer program (OCR) first created electronic text from the document image. Where the OCR results were inconclusive, staff checked and corrected the text as necessary. Please note that the numbers and text in charts and tables were not reliably recognized by the OCR process and were not checked or corrected by staff. Strictly Confidential (FR) Class I FOMC July 13, 1984 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 July 13, 1984 MONETARY POLICY ALTERNATIVES Recent developments (1) Growth in M1 accelerated to about a 12-1/4 percent annual rate on average in May and June. As a result, expansion over the March to June period, at about an 8-1/4 percent rate, was well above the Committee's specification for that period of 6-1/2 percent. in the broader monetary aggregates was about in in the case of M3 in Committee meeting. In contrast to M1, growth line with anticipations, line with the upward revised expectations of the last Over the March to June period, M2 grew at a 7-3/4 percent annual rate and M3 at a 10-1/4 percent rate. Compared with the longer-run ranges adopted at the February meeting, M1 by June was somewhat below its upper limit, M2 a little below the middle of the range, and M3 above the range. (2) Domestic nonfinancial debt is estimated to have expanded at about a 13 percent annual rate over the past three months, with both federal and private borrowing continuing at about their advanced firstquarter pace. Borrowing related to mergers is estimated to have accounted for about one percentage point of total debt growth in the first half of the year. (3) Total reserve growth accelerated to a 10-3/4 percent rate in May and further to a 26 percent annual rate in June, owing to a larger demand for excess reserves and rapid growth of required reserves in June which reflected especially strong demand deposits in that month and a surge in large time deposits that began in May. borrowing by Continental Illinois before it After adjustment for was formally classified -2- KEY MONETARY POLICY AGGREGATES (Seasonally adjusted annual rates of growth) April March to June May June 12.8 11.5 8.7 7.3 10.6 11.3 8.6 10.3 13.6 14.1 1 1 .2e 13.1 5.8 14.9 2.2 Q4 to June Money and Credit Aggregates 0.2 Domestic nonfinancial debt Bank credit e 7.7 13. 0 e 11.6 Reserve Measures 1 Nonborrowed reserves 2 -9.0 -49.4 83.2 (20.1) (24.1) 7.0 (11.8) 6.3 (8.4) Total reserves 0.0 10.7 26.3 12.4 9.5 Monetary base 6.0 10.1 11.3 9.2 8.5 1190 2952 (928) 1428 (1012) 577 773 Memo: (Millions of dollars) Adjustment and seasonal borrowing Excess reserves e--Estimated. Note: Figures in parentheses treat all discount window borrowings by Continental Illinois after May 9 as extended credit and therefore as nonborrowed reserves; such borrowings were formally classified as extended credit on June 7. 1. 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 "other extended credit" from the Federal Reserve. -3as extended credit in early June, nonborrowed reserves rose at about a 22 percent rate over the last two months. Adjustment plus seasonal credit remained very close to $1 billion in each of the complete 2-week statement periods since the last Committee meeting. Thus far in the current statement period, borrowing has averaged $662 million. (4) The federal funds rate has risen from the area of 10-1/2 percent at the time of the May meeting to an average of around 11 percent in June, with trading mostly in an 11 to 11-1/2 percent range thus far in July. Money market pressures were especially marked around the mid-June tax date and in the reserve maintenance period containing the quarter-end statement date and the July 4 holiday. Generally, over the whole period since the last Committee meeting, federal funds have traded at a higher rate than might have been expected relative to the average level of discount window borrowing, perhaps partly because large banks seem to have become somewhat more conservative in their reserve management (for example, more reluctant to use the discount window) in light of market concerns generated by Latin American debt problems. Given these concerns, the spread of CD over bill rates widened further and there were indications of tiering within the CD market. Spreads have narrowed somewhat in recent days, but over the intermeeting period 3-month CD and Euro-dollar rates rose around 50 basis points on balance, while the 3-month T-bill rate was about unchanged. Mar- ket concerns also appear to have affected private credits in general to some degree. The bond market has been quite volatile since the FOMC meeting, with Treasury bond yields currently about 15 to 40 basis points below levels at the time of the last FOMC meeting. Private longer-term market rates, on the other hand, are about unchanged on balance over the same period, while rates on conventional fixed-rate home mortgages have risen about 65 basis points. -4(5) The dollar's exchange value has risen, net, about 4 percent on a weighted average basis since the last Committee meeting. Appreciations against major foreign currencies range from 3 percent against the Canadian dollar to almost 6 percent against sterling. The dollar weakened early in the period at the time of greatest concern about large banks, but the rise in U.S. short-term interest rates and indications of stronger than expected U.S. growth contributed to a sharp rise in the weighted average dollar to a new peak. -5- Longer-run ranges for 1984 and 1985 (6) The table below shows the 1984 growth ranges for the monetary and credit aggregates that are currently in place, an alternative set that might be considered, year. and actual growth through the first half of the The alternative encompasses somewhat higher growth ranges for M3 and credit than in the current set of ranges. Actual Growth QIV to QII QIV to June Current Alternative M1 4 to 8 4 to 8 6.7 7.5 M2 6 to 9 6 to 9 7.0 7.1 M3 6 to 9 6-1/2 to 9-1/2 9.7 9.8 Debt 8 to 11 9 to 12 13.0 13.0 (7) As may be seen from the table, the growth to date for M1 and M2 suggests little need to alter their longer-run ranges. Despite growth in nominal GNP over the first half of the year that has been about 2-1/2 percentage points faster than projected by the staff at the beginning of the year, expansion of these two aggregates has been within their ranges. Growth in their income velocities accelerated to annual rates of around 4-1/2 to 4-3/4 percent, in part reflecting the one to two percentage point rise in short rates since the fourth quarter, following velocity increases in the second half of last year in the neighborhood of 2-1/2 percent for both aggregates. The largest velocity increases for M1 and M2 occurred in the first quarter of this year, and velocity growth in the second quarter was more in line with experience in the second half of last year. Assuming that velocity continues to rise at a moderate pace, and also assuming some little further rise in short-term interest rates, M1 growth over the balance of the year is likely to remain in the upper half of its range and M2 growth around its midpoint, given the staff's GNP projection. (8) In contrast to M1 and M2, growth of M3 and total debt has been above their longer-run ranges thus far this year, as the velocities of these aggregates have not accelerated from their pace in the second half of last year. The alternative set of ranges for 1984 provides an option of raising growth of M3 and debt by 1/2 and one percentage points, respectively, while retaining the current M1 and M2 ranges. This could be considered as needed to reflect the impact of merger activity. range, Credit growth for the year might be above the upward adjusted though, given the strength of demands for goods and services in the staff's GNP forecast. On the other hand, there is also some, though small, probability that M3 and debt growth could come within their present longerrun ranges by year-end. This could occur if concerns about the fragility of financial institutions and markets were to intensify, making it more difficult for institutions to raise funds and leading to more conservative lending practices generally. It may also occur if for other reasons the economy were to slow more than currently projected and merger activity were to subside much more rapidly than assumed. (9) Three alternative sets of tentative ranges for 1985 are shown in the table below for Committee consideration. represents the current ranges. Alternative I simply Alternative III reduces all of the ranges by 1/2 point-with an option shown in parentheses for narrowing the M1 range while retaining the alternative III midpoint should the Committee wish to indicate a little more confidence in M1 as a guide. is in between. Alternative II No alternative providing higher ranges is shown on the thought that would be inconsistent under existing economic circumstances- particularly so in the market's view--with the Committee's intention to continue making progress toward reasonable price stability. I II III M1 4 to 8 4 to 7-1/2 3-1/2 to 7-1/2 (or 4 to 7) M2 6 to 9 6 to 8-1/2 5-1/2 to 8-1/2 M3 6 to 9 6 to 9 5-1/2 to 8-1/2 8 to 11 8 to 11 7-1/2 to 10-1/2 Debt (10) How much, if any, reduction in growth of the aggregates the Committee might wish to consider for 1985 depends in part on assessment of the trend in velocity. It also depends on the desirability of a more or less gradual strategy of monetary growth rate reductions given price pressures, the need to sustain the economic expansion, and implications of various strategies for overall financial and economic stability. (11) With regard to the underlying trend in the velocity of M1, that cannot be known with any real certainty, given the relative recentness of institutional changes affecting that aggregate. The trend since the Second World War after taking out the effect of the rise of interest rates over that period appears to be around 2 percent. The most probable outcome under current circumstances would seem to be under 2 percent, as the introduction of interest-bearing checkable accounts may well have increased the income elasticity of demand for M1 by making transactions accounts more attractive as savings instruments and also may have worked to reduce the pace of technological innovation in money substitutes. With regard to the trend velocity of M2, our best estimate continues to be around zero, although M2 velocity has proven to be quite variable. At the beginning of 1985, the minimum denomination on MMDAs and super-NOW accounts will fall from $2,500 to $1,000. We have assumed that this change will have only a minimal impact on M1 and M2. (12) At this point monetary policy is expected to confront greater upward price pressures next year than this, as we go into the third year of economic expansion with relatively limited excess labor and plant capacity and assuming a drop in the dollar on exchange markets. If, as currently projected by the staff, price increases next year are on the order of 5 to 5-1/2 percent while economic growth decelerates to a pace more consistent with its potential, it seems probable that a slowing in M1 growth in 1985 to the area of 5-1/2 to 6 percent-as assumed for the GNP projection and consistent with alternatives II or III--might generate a little further upward pressure on short-term interest rates. In 1985, we would anticipate M1 velocity growth of 2 to 2-1/2 percent associated with the projected GNP increase of around 8 percent. The increases in velocity of M1 over the third year of four previous expansions that have lasted at least that long have averaged in the neighborhood of 4 percent, but they have generally been accompanied by rather sizable interest rate increases and occurred in an era when the underlying velocity trend was probably higher than can now be expected. Maintenance of an M1 range of 4 to 8 percent as in alternative I--and with actual M1 growth expected to remain above the midpoint-might involve no further upward interest rate pressures next year. (13) The growth of debt is expected to moderate noticeably next year, on the assumption of reduced merger activity and in view of the impact on credit demands of the projected 2-1/4 percentage point slowing in growth of nominal GNP. As demands taper off, credit at banks and thrifts also is projected to grow more slowly, accompanied by more moderate M3 expansion. However, with both debt and M3 running above their ranges this year, even a substantial slowing may not allow scope for more than the one-half percent reduction in ranges suggested under alternative III, and -9- growth would be expected near the upper ends of these ranges. Under alternative II the current ranges for both credit and M3 are suggested to be retained, although this would of course represent a reduction if Committee chose to adjust upward the existing 1984 range. the -10- Short-run alternatives (15) Shown below are three possible approaches to policy implementation for the period immediately ahead. Specifications for the monetary aggregates are presented for the June-to-September period, along with proposed federal funds rate ranges. (More detailed material can be found on the charts and table on the following pages.) Alt. A Alt. B 7 8 9-1/2 5-1/2 7-1/2 9-1/4 7-1/2 to 11-1/2 8 to 12 Alt. C Growth from June to September Ml M2 M3 Federal funds rate range (16) 4 7 9 8-1/2 to 12-1/2 All of the alternatives call for deceleration in growth of M1 and M3 over the next three months from their March-to-June pace; however, on a quarterly average basis growth in M1 would be stronger in the third than the second quarter because of the carryover effect on the averages of the rapid growth in money in the latter part of the second quarter. For M1, a deceleration over the third-quarter months is needed to keep long-run growth from the fourth quarter of 1983 base from moving closer to the upper limit of the Committee's current 4 to 8 percent range. still In the case of M3 the contemplated deceleration would leave that aggregate above its long-run range. In all cases, M2 remains at or a little below its midpoint. (17) Alternative B--which underlies the staff's GNP projection- contemplates a marked slowing in M1 growth to around a 5-1/2 percent annual rate over the June-to-September period in the process of bringing Chart I CONFIDENTIAL (FR) CLASS II FOMC Actual and Targeted M1 Billions of dollars v---7ft "ACTUAL 8% LEVELS a SHORT RUN ALTERNATIVES 4% -1530 -J520 -510 I 0 N 0N 1983 I . D I J I F M I A i M 1 .J J I . J 1984 I I A 1 5 I 0 I N D Chart 2 CONFIDENTIAL (FR) CLASS II FOMC Actual and Targeted M2 Billions of dollars 12400 -ACTUAL 9% - LEVELS 2380 * SHORT RUN ALTERNATIVES 2360 2340 2320 6% - 2300 2280 2260 2240 2220 2200 2180 t -S O N 1983 I D I J I F 1 M A 1 M I J J 1964 I A 1 S 1 O 1 N 2160 0 Chart 3 CONFIDENTIAL CLASS II Actual and Targeted M3 (FR) FOMC Billions of dollars 2960 - 2940 LEVELS -ACTUAL 2920 * SHORT RUN ALTERNATIVES A fe / - 2900 - 2880 - 2860 6%- 2840 - 2820 - 2800 - 2780 - 2760 - 2740 - 2720 - 2700 - 2680 2660 IIl O N 1983 0 J F M .II A M J J 1964 A I I S O , 1 N 2640 O Alternative Levels and Growth Rates for Key Monetary Aggregates Ml M2 M3 Alt. C Alt. A Alt. B Alt. C Alt. A Alt. B Alt. C Alt. A Alt. B ------ ------ ------ ------ ------ ------ ------ ------ May June 535.3 541.0 546.2 535.3 541.8 546.2 535.3 541.0 546.2 2242.8 2259.1 2272.8 2242.8 2259.1 2272.8 2242.8 2259.1 2272.8 2789.8 2816.0 2836.3 2789.8 2816.8 2836.3 2789.8 2816.0 2836.3 July August September 548.6 552.6 555.8 548.4 551.6 553.7 548.2 550.6 551.7 2286.3 2302.3 2318.3 2286.1 2301.0 2315.3 2285.9 2299.6 2312.6 2859.9 2881.4 2903.7 2859.9 2880.9 2901.9 2859.9 2880.4 2900.1 0.2 12.8 11.5 0.2 12.8 11.5 0.2 12.8 11.5 6.9 8.7 7.3 6.9 8.7 7.3 6.9 8.7 7.3 10.6 11.3 8.7 10.6 11.3 8.7 10.6 11.3 8.7 5.3 8.7 6.9 4.8 7.0 4.6 4.4 5.3 2.4 7.1 8.4 8.3 7.0 7.8 7.5 6.9 7.2 6.8 18.0 9.0 9.3 10.0 8.8 8.7 10.0 8.6 8.2 7.0 5.5 4.0 8.8 7.5 7.0 9.5 9.3 9.0 7.2 6.1 8.5 7.2 6.1 7.7 7.2 6.1 7.0 7.0 6.9 7.8 7.0 6.9 7.5 7.0 6.9 7.3 9.0 10.2 9.6 9.0 10.2 9.5 9,. 10.2 9.4 7.4 7.0 6.5 7.5 7.3 7.2 9.8 9.8 Monthly Levels 1984--April Growth Rates Monthly 1984--April May June July August September 1984 June to Sept. Growth Rates Quarterly Average 1984--01 Q2 Q3 Memo: '83 04 to Sept.'84 9.7 -12- growth of that aggregate closer to the midpoint of its longer-run range by the end of the year. Such June-to-September growth, distributed fairly evenly over the quarter, would entail a 7-3/4 percent quarterly average increase in M1. That growth in money may not involve much, if any, further rise of interest rates over the summer, assuming nominal GNP grows no faster than the 9-1/2 percent annual rate currently projected for the third quarter and given the rise of interest rates that has already taken place. (18) The deceleration of M1 growth under alternative B is not expected to be accompanied by any significant slowing of M2 from its rate of growth of the previous three months. aggregate is Growth of the latter likely to be sustained, given the projected reasonably strong growth in personal income and assuming little change in the personal savings rate. Somewhat more rapid expansion in the nontrans- actions component is expected, partly reflecting a lagged response of the public to the increased rate attractiveness of time deposits and MMDAs relative to demand deposits and regular NOW accounts. However, expansion of M3 over the summer might well slow from its unusually rapid second-quarter pace. Banks may have less need to issue CDs as merger-related financing demands are reduced, and in any event the recent tightening of markets and widening of yield spreads against banks might encourage a somewhat less aggressive posture by banks in credit markets. Even so, with the economy and underlying credit demands expected to be fairly strong, M3 growth would probably be high relative to its long-run range. (19) Growth of domestic nonfinancial debt is expected to decelerate moderately in the months ahead, but credit demands seem likely -13- to be strong enough to generate growth at around an 11-1/2 percent annual rate pace over the third quarter, with only a small further falling off in prospect later in the year. Although the pace of borrowing by businesses is expected to slow, this reduction reflects only the assumed abatement of merger activity. Underlying demands for funds by business are expected to strengthen in the third quarter as the financing gap (the excess of capital spending over internal funds) widens, and to be even stronger in the fourth quarter. Federal government credit demands are expected to moderate slightly between the second and third quarters, but to remain relatively large over the balance of the year. The more fundamental slowing in credit growth in prospect is in the household sector and depends on a weakening in spending for homes and durables. (20) Expansion in the aggregates as specified in alternative B would probably entail growth of nonborrowed reserves at about an 8 percent annual rate from June to September, with borrowing continuing to average around $1 billion. If recent experience is any guide, the federal funds rate would probably average in the 11 to 11-1/4 percent area. However, should investors gain more confidence in banks, and should bank attitudes toward reserve management and the discount window become less cautious, the funds rate could well trade consistently below 11 percent for S1 billion in borrowing. If that occurred, it might entail greater expansion over time in nonborrowed reserves--as banks more willingly lend and add to deposits-and hence more money growth than assumed for this alternative. (21) Interest rates generally might show little net change under alternative B, though probably edging higher from the most recent levels if funds traded consistently around 11-1/4 percent. Speculation about a discount rate increase could become more widespread in markets, -14and this could itself add to upward pressures, at least temporarily, on federal funds and other rates. The dollar may well remain generally firm on exchange markets. (22) The degree of tightness in bank reserve positions under this alternative would also work to restrain money and credit growth later in the year. Thus, alternative B may be consistent with growth in M1 over the year 1984 in the area of 6-1/2 percent with only a little further upward movement of interest rates. Growth of M3 and credit for the year would probably be somewhat above the upper limits of their current longerrun ranges, though expanding somewhat more slowly in the second half than in the first half of the year. Growth of M2 would be expected to be around the midpoint of its long-run range. (23) Alternative A involves a policy approach that keeps M1 growth nearer the upper end of its longer-run range. The 7 percent annual growth rate for this aggregate from June to September would bring growth from QIV '83 to September to just under 7-1/2 percent. Such money growth, when translated to a quarterly average basis for the third quarter, implies only a small rise in the income velocity of M1 over the months ahead and is probably consistent with some drop in money market rates from recent levels under existing circumstances, particularly considering the lingering restraining effects on money demand of the rise of interest rates over recent months. Nonborrowed reserves are likely to expand at a 14 percent annual rate under this alternative, with borrowing about $750 million. Borrowing in that area might involve a federal funds rate of around 10-1/2 percent-unless the recent relative reluctance of banks to borrow from the discount window abates, in which case the funds rate could be lower for such a level of borrowing. -15- (24) Such reserve and money market conditions appear to be on the easy side of current market expectations. Should they be sustained, bond prices might be expected to rise, assuming the economy does not unexpectedly strengthen, no major disappointments occur with respect to the budget, and M1 does not grow much faster than specified. The 3-month Treasury bill rate may drop about 25 basis points to around 9-3/4 percent; private short-term rates, particularly for CDs, may decline by more in such a market atmosphere. Whether these rate levels would be sustainable or reversed later in the year or in 1985, depends in part on the likelihood that the rate declines themselves help generate a strengthening of money and credit growth inconsistent with the Committee's long-run objectives. A reversal of the rate declines and a further rise seems most likely, given the projected overall strength of money and credit demands, if such objectives encompass M1 growth in 1984 and 1985 in the 6-1/2 and 6 percent areas, respectively. (25) Alternative C contemplates a very considerable decelera- tion in M1 growth-as more consistent with growth around the midpoint of its longer-run range over the year as a whole-and greater restraint on growth of the broader money and credit aggregates. The 4 percent annual rate of growth in M1 from June to September would bring expansion of this aggregate from QIV '83 to September to 6-1/2 percent at an annual rate. Growth at a 3-1/4 percent annual rate from September to December would be needed to hit 6 percent for the year as a whole. (26) Such a deceleration of money growth over the next three months would probably require a sharp slowing of nonborrowed reserve growth to a one percent annual rate, assuming a rise in borrowing to $1-1/4 to $1-1/2 billion. The federal funds rate would probably rise to -16- around 12 percent, and other rates would adjust sharply upwards. Quality rate spreads-such as between bills and CDs, or high grade industrial and bank holding company commercial paper--would probably widen. Large banks may be viewed as coming under even more pressure because of increasing difficulties many borrowers would have in meeting higher debt service payments. In addition, thrift institutions-which still have a sizable portion of their portfolio in fixed-rate mortgages--would be moving into a negative earnings position. The dollar may rise further on exchange markets, but this could prove to be temporary should the market come to the view that the financial system is coming under excessive strain. -17- Directive language (27) Given below is draft directive language related to the Committee's decisions on the longer-run ranges (draft language for the operating paragraph is shown in paragraph (28)). Suggested deletions from the current directive are shown in strike-through form with proposed additions in caps and certain alternatives bracketed. Deletion of the two full sentences concerning M1 is suggested on the ground that behavior of that aggregate over recent quarters has been somewhat more "normal" in relation to GNP and other economic variables. able uncertainties that still The consider- remain in interpreting M1 and the other aggregates, given ongoing adaptation to institutional changes by banks and the public and the potential for financial market disturbances, appear to be clearly encompassed by the language of the second paragraph below. 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 an improved pattern of international transactions. IN FURTHERANCE OF THESE OBJECTIVES the Committee AGREED AT THIS MEETING TO REAFFIRM THE RANGES FOR MONETARY GROWTH THAT IT HAD established growth ESTABLISHED IN JANUARY: [DEL: ranges for the broader aggregates of] 4 TO 8 PERCENT FOR M1 AND 6 to 9 percent for both M2 and M3 for the period from the fourth quarter of 1983 to the fourth quarter of 1984. /WITH REGARD TO ______, THE COMMITTEE CHANGED THE RANGE(S) FOR 1984 TO ___________. -18- percent 8 to 4 of range a that considered also Committee The [DEL: for the same period, taking account appropriate be would M1 for of the possibility ofM1, its that, in the light of changed competition relationship to GNP over time may be shifting. Pend- ing further be to need will aggregate hat int growth experience, interposed in the lightof monetary other in growth the aggregates, which for the time being would continue to receive weight.] substantial The associated range for total domestic nonfinancial debt was ALSO REAFFIRMED [DEL: set]at (RAISED TO) 8 to 11 (____TO ____)percent for the year 1984. FOR 1985 THE COMMITTEE AGREED ON TENTATIVE RANGES OF MONETARY GROWTH, MEASURED FROM THE FOURTH QUARTER OF 1984 TO THE FOURTH QUARTER OF 1985, OF ____TO ____ PERCENT FOR M1, PERCENT FOR M3. ____TO ____ PERCENT FOR M2, AND ____TO ____ THE ASSOCIATED RANGE FOR NONFINANCIAL DEBT WAS SET AT ____ TO ____ PERCENT. The Committee understood that policy implementation would require continuing appraisal of the relationships not only among the various measures of money and credit but also between those aggregates and nominal GNP, including evaluation of conditions in domestic credit and foreign exchange markets. (28) Given below is suggested language for the operating paragraph of the directive. The specifications adopted at the meeting on May 22 are shown in strike-through form. In the short run, the Committee seeks to DECREASE SLIGHTLY (ALT. A)/ maintain (ALT. B)/INCREASE SLIGHTLY (ALT. C) existing -19- pressures on bank reserve positions. This ACTION is expected to be consistent with growth in M1, M2, and M3 at annual rates of around [DEL: 6-1/2, 8 and 10] ____, ____, during the period from [DEL: to] March AND____ percent, June TO SEPTEMBER. respectively, Somewhat greater reserve restraint might be acceptable in the event of more substantial growth of the monetary aggregates, while somewhat lesser restraint might be acceptable if growth of the monetary aggregates slowed significantly. In either case, such a change would be considered only in the context of appraisals of the continuing strength of the business expansion, inflation- ary pressures, financial market conditions, and the rate of credit growth. The Chairman may call for Committee consultation if it 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 7-1/2 with a federal funds rate persistently outside a range of [DEL: 11-1/2] to ____ TO ____ percent. Selected Interest Rates July 16. 1984 Percent money market mutual Period bank prim pr loan fund fund 7 8 on Term Ir U S government constant maturity yields 9 10 year 10 30 year 11 -year Long Term munl corporate cpal A utility recently Bond offered Buyer 12 13 conven tional at S&Ls 14 home mortgages FNMA FHAVA 1 year cling ARM 15 16 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 12.50 10.49 1984--High Low 11.49 9.41 10.03 8.84 10.56 8.94 11.09 9.01 11.71 9.35 11.15 9.16 10.21 8.70 13.00 11.00 13.44 10.87 13.84 11.62 13.81 11.69 15.30p 12.83 11.44 9.86 14.68 13.19 14.00 12.50 13.70 11.25 1983--May June 8.63 8.98 8.19 8.79 8.22 8.89 8.23 8.87 8.49 9.20 8.36 8.97 7.83 8.01 10.50 10.50 9.66 10.32 10.38 10.85 10.53 10.93 11.92 12.40 9.56 10.07 12.63 12.87 11.63 11.88 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 12.79 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. Nov. Dec. 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 12.89 13.14 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 1984--Jan. Feb. Mar. 9.56 9.59 9.91 8.90 9.09 9.52 9.02 9.18 9.66 9.07 9.20 9.67 9.42 9.54 10.08 9.23 9.35 9.81 8.80 8.72 8.91 11.00 11.00 11.21 10.93 11.05 11.59 11.67 11.84 12.32 11.75 11.95 12.38 12.99 13.05 13.63 10.03 10.00 10.37 13.37 13.23 13.39 12.50 12.50 12.70 11.45 11.38 11.91 Apr. May June 10.29 10.32 11.06 9.69 9.83 9.87 9.84 10.31 10.51 9.95 10.57 10.93 10.41 11.11 11.34 10.17 10.38 10.82 9.29 9.52 N.A. 11.93 12.39 12.60 11.98 12.75 13.18 12.63 13.41 13.56 12.65 13.43 13.44 13.96 14.79 15.56 10.26 10.88 11.07 13.65 13.94 14.42 13.00 13.94 14.00 12.30 12.83 13.45 May 2 9 16 23 30 10.70 10.46 10.52 9.75 10.30 9.67 9.90 9.94 9.85 9.69 9.88 10.22 10.27 10.35 10.52 10.08 10.37 10.55 10.65 10.89 10.52 10.85 11.39 11.14 11.27 10.24 10.34 10.66 10.24 10.27 9.35 9.40 9.58 9.51 9.60 12.00 12.14 12.50 12.50 12.50 12.16 12.45 12.73 12.83 13.19 12.79 13.08 13.44 13.50 13.84 12.83 13.11 13.48 13.52 13.81 14.40 14.77 14.87 15.15 15.02 10.34 10.61 10.82 11.21 11.44 13.78 13.87 14.04 14.08 14.29 13.00 13.50 13.50 13.50 14.00 12.45 12.70 13.00 13.15 13.35 June 6 13 20 27 10.72 10.85 11.49 11.27 9.78 9.94 9.91 9.81 10.48 10.56 10.45 10.55 10.81 10.91 10.83 11.09 11.17 11.16 11.21 11.67 10.44 10.72 10.86 11.06 9.74 9.87 10.00 10.04 12.50 12.50 12.50 12.71 13.04 13.11 13.06 13.44 13.57 13.51 13.38 13.75 13.52 13.41 13.27 13.56 14.82 14.78 15.21 15.28 11.16 10.97 10.94 11.19 14.33 14.47 14.49 14.50 14.00 14.00 14.00 14.00 13.35 13.40 13.40 13.60 July 4 11 18 25 10.91 11.25 9.87 10.03 10.45 10.48 11.08 10.97 11.71 11.69 11.11 11.15 10.05 10.21 13.00 13.00 13.44 13.29 13.83 13.62 13.59 13.40 15.30 14.88 11.11 10.88 14.66 14.68 14.00 14.00 13.70 13.60 Daily--July 6 12 13 11.13 11.03 10.95p 10.00 10.03 9.96p 10.45 10.30 10.44 11.00 10.96 10.85 11.74 11.23 11.45 11.13 11.12 11.03 13.00 13.00 13.00 13.38 13.19 13.04p 13.75 13.42 13.30p 13.55 13.20 13.11p - NOTE Weekly data for columns 1 through 11 are statement week averages Data In column 7 are taken from Oonoghue's Money Fund Report Columns 12 and 13 are 1 day quotes for Friday and Thursday, respectively following the end of the statement week Column 13 Is the Bond Buyer revenue Index Column 14 Is an average of contract Interest rates on new commitments for conventional first mortgages with 80 percent loan to value ratios at a sample of savings and loan associations on the Friday following the end of the statement week After November 30, 1983, column 15 refers only to VA guaranteed loans Column 16 Is the initial gross yield posted by FNMA, on the Friday following the end of the statement week, In its purchase program for adjustable rate home mortgages having rate and payment adjustments once a year FR1367(4184) Security Dealer Positions Millions of dollars July 16, 1984 Pgsitions Cash Period 4 4 Treaaury bills Treasury coupons under over 1vear 1 year _ -- s . . e nd Futures Positions.. Forward -- . Forward federal agency private short-term Treasury bills and Futur reasury coupons under over 1 year 1 year federal agency [ private short-term 1983--High Low 20,858 -296 13,273 -3,461 1,579 -687 8,778 -3.148 12,088 4.013 17.005 8,839 1,654 -11,307 14 -95 1984--High Low 19.053 5,047 6,765 12.140 1,310 2.477 -4.785 17,554 11.086 14,R61* 11,263 8,272 -13,048 22 -109 2,272* -933 -7,223 -10,402 1983--June 12.133 6,756 1,084 436 5,748 9,787 -23 -722 -1,595 -8,423 July Aug. Sept. 7,992 13.669 16.971 4,076 5,929 8,011 956 748 223 140 2.639 6.344 6,976 8,093 9.285 10,275 10,361 13,138 -2,635 -1,861 -7,309 -6 -3 -2 -1,282 -2.706 -2,613 -1,836 -3.634 -5,018 -8,673 -5.899 -5.090 Oct. Nov. Dec. 14.672 15,981 18,172 9.694 10,762 8,653 609 934 1,165 3.390 325 -831 10.255 9.451 11.568 14.242 15,302 15.449 -9,132 -7,993 -5,549 -12 -2 -2 -1,667 -1,022 669 -5,909 -5.445 -7,354 -6,798 -6.331 -5.596 1986-Jan. Feb. 12,470 9,266 15,956 10,815 9,658 4,627 1,083 953 811 667 -1,543 -2,626 11.398 12.530 16,164 12,786 13,336 12.763 -10,846 -8,784 -1,027 -15 -38 -10 -116 23 1,045 -7,474 -8,192 -9.552 -5,829 -8,677 -6,239 14.463 14,191 16,515* 2,929 -7,091 -2,628* -32 -291 -595* -1.643 -1.754 -3.224* 16.649 16,852 16,003* 13.063 12,525 14.475* 2,108 5,489 2,204* -13 -10 -14* -9,406 -9,650 -9.934* -5,453 -2,237 -1,193* 2 9 16 23 30 11.392 11,221 16,016 15,105 14.699 -2.812 -295 -284 -1 -263 -541 -1,137 -1,674 187 -2.986 -2.715 16,729 17.016 16,875 16.390 16.723 13.659 14.119 12.190 11,263 11,703 -213 3,234 6,262 6,423 8,272 -3 -8 -15 -5 -17 6 13 20 27 19.053 18,627 15,970* 14.023* -4,432 -1.350 -712* -4,085* -427 -365 -647* -843* 2.207 -3.391 -3.419* -2,832* 17.285 16,547 15,714* 14,995* 14,147 14.318 14,861* 14,307* 6,029 4.987 - 149* -604* -37 -41 -2* 6 11 18 25 13,554* 10,660* -2,904* -4,368* -1,038* -669* -5,451* -3,023* 15,961* 16,887* 14.868* 15,236* 596* -2,326* itar, Apr. May June 1984--Hay June July -7,601 -8,251 -6,019 -8,202 843* NOTE: Government securities dealer cash positions consist of securities already delivered, commitments to buy (sell) securities on an outright basis for Immediate delivery (5 business days or less), and certain "when-issued" securllies for delayed delivery (more than 5 business days). Futures and forward positions Include all other commitments Involving delayed delivery; futures contracts are arrang. ed on organized exchanges. 1. Cash plus forward plua futures posltlons In Treasury, federal agency, and private short-term securities. 2. Adjusted for reverses to maturity and related transactions. *Strictly confidential. -914 1,516 -3,270 476 359 1,422* 236 378 -51 387 766 -907 -8.001 -4,411 -9,564 5* -9,819 -9,685 -10,400 -9.709 -9.014 -9,091 -5.088 -3,459 -1.472 -1,085 -2,381 -8* 1,088 364* 2,272* -10.257 -10,402 -9,862* -9,183* -2.082 -2,766 -178* 5* 42* -10* 3.265* 2,391* -10.470* -10.576* -1,315* -2,877* 1,033 STRICTLY CONFIDENTIAL (FR) CLASS II-FOMC Net Changes in System Holdings of Securities 1 July 16, 1984 Millions of dollars, not seasonally adjusted Treasury coupons net purchases Treasury bills net2 change Period within 1-year 6,243 -3.052 5,337 5,698 13,068 1979 1980 1981 1982 1983 1983--QTR. II III IV 1984--QTR. I II 5,116 4.617 4.738 -1,168 491 1984--Jan. Feb. -3,267 -1,060 Mar. 3,159 May June 1984--APR. 4 1,633 11 It 321 18 25 JUNE 5-10 I- 2 within l1yeaI 1-5 5-10 4 over 10 --I Net change outright holdings 5 total --- Net RPs 10,290 2,035 8,491 8,312 16,342 -2.597 2,462 684 1,461 -5,445 454 811 379 307 383 5.035 4.564 2,768 2,803 3.653 595 481 820 108 124 151 1,203 975 1,474 6.208 5,439 6.120 -793 9,412 -10,739 -300 1,484 -1,555 1 ,918 -286 70 -300 -3,607 -1,098 3,149 1 .253 -8,347 4,764 -3,633 786 7,286 -3,643 -3,572 1,633 321 2,136 1,937 3,724 -375 808 200 277 -300 ---- -- 131 217 133 1 484 652 1 937 1,484 2.300 1 ,660 278 -1.214 -1,980 -959 385 278 -1,214 -2.020 -959 385 4.978 -5,962 -5.689 2.691 2,163 6 13 497 458 483 456 72 72 -1.402 386 5.938 -6,737 -1 904 1,978 20 JULY 6,807 9 16 23 30 27 4 11 LEVEL--JULY 12 70.4 17.0 35.5 14.3 19.1 1 Change from end-of period to end of period. 2 Outright transactions in market and with foreign accounts, and redemptions (-I 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 isues. and direct Treasury borrowing from the System. 4 Outright transactions in market and with foreign accounts only. Excludes redemptions and maturity shifts 2.3 4.5 1.3 .4 8.5 6 ~ 3,456 2,138 1,702 1.794 1,896 ---300 198 Federal agencies net purchases over 10 3,283 -3,593 801 Apr. HAY I 15 3 164.9 -32 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 (+), 

Federal Reserve (1984, July 16). Bluebook. Bluebooks, Federal Reserve. https://whenthefedspeaks.com/doc/bluebook_19840717

@misc{wtfs_bluebook_19840717,
  author = {Federal Reserve},
  title = {Bluebook},
  year = {1984},
  month = {Jul},
  howpublished = {Bluebooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/bluebook_19840717},
  note = {Retrieved via When the Fed Speaks corpus}
}