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 MONETARY POLICY ALTERNATIVES Prepared for the Federal Open Market Committee By the staff Board of Governors of the Federal Reserve System STRICTLY CONFIDENTIAL (FR) September 16, 1988 CLASS I - FOMC MONETARY POLICY ALTERNATIVES Recent developments (1) Since the August FOMC meeting, reserve paths have continued to specify adjustment plus seasonal borrowing of $600 million. After the 1/2 percentage point increase in the discount rate announced in the week preceding the meeting, this level of borrowing was expected to be associated with federal funds trading in a range of 8 to 8-1/4 percent. Over the two complete maintenance periods since the discount rate hike, adjustment plus seasonal borrowing averaged $592 million and the federal funds rate averaged 8.13 percent. Thus far in the current period, borrowing is run- ning at close to $590 million and the federal funds rate is averaging 8-1/8 percent. Reflecting declines in both required and excess reserves, total reserves fell in August. However, because currency continued to grow-- albeit at a reduced pace--the monetary base increased at a 2-1/2 percent rate. (2) While federal funds have continued to trade near their level at the time of the last FOMC meeting, most other market rates have declined since then. Data suggesting a more moderate pace of economic expansion and weaker oil prices apparently were interpreted as pointing to some reduction in potential inflation pressures and to a lesser likelihood of a near-term 1. Seasonal borrowing has remained unusually heavy, averaging about $430 million in the last two complete periods. The Midwest has been the primary locus of the demands for seasonal credit, but there is little evidence that the increased borrowing has been related to this summer's drought. In conformance with its usual pattern, seasonal borrowing has retreated since the end of August to $395 million so far in this maintenance period. MONETARY, CREDIT, AND RESERVE AGGREGATES (Seasonally adjusted annual rates of growth) June July August June to August QIV '87 to August Money and credit aggregates M1 9.1 0.2 5.2 M2 3.8 2.5 6.2 M3 6.4 4.0 6.9 Domestic nonfinancial debt 7.6 8.5 8.5 Bank credit 11.1 4.9 8.0 Reserve measures reserves Nonborrowed reserves Nonborrowed Memo: 4.0 Total reserves 5.4 11.9 Monetary base 6.2 10.4 -2.9 4.5 2.5 6.5 (Millions of dollars) Adjustment plus seasonal borrowing Excess reserves 902 588 1007 951 1. Includes "other extended credit" from the Federal Reserve. NOTES: Monthly reserve measures, including excess reserves and borrowing, are calculated by prorating averages for two-week reserve maintenance periods that overlap months. Reserve data incorporate adjustments for discontinuities associated with changes in reserve requirements. tightening of monetary policy. Bond yields have dropped as much as 3/8 of a percentage point; rates on fixed-rate mortgages in the primary market, though falling most recently, have lagged other rates and are down only about half that amount on balance over the intermeeting period. The de- cline in bond rates contributed to higher stock prices, which are up an average of about 3 percent over the period. Most short-term rates are down roughly 1/4 to 3/8 of a percentage point since the August meeting, with the exception of the 3-month Treasury bill rate which has moved up slightly, buoyed in part by an enlarged supply. (3) The upward pressure on the dollar that had prevailed before the August FOMC meeting continued until late in the month, when hikes in European official lending rates arrested the dollar's climb. The dollar moved lower along with U.S. interest rates following the employment report for August. As the mark recovered against the dollar, it also moved to the top of the EMS parity grid, and with tensions emerging in the EMS, German short-term market interest rates eased back somewhat. Even so, the spread of short-term U.S. rates over the average of foreign rates is now narrower than it was prior to the U.S. discount rate increase. More recently, the dollar has firmed in response to publication of favorable trade data for July, leaving the exchange rate little changed on balance for the entire intermeeting period. -4- (4) The monetary aggregates slowed further in August, and early data suggest that this trend has continued into September. M2 was re- strained to a 2-1/2 percent annual rate last month mainly by the earlier rise in market interest rates, which substantially increased the opportunity costs of most monetary assets. August to a 4 percent pace. In addition, M3 growth slowed in For July and August combined, growth of M2 and M3 averaged just below the 3-1/2 and 5-1/2 percent rates specified by the Committee for the June-to-September period. Since the fourth quarter of 1987, M2 has grown at 6-1/4 percent and M3 at 7 percent. (5) The deceleration in M2 last month was concentrated in its liquid deposit components: demand deposits, OCDs, and MMDAs all ran off, and savings deposits slowed. (Indeed, M1 was flat in August, after expand- ing at more than a 9 percent rate in the previous two months.) By con- trast, small time deposits picked up, buoyed by a deposit yield curve that has steepened since the spring. Overnight RPs rebounded from their July decline, along with a turnaround in bank holdings of government securities. As a result of that turnaround, bank credit growth strengthened somewhat last month despite a sharp slowdown in business lending. Managed liabili- ties in the non-M2 portion of M3 continued to expand rapidly in August, but on balance instruments outside M3--such as borrowings from banks' own foreign offices--funded the pickup in bank credit growth and also offset some of the weakness in core deposits. Growth of both M2 and M3 may have been damped a bit by regulators' efforts to moderate thrift deposit pricing behavior and to restrain asset growth; both retail time deposits and large CDs at thrift institutions have been relatively weak in recent months. (6) The debt of domestic nonfinancial sectors appears to have grown at a slightly faster pace in August. The pickup was most evident in its federal component, especially in an increase of bill issuance in advance of seasonally larger deficits and in light of uncertainty about authority to issue long-term bonds. Business borrowing apparently remained subdued as a rebound in commercial paper issuance and an increase in bond offerings about offset the marked slowdown in bank loans. To a degree, the reduced pace of business borrowing thus far in the third quarter may reflect some slowing of equity retirements. Bank data suggest that con- sumer borrowing may have increased in August from a relatively sluggish pace in July. In response to the high level of rates, residential mortgage lending seems to have moderated in July. Since the fourth quarter of 1987, overall domestic nonfinancial debt has grown at an 8-1/2 percent rate, a little below the midpoint of its 7 to 11 percent monitoring range. Policy alternatives (7) Three policy alternatives are presented below. Under alter- native B, reserve paths would continue to be drawn with adjustment plus seasonal borrowing of $600 million, while under alternatives A and C reserve paths would embody borrowing levels of $400 million and $800 million, respectively. Under alternative B, the federal funds rate would be expected to continue to trade generally in the 8 to 8-1/4 percent area. In the next few days, however, a tax-related surge in the Treasury balance could push the funds rate briefly to or even above 8-1/4 percent, and temporary pressures could resurface around quarter end. The funds rate would fall to the 7-1/2 to 7-3/4 percent area under alternative A and rise to the 8-1/2 to 8-3/4 percent area under alternative C. (8) The table below presents growth rates of the monetary aggregates for the August-to-December period expected under the three alternatives. Under all the alternatives, money growth is expected to remain relatively slow over coming months. This reflects, in part, continued adjustment by money holders to previous increases in interest rates and opportunity costs. In addition, regulators are assumed to maintain pressures on thrifts to hold down costs and asset growth, continuing to damp expansion of retail time deposits and large CDs. Finally, the climb in market interest rates over the spring and summer may have an especially pronounced effect on demand deposits as year-end approaches. If, given the rise in rates, business demand deposits exceed the lower levels needed to meet compensating balance requirements, businesses would reduce these 2. Because only partial data are available for September, an August base period is used for the monetary aggregates specifications. -7- deposits late this year, as they did in late 1987, with effects on M2 as well as M1. All the alternatives would leave M2 in the fourth quarter somewhat below and M3 somewhat above the midpoints of their annual ranges for 1988, and M1 around 4 percent above its level in the fourth quarter of 1987. The different reserve pressures under each alternative, however, do imply divergent trajectories in the aggregates by the turn of the year. Alt. A Alt. B 4 3 5 1/2 Alt. C Growth from August to December M2 M3 M1 5-1/2 2 2 4-1/2 -1 Implied growth from Q4 '87 to Q4 '88 M2 M3 M1 Associated federal funds rate range Long-run ranges 5-1/2 6-1/2 4-1/4 5-1/2 6-1/2 4 5-1/4 6-1/4 3-3/4 5-1/2 to 9-1/2 6 to 10 6-1/2 to 10-1/2 4 to 8 4 to 8 (9) With markets now expecting no change in policy over the near term, short-term rates likely would remain near current levels under alternative B; the 3-month Treasury bill rate should stay around 7-1/4 percent. The dollar will probably trade around recent levels for a while under this alternative especially if, as seems likely, foreign monetary policies are also unchanged over coming weeks. In this environment, the behavior of bond yields will depend importantly on the strength of incoming data on the Alternative Levels and Growth Rates for Key Monetary Aggregates M2 M3 M1 ------------------------------------- ------------------------ -----------------------Alt. A Alt. B Alt. C Alt. A Alt. B Alt. C Alt. A Alt. B Alt. C Levels in billions 1988 July August September 3026.2 3032.6 3038.5 3026.2 3032.6 3038.2 3026.2 3032.6 3037.9 3833.0 3845.7 3854.1 3833.0 3845.7 3854.1 3833.0 3845.7 3854.1 782.4 782.5 783.1 782.4 782.5 783.0 782.4 782.5 782.9 3047.3 3058.8 3071.6 3045.5 3053.9 3061.6 3043.7 3049.0 3051.6 3871.8 3891.4 3914.4 3871.1 3889.5 3909.3 3870.4 3887.6 3904.2 784.3 786.0 787.6 783.6 784.0 783.7 782.9 782.0 779.8 3.8 2.5 2.3 3.8 2.5 2.2 3.8 2.5 2.1 6.4 4.0 2.6 6.4 4.0 2.6 6.4 4.0 2.6 9.1 0.2 0.9 9.1 0.2 0.8 9.1 0.2 0.7 3.5 4.5 5.0 2.9 3.3 3.0 2.3 2.1 1.0 5.5 6.1 7.1 5.3 5.7 6.1 5.1 5.3 5.1 1.8 2.6 2.4 0.9 0.6 -0.5 0.0 -1.4 -3.4 Quarterly Ave. Growth Rates 3.9 1987 Q4 6.8 1988 Q1 7.7 Q2 3.9 Q3 3.5 Q4 3.9 6.8 7.7 3.9 2.8 3.9 6.8 7.7 3.9 2.1 5.5 7.1 7.5 5.6 5.0 5.5 7.1 7.5 5.6 4.7 5.5 7.1 7.5 5.6 4.5 3.9 3.8 6.3 5.4 1.6 3.9 3.8 6.3 5.3 0.6 3.9 3.8 6.3 5.3 -0.5 2.9 3.9 4.4 2.9 2.9 3.1 2.8 1.9 1.8 4.3 5.4 6.3 4.3 5.0 5.7 4.3 4.6 5.2 3.4 2.0 2.3 3.4 0.5 0.3 3.3 -1.0 -1.6 7.3 6.2 5.6 6.2 5.8 5.6 7.3 6.2 5.4 6.2 5.8 5.2 7.3 6.2 5.2 6.2 5.8 4.9 7.4 6.9 6.5 6.9 6.5 6.5 7.4 6.9 6.4 6.9 6.5 6.4 7.4 6.9 6.3 6.9 6.5 6.3 5.1 5.2 4.3 5.2 4.8 4.2 5.1 5.2 4.1 5.2 4.7 3.7 5.1 5.2 3.8 5.2 4.7 3.3 October November December Monthly Growth Rates 1988 July August September October November December June 88 to Sept 88 Aug. 88 to Dec. 88 Sep. 88 to Dec. 88 Q4 Q4 Q4 Q4 Q4 Q4 87 87 87 87 87 87 to to to to to to Q2 88 Q3 88 Q4 88 Aug. 88 Sept 88 Dec. 88 1988 Target Ranges: 4.0 to 8.0 4.0 to 8.0 7 Chart 1 ACTUAL AND TARGETED M2 Billions of dollars *1 - Actual Level * Short-Run Alternatives -- 3300 3250 -1 3200 -- 3150 - 3100 9A *8 3050 c 4% - 3000 , -1 2950 <r* I O I N D 1987 1L I J F I M A I M J J 1988 I I A I S I O 2900 - 2850 I I N - D 2800 J 1989 Chart 2 ACTUAL AND TARGETED M3 Billions of dollars 4140 Actual Level SShort-Run Alternatives -4 4080 -H 4020 3960 8% IA C 3900 3840 V 7 - 4% -1 3780 -1 3720 -1 3660 -1 3600 I 1987 O N D 1987 I I I J F M I A I M I J J 1988 I I A I S I O I N D I1989 3540 J 1989 Chart 3 M1 Billions of dollars Actual Level ------ Growth From Fourth Quarter * Short-Run Alteratives 1 900 15% -- 880 -- 860 840 10% 820 - 800 - 780 5% .-- ec -- 760 --------------..-----------.. --. -- -- ' "" 0% 740 I O I N D 1987 I I J I F I M I A I M I J I J A 1988 I I S I I O N I D J 1989 Chart 4 DEBT Billions of dollars I 9400 Actual Level * Projected Level -1 9200 11% -1 9000 8800 -q 8600 -1 8400 -- I O 8200 I I I I I I I I I I I I I I 8000 N D J F M A M J J A S O N D J 1989 1988 1987 economy and prices. If such data confirm market perceptions of moderate growth and little additional pressure on prices, these yields probably would hold at recent lower levels. But bond yields would retrace some of their recent declines if incoming information shows less moderation in demands and more strength in oil prices than now seems built into market expectations. In addition, bond yields may have been held down by a paucity of supply, which could be reversed by congressional passage of long-bond authorization for the Treasury or by decisions by corporations or state and local governments to take advantage of recently reduced long-term rates. (10) M2 is expected to continue to grow at a 3 percent annual rate from August to December under alternative B, with particular weakness in liquid deposits; M1 is projected to increase at only a 1/2 percent annual rate over this period. Although offering rates should move closer to cur- rent levels of market interest rates, growth of M1 and M2 relative to income will be restrained by the earlier widening of opportunity costs and the other factors discussed above. M2 velocity would rise at a 3 percent rate in the fourth quarter, somewhat faster than in the current quarter, and M1 velocity at a 5-1/2 percent rate. (11) M3 likely would continue to grow at a 5 percent rate under alternative B, and its velocity would edge up again in the fourth quarter. A further moderation in credit growth at thrifts, and associated funding needs, is likely to be offset by some pickup in bank credit, as lending to businesses and securities acquisitions rebound following weakness over July -10- and August. Total borrowing by businesses is expected to strengthen some- what over the balance of the year, reflecting larger external financing needs and substantial further share retirements, with credit demands still focused to a large extent on the short- and intermediate-term markets. Domestic nonfinancial debt is expected to rise at a 8-1/2 percent rate over the last four months of the year and for the year as a whole, leaving it somewhat below the midpoint of its 7 to 11 percent monitoring range. (12) With markets not now expecting a near-term tightening of policy, the rise in the federal funds rate under the firmer reserve conditions of alternative C would be about matched by increases in other shortterm rates--perhaps including the prime rate. Bond yields and the dollar also would back up; the amounts would depend on surrounding circumstances, but could be considerable if market participants extrapolated a renewed tightening trend for policy in the context of incoming data suggesting continued momentum in the economy. Foreign monetary authorities might follow suit to temper the rise in the dollar. The further rise in oppor- tunity costs under alternative C would likely damp M2 growth to only a 2 percent rate over the August-to-December period, and its M1 component would be expected to decline a little. growing at only a 1 percent rate. By the end of the year, M2 would be M3 growth also would slow from its pace of recent months, mainly reflecting further weakness in institution-only money market mutual funds. (13) Under alternative A, M2 and M3 would strengthen over the August-to-December period. Partly owing to some narrowing of opportunity -11- costs, M2 by December would likely be growing at a rate around the 5 percent midpoint of its provisional range for next year, and M3 at 7 percent. An immediate easing would come as a surprise to market participants, given the recent policies and statements of the Federal Reserve and current perceptions that inflationary pressures, though perhaps less certain to mount, are not likely to moderate substantially. Short-term market rates would drop immediately by about the full extent of the easing in the funds rate, and bond yields would also decline. The initial bond market response could be substantial, but if data failed to confirm some further moderation in the economy and price pressures, bond yields could retrace much of these declines, especially if downward pressure on the dollar persisted. -12- Directive language (14) Draft language for the operational paragraph, with the usual alternatives for varying degrees of reserve pressure, is presented below. The draft language on possible intermeeting adjustments also has the usual options for symmetry and asymmetry and retains the ordering of the factors to be considered in making such adjustments that was adopted at the August meeting. OPERATIONAL PARAGRAPH In the implementation of policy for the immediate future, the Committee seeks to DECREASE SOMEWHAT (Alt. A)/maintain (Alt. B)/INCREASE SOMEWHAT (Alt. C) the existing degree of pressure on reserve positions. Taking account of indications of inflationary pressures, the strength of the business expansion, the behavior of the monetary aggregates, and developments in foreign exchange and domestic financial markets, somewhat (SLIGHTLY) greater reserve restraint would (MIGHT), or (SOMEWHAT) slightly lesser reserve restraint (WOULD) might, be acceptable in the intermeeting period. The contemplated reserve conditions are expected to be consistent with growth in M2 and M3 over the period from[DEL: June]AUGUST through [DEL: September]DECEMBER at annual rates of about [DEL: 3-1/2-and- 5-1/2] ____ AND ____ percent, respectively. The Chairman may call for Committee consultation if it -13- appears to the Manager for Domestic Operations that reserve conditions during the period before the next meeting are likely to be associated with a federal funds rate persistently outside a range of [DEL: 6 to 10] ____ TO ____ percent. September 19, 1988 SELECTED INTEREST RATES (percent) ---federal funds Short -Term Treasury bills-secondary market--- 3 month 6 month 12 month Ionu- i r-----------U.S. Gov't. constant-maturity yields--- cds sec mkt 3-month comm. paper 1-month money market mutual fund bank 10-year 30-year corp. A utility rec off prime loan 3-year Long-g[o conventional home---ortgages sec mkt primary market &#45;&#45;&#45; muni. Bond Buyer fixedrate fixedrate ARM 87--High Loa 7.62 5.95 6.84 5.24 7.16 5.36 7.64 5.40 8.49 5.83 8.12 5.88 6.70 5.28 9.25 7.50 9.29 6.37 9.96 7.03 9.97 7.34 11.50 8.79 9.59 6.92 11.98 8.97 11.58 9.03 8.45 7.47 88--High Low 8.19 6.38 7.30 5.61 7.51 5.81 7.71 6.15 8.47 6.58 8.21 6.50 7.38 6.03 10.00 8.50 8.88 7.33 9.36 8.16 9.42 6.40 10.73 9.63 8.34 7.76 10.97 9.98 10.71 9.84 8.16 7.49 Monthly SEP 87 OCT 87 NOV 87 DEC 87 JAN 88 FEB 88 MAR 88 APR 88 HAY 88 JUN 88 JUL 88 AUG 88 7.22 7.29 6.69 6.77 6.83 6.58 6.58 6.87 7.09 7.51 7.75 8.01 6.40 6.13 5.69 5.77 5.81 5.66 5.70 5.91 6.26 6.46 6.73 7.06 6.64 6.69 6.19 6.36 6.25 5.93 5.91 6.21 6.56 6.71 6.99 7.39 7.11 7.05 6.50 6.69 6.52 6.21 6.28 6.56 6.90 6.99 7.22 7.59 7.37 8.02 7.24 7.66 6.92 6.60 .653 6.92 7.24 7.51 7.94 8.35 7.26 7.38 6.77 7.76 6.76 6.55 6.57 6.80 7.07 7.41 7.72 8.09 6.22 6.57 6.45 6.57 8.67 8.75 7.99 8.13 7.87 7.38 7.50 7.83 8.24 8.22 8.44 9.59 9.61 8.95 9.12 8.83 8.43 8.63 8.95 9.23 9.00 9.14 9.32 10.84 11.07 10.39 10.42 10.05 9.75 9.91 8.77 9.42 9.52 8.86 8.99 8.67 8.21 8.37 8.72 9.09 8.92 9.06 9.26 10.61 10.41 10.40 10.45 8.61 9.06 8.39 8.43 8.11 7.83 8.08 8.22 8.30 8.14 8.15 8.16 11.01 11.42 10.73 10.82 10.43 10.02 10.12 10.44 10.73 10.62 10.64 10.87 10.89 11.26 10.65 10.65 10.43 9.89 9.93 10.20 10.46 10.46 10.43 10.60 7.95 6.22 6.04 6.09 6.20 6.51 6.77 7.06 8.70 9.07 8.78 8.75 8.75 8.51 8.50 8.50 8.84 9.00 9.29 9.84 8.00 7.96 7.85 7.61 7.52 7.58 7.71 7.85 7.84 8.01 8.21 8.15 8.10 8.10 8.12 10.73 10.57 10..65 10.53 10.43 10.58 10.51 10.35 10.40 10.39 7.90 7.88 7.79 7.83 7.81 10.38 10.44 10.46 10,49 7.79 7.82 7.89 7.87 6.57 10.23 8.25 Meekly JUN JUN JUN JUN JUN 1 88 8 88 15 88 22 88 29 86 7.41 7.37 7.43 7.54 7.63 6.44 6.44 6.40 6.42 6.55 6.82 6.71 6.61 6.74 6.75 7.11 7.01 6.89 7.02 7.01 7.47 7.46 7.43 7.53 7.58 7.34 7.36 7.34 7.41 7.50 6.37 6.41 6.50 6.56 6.62 9.00 9.00 9.00 9.00 9.00 8.41 8.25 8.11 8.27 8.23 9.17 8.99 8.84 8.97 8.88 9.27 9.09 8.95 9.05 8.91 10.43 10.46 10.47 10.36 10.25 JUL JUL JUL JUL 6 88 13 88 20 88 27 88 7.81 7.59 7.83 7.60 6.55 6.65 6.70 6.84 6.72 6.93 7.05 7.10 7.02 7.21 7.26 7.27 7.67 7.85 8.00 8.06 7.58 7.64 7.77 7.79 6.68 6.70 6.63 6.91 9.00 9.00 9.50 9.50 8.18 8.40 8.49 8.53 8.83 9.04 9.11 9.11 8.89 9.09 9.21 9.22 10.39 10.44 10.44 10.41 8.14 6.15 8.13 10.65 10.65 10.75 10.73 3 88 10 88 17 88 24 88 31 88 7.84 7.12 7.27 7.48 7.51 7.48 7.33 7.48 7.67 7.67 7.71 8.10 8.17 8.46 8.47 8.46 7.86 7.91 8.21 8.18 8.19 6.94 6.97 7.13 7.21 7.27 9.50 9.50 10.00 10.00 10.00 8.54 8.65 8.83 8.02 8.15 6.93 6.93 7.02 7.10 7.30 8.86 8.88 9.08 9.15 9.36 9.35 9.32 9.17 9.18 9.42 9.41 9.38 10.31 10.53 10.50 10.51 10.30 8.05 8.18 8.20 8.19 8.10 10.66 10.97 10.89 10.95 10.74 10.44 10.57 10.71 10.67 10.65 7.90 8.00 8.07 8.06 8.16 SEP 7 88 SEP 14 68 8.15 8.13 7.27 7.23 7.43 7.40 7.55 7.48 8.32 6.22 8.15 8.07 7.37 7.38 10.00 10.00 8.64 8.53 9.06 6.94 9.11 9.01 10.22 10G21 7.98 7.66 10.68 10.54 10.53 10.43 8.14 6.12 8.13 8.24 8.07p 7.28 7.17 7.15 7.42 7.38 7.37 7.51 7.43 7.46 8.24 8.17 8.19 8.07 8.04 8.05 10.00 10.00 10.00 8.52 8.51 8.5Zp 8.93 8.91 8.43p 8.99 9.00 9.01p Daily SEP 9 88 SEP 15 88 SEP 16 88 7.75 8.19 8.16 NOTE: Meekly data for columns 1 through 11 are statement week averages. Data in column 7 are taken from Donoghue's Honey Fund Report. Columns 12. 13 and 14 are 1-day quotes for Friday, Thursday or Friday, respectively, following the end of the statement week. Column 13 is the Bond Buyer revenue index. Column 14 for is the FNMA purchase yield, plus loan servicing fee, on 30-day mandatory delivery commitments. Column 15 is the average contract rate on nw commitments fixed-rate mortgagesiFRls) with 80 percent loan-to-value ratios at a sample of savings and loans. Column 16 is the average initial contract rate on new commitments for 1-year, adjustable-rate mortgagesIARMis at SALs offering both FRHs and ARMs with the same number of discount points. Strictly Confidential (FR) Class II FOMC Money and Credit Aggregate Measures Seasonally adjusted ______ __ _ . _ w s,,,. . Period Mi M2 QUARTERLY AVERAGE 1987-3rd QTR. 1987-4th QTR. 1988-1st QTR. 1988-2nd QTR. MONTHLY 1987-AUG. SEP. OCT. NOV. DEC. MEEKLY 1988-AUG. SEP. 1. 12.0 15.6 9.4 4.0 0.8 2.8 3.9 3.8 6.3 3.9 4.7 14.0 -5.6 4.7 4.8 5.7 0.8 -3.0 1.9 1.1 5.4 1 8 15 22 29 p 5 p 8.9 6.2 12.8 LEVELS ($BILLIONS) : MONTHLY 1988-APR. MAY JUNE JULY AUG. p li qu i t id easse, nontransactions components M3 L in M3 only A ... .-. u0 . total loans and investmenl U.S. government 19, 1988 .. i . non... nanc a il other* l I _____ dbt total* 4n : 1.6 1988-JAN. FEB. MAR. APR. MAY JUNE JULY AUG. p an d in M2 ANN. GROWTH RATES (I) ANNUALLY (04 TO r4) 1985 1986 1987 ..---.. .--.-. tock Mone SEP. t .-..--. 6.8 7.7 10.0 8.7 8.7 11.3 0.2 9.8 9.1 9.5 4.5 0.2 2.5 770.1 770.2 5.8 3.8 2990.9 3002.2 7.9 7.4 3.3 3.4 8.2 11.2 7.7 9.1 5.4 8.5 8.3 5.2 10.2 9.9 7.8 15.2 14.7 9.0 12.7 12.8 9.8 13.3 13.3 9.6 3.6 3.9 7.8 8.3 11.4 11.9 8.4 6.8 4.6 5.5 7.1 7.5 4.4 5.8 6.7 8.7 6.2 5.5 5.1 10.8 5.8 7.6 9.3 8.Z 8.5 10.9 8.0 8.6 7.9 10.1 8.3 8.5 4.9 5.9 2.8 3.0 3.6 11.3 6.5 13.3 20.8 0.3 6.1 5.2 7.3 4.9 1.5 6.5 7.4 8.1 3.1 0.3 9.7 8.6 6.0 2.6 -1.0 8.7 6.5 4.1 13.0 8.3 7.2 10.1 12.4 11.9 8.8 7.6 9.2 10.4 12.1 8.7 9.0 11.4 9.7 8.9 6.1 4.4 2.0 3.3 3.3 19.0 6.0 -0.5 8.1 15.1 16.0 9.4 8.6 10.8 8.1 7.4 5.3 7.7 6.4 4.0 10.3 8.9 7.2 11.5 8.1 3.8 9.4 6.1 9.3 7.9 11.4 13.0 11.1 4.9 6.7 5.3 11.1 15.2 7.1 2.7 5.3 4.1 7.3 7.3 6.9 6.7 9.1 10.1 8.8. 8.7 8.9 6.8 7.9 8.7 8.6 8.3 8.0 7.6 8.5 2220.8 2232.0 2240.1 2243.9 2250.1 781.0 786.3 796.2 806.8 813.1 3771.9 3788.5 3812.8 3833.0 4465.2 4495.2 4509.3 4544.5 2297.7 2322.5 2343.9 2353.5 2366.7 2018.5 2023.1 2032.1 2039.0 2051.4 6511.2 6565.8 6614.0 6661.8 6711.3 8529.7 8588.9 8646.0 8700.9 8762.7 809.9 813.8 812.0 812.2 815.4 3840.4 3844.0 3841.2 3846.5 3849.6 811.9 3848.6 776.5 782.4 3016.6 3026.2 782.5 3032.6 784.3 782.2 3030.5 780.2 783.3 782.7 3029.3 3034.4 3034.1 2246.2 2248.1 2249.1 2251.1 2251.5 783.1 3036.8 2253.7 Debt data are on a monthly average basis, discontinuities. p-preliminary pe-preliminary estimate 3030.3 derived by averaging end-of-month 3845.7 levels of adjacent months, and have been adjusted to remove Strictly Confidential (FR) II FOMC Class Components of Money Stock and Related Measures seasonally adjusted unless otherwise noted Small Period LEVELS I$BILLIONSI : ANNUALLY (4TH QTR. 1985 1986 1987 2 3 MMDOA NSA S_____ ______ _____ 4 5 denomination time deposits' Savings deposits _____ _ Money market mululi lunds. NSA general Institupurpose tioni and broker/ only dealer' 6 Large deonomlnation time deposits Term RP NSA' 10 11 __ 7 Term Eurdollars NSA' Savings bonds Shortterm Treasury securities 12 13 14 Commorcial paper' Bankers ccplances __ 9 15 16 263.5 294.6 291.7 176.8 228.6 259.7 67.2 77.9 81.1 509.9 569.2 528.9 299.9 362.2 415.4 877.1 858.9 899.4 176.8 207.6 219.7 64.1 84.7 87.2 433.9 441.5 479.2 62.7 82.6 109.7 77.6 81.0 92.2 78.9 89.7 99.4 292.3 283.8 266.8 201.6 228.5 255.2 43.2 37.8 190.2 191.4 292.1 257.2 258.6 79.6 83.3 545.0 S40.5 417.8 418.6 865.9 872.1 213.1 216.3 84.0 81.3 462.4 465.3 109.2 111.3 90.2 94.5 98.1 98.4 258.9 263.7 251.8 256.6 43.5 290.5 193.1 195.0 196.5 295.9 291.3 288.0 260.3 259.5 259.3 85.9 79.6 77.9 533.9 527.7 525.2 417.0 415.0 414.3 883.3 901.7 913.1 218.2 219.7 221.1 82.5 89.5 09.6 472.3 480.5 484.7 108.7 111.6 108.7 93.0 92.8 90.8 98.8 99.3 100.2 272.7 269.7 258.0 254.2 252.5 258.9 44.5 45.0 DEC. 1988-JAN. FEB. IAR. 198.4 199.3 200.9 289.9 287.8 287.9 263.3 265.0 266.9 82.9 524.1 522.6 524.7 414.4 416.2 419.8 924.6 941.5 953.5 225.0 231.0 234.8 94.4 98.7 97.4 482.9 489.7 491.4 109.5 113.7 111.4 85.3 85.4 89.7 101.4 102.6 103.5 259.9 255.4 249.6 269.0 274.1 280.3 43.6 40.9 40.6 APR. MAY JUNE 202.5 203.6 204.9 290.2 287.4 289.9 270.1 271.9 274.4 76.1 $0.8 81.0 523.3 519.6 522.3 422.7 425.1 429.0 964.6 972.0 975.0 235.8 231.7 228.9 91.9 90.0 86.3 492.9 496.0 502.3 113.8 119.5 122.2 88.7 91.5 92.9 104.6 105.4 106.1 259.3 259.2 248.6 288.2 301.1 301.2 41.2 40.9 40.6 JULY AUG. p 206.3 207.2 290.6 290.0 278.3 278.1 78.4 81.4 521.1 517.2 431.8 433.9 978.5 985.3 229.5 230.9 84.8 84.0 510.1 515.8 123.0 121.0 93.9 99.5 106.9 252.2 313.4 38.9 OCT. NOV. __ 2. 3. 4. 1 Overnight RPs and EurodollIar NSA' 19, 1988 166.9 179.3 194.9 MONTHLY 1987-AUG. SEP. 1. Currency Denmnd deposits Olher checkable deposits SEP. ___ __ __ _ j __ _I_ __J_ _ 78.3 75.0 I ___ J Net of money market mutual fund holdings of these items. _ _I_ _ I __ _I __ _ _ _ I_ _ _ 45.1 44.3 45.7 _ institutions are subtracted from small Includes retail repurchase agreements. All IRA and Keogh accounts at commercial banks and thrift Excludes IRA and Keogh accounts. institutions. Net of large denomination time deposits held by money market mutual funds and thrift p-preliminary time deposits. bills Net Changes In System Holdings of Securities' STRICTLY CONFIDENTIAL (FR) CLASS II FOMC Millions of dollars, not seasonally adjusted September 20, 1988 I Period T Treasury bills Net purchases = Treasury Redemptions (-) Net purchlases 3 N Net change I - Treasury coupons I within 1-year 1-5 1,797 1,896 1,938 2,185 893 9,779 388 890 236 358 236 2,441 8,698 15,468 11,479 18,096 20,099 12,933 3,000 2,400 7,700 3,500 1,000 9,029 5,698 13,068 3,779 14,596 19,099 3,905 312 484 826 1,349 190 3,358 1987--Q1 02 03 Q4 -1,914 5,823 4,690 4,334 800 -2,714 5,823 -3,539 4,334 1,767 143 1,449 -252 5,036 2,356 2,639 1988--Q1 02 319 423 423 1,092 150 479 2,200 1987--Dec. -49 1988--Jan. Feb. Mar. Apr. May June July August 600 1,600 -1,881 423 515 515 560 293 158 1,858 2,803 3,566 3,440 4,185 1,476 17,366 189 292 256 162 398 276 8,312 16,342 6,964 18,619 20,178 20,994 1,461 -5,445 1,450 3,001 10,033 -11,033 1,226 619 596 920 493 445 -252 8,948 3,610 5,059 110 37 59 70 -3,076 14,735 12 9,323 -14,254 2,121 -1,433 2,533 -800 3,661 -175 1,017 -975 966 155 130 -3,011 7,030 -3,514 5,220 2,589 596 445 4,109 13 4,246 -1,629 131 21 3 120 11 -780 -2,788 557 7,040 -11 10 515 -10 -4,807 1,247 45 9,111 -10,575 6,683 -5,941 -1,655 67 222 176 51 307 383 441 --6,737 -649 -1,792 560 423 -192 over 10 1,092 Net RPs 5 - 1982 1983 1984 1985 1986 1987 8,229 5-10 Redemptions (-) Federal Net change agencies outright redemptions holdin s Net change total? (-) -800 -175 -975 3,661 1,017 6,737 July -3,571 66 -4,012 -3,261 Aug. 10 24 -10 -- -- 31 Sept. Memo: -2,825 -876 476 -2,678 2,322 - 3 10 17 -2,454 5,272 104 528 7 14 6 LEVEL (bil.$) Sept. 14 112.2 -1 21.6 55.1 13.7 26.5 1 Change from end-of-period to end-of-penod. 2 Outright transactions in market and with foreign accounts. 3 Outright transactions in market and with foreign accounts, and short-term notes acquired in exhange for maturing bills Excludes maturity shifts and rollovers of maturing coupon issues. -2.9 236.3 -117.0 4 __ _ _ __ _ _ __ _ 4. Reflects net change and redemptions (-) of Treasury and agency securities. 5. Includes changes in RPs (+), matched sale-purchase transactions (-), and matched purchase sale transactions (+). 6. The levels of agency issues were as follows: aWthn 1-5 S-year1.1 5-10 over 0 .2 1 3.3 1.1 .2 2.6 total 1 7.2 _ 

Federal Reserve (1988, September 19). Bluebook. Bluebooks, Federal Reserve. https://whenthefedspeaks.com/doc/bluebook_19880920

@misc{wtfs_bluebook_19880920,
  author = {Federal Reserve},
  title = {Bluebook},
  year = {1988},
  month = {Sep},
  howpublished = {Bluebooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/bluebook_19880920},
  note = {Retrieved via When the Fed Speaks corpus}
}