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 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 March 24, 1989 MONETARY POLICY ALTERNATIVES Recent developments (1) Monetary policy was tightened in two steps over the intermeeting period. On February 14, in view of mounting evidence of inflationary pressures, the borrowing assumption was raised to $700 million from the $600 million level that had been continued after the February FOMC meeting. Federal funds were expected to trade around 9-1/4 to 9-3/8 percent, up from 9 to 9-1/8 percent at the time of the meeting. Although federal funds did trade mostly in this higher range, borrowing averaged only $366 million in the maintenance period ending February 22. In association with the increase in the discount rate to 7 percent on February 24, federal funds moved up to average a little above 9-3/4 percent. Borrowing con- tinued to fall short of the $700 million allowance, coming in at just $550 million for the maintenance period ending March 8. In light of these indications of additional weakening in borrowing demands, the borrowing assumption was reduced to $500 million in the maintenance period beginning March 9 as a technical adjustment to make it more consistent with expected conditions in reserve markets. In that maintenance period, which ended March 22, adjustment plus seasonal borrowing was $422 million and the federal funds rate averaged 9.85 percent. (2) The tightening of policy, together with renewed concerns about inflation and associated future policy moves, propelled other interest rates higher across the maturity spectrum over the intermeeting period. Increases in private short-term rates have totaled nearly 1 percentage point, including two half-point increases in the prime rate, somewhat more than the almost 3/4 percentage point rise in the funds rate. The addi- tional increase in these rates followed release of the second large jump in producer prices, which was seen as raising the odds of a further nearterm firming of policy. It may also have reflected greater supplies of short-term paper, especially bank CDs to fund stronger bank credit and sponsored agency obligations to meet demands for FHLB advances as thrift deposits ran off. By contrast, Treasury bill supplies have been flat, and with substantial retail demand for these instruments through noncompetitive tenders, bill rates rose only about half a percentage point. (3) Long-term rates rose immediately following the FOMC meeting, when an unchanged Federal Reserve policy stance in the face of strong economic data apparently led to renewed concerns about the possible intensification of inflation, especially since the dollar weakened as well. Further increases in long-term rates were registered as incoming price data--both broad indexes and prices of oil and other commodities--were interpreted as signalling an actual pickup in inflation and a need for further policy firming. On balance, yields on Treasury bonds are 40 to 50 basis points higher over the intermeeting period. Actual and anticipated sales of mortgages and mortgage-backed securities by thrifts may have contributed to larger increases in yields on these instruments in both primary and secondary markets. In the primary market, rates on fixed-rate mortgages rose nearly 70 basis points to 11.22 percent over the intermeeting period, while the spread between secondary market mortgage securities and Treasuries widened around 15 to 35 basis points. The dollar's weighted-average foreign exchange value rose (4) marginally on balance over the intermeeting period. The dollar weakened early in the period, given the restrained response of the Federal Reserve to incoming economic and price data and in view of expected further monetary tightening by foreign central banks, especially the Bundesbank. Market perceptions reversed and the dollar strengthened substantially, however, shortly after the Federal Reserve's discount rate increase and amid clear signals from the Bundesbank and other central banks that they would not raise rates in the near term. As the dollar moved back toward its earlier peak against the Deutschmark, the Desk for marks. $650 million (5) sold After considerable weakness in January, growth of M2 and M3 strengthened in February and is estimated to have picked up further in March. Still, expansion of the aggregates so far this year has remained subdued, reflecting high opportunity costs and probably also the problems of the thrift industry. M2 growth of 1-1/2 percent since December is slightly slower than the 2 percent specification of the Committee, which, however, did not embody the policy tightening that occurred. Growth of M3 for the December-to-March period at a 3-3/4 percent rate is in line with the Committee's expectations for this interval. The levels of M2 and M3 in March are estimated to be a little below and a little above the lower bounds of their respective annual growth cones. (6) Within M2, liquid deposits have remained quite weak--M1 was about unchanged over February and March--and small time deposits relatively strong. Offering rates on retail time deposits have moved up sub- stantially, but remain unusually low relative to Treasury yields, especially at thrifts. Deposits at thrift institutions with FSLIC insurance have continued to decline, though outflows in late February and early March may have abated from earlier in the quarter. While most of these funds seem to have remained within M2, the thrift situation still appears to have depressed growth of this aggregate in the first quarter. Some apprehensive depositors seem to have opted for market instruments, and regulatory pressures on deposit rates at thrifts have held down offering rates more generally and widened the opportunity cost of holding M2 assets. Thrift behavior may also have affected M3. S&Ls have substituted non-M3 sources--FHLB advances--for deposits and probably have restrained credit expansion; S&L assets declined in January, the latest month for which data are available. On the other hand, the expansion of M3 over the past two months has been supported by the strong reliance of commercial banks on managed liabilities, particularly large time deposits, to fund increased lending. Bank credit growth was spurred in February by borrowing used to retire shares in RJR Nabisco. (7) Even abstracting from the RJR Nabisco deal, business borrowing has shown renewed vigor in February and March. Concerns about event risk and the higher level of interest rates have pushed these demands into MONEY, CREDIT, AND RESERVE AGGREGATES (Seasonally adjusted annual rates of growth) Jan. to Mar.pe QIV'88 to Mar. p e Jan. Feb. M1 -6.1 1.8 M2 -1.3 1.7 4-1/4 3 2-1/2 M3 1.6 3.2 6-1/4 4-3/4 4-1/4 Domestic nonfinancial debt 6.9 10.1 n.a. n.a. 8.5 Bank credit 2.4 14.4 n.a. n.a. 7.0 -11.5 2.4 -9 -3-1/4 -4-1/2 -8.5 -1.1 -8-1/4 -4-3/4 -4-1/2 4.0 4.4 5-3/4 616 437 478 1145 1153 885 Mar.pe Money and credit aggregates -1 1/2 -1/4 Reserve measures Nonborrowed reserves 2 Total reserves Monetary base Memo: 5 4-3/4 (Millions of dollars) Adjustment plus seasonal borrowing Excess reserves pe - preliminary estimate. 1. Fourth quarter to February. 2. Includes "other extended credit" from the Federal Reserve. NOTE: Monthly reserve measures, including excess reserves and borrowing, are calculated by prorating-averages for two-week reserve maintenance periods that overlap months. The March figures assume an average level of adjustment plus seasonal borrowing of $500 million and excess reserves of $950 million for the maintenance period ending April 6. Reserve data incorporate adjustments for discontinuities associated with changes in reserve requirements. -6- shorter-term areas: both bank lending and commercial paper issuance net of merger effects picked up in February, and at least for commercial paper, this strength has continued into March. In addition, recent weeks have seen a flurry of new investment-grade industrial bonds concentrated in short maturities, often of one year. Mortgage lending has strengthened somewhat from late 1988, and consumer borrowing has held steady. With government borrowing also picking up in February, overall domestic nonfinancial debt accelerated that month, lifting this aggregate to the midpoint of its range. Policy alternatives (8) Three alternatives are presented below for Committee consideration. Alternative B maintains the current degree of reserve market pres- sure, with federal funds trading around 9-3/4 percent or slightly higher in association with adjustment plus seasonal borrowing of $500 million. Alternative A entails federal funds around 9-1/4 percent and borrowing of $300 million, and alternative C involves funds around 10-1/4 percent and borrowing of $700 million. These relationships assume that the heightened reluctance of banks to tap the discount window of recent weeks will persist over the intermeeting period. Uncertainties about the relationship between borrowing and the spread of the funds rate over the discount rate suggest a continued flexible approach to the borrowing objective in open market operations. Even with this approach, funds could temporarily trade above expected levels in coming days should significant quarter-end pressures emerge and again in the latter half of April should individual income tax payments prove to be larger than anticipated, leading to a sharper advance in required reserves and a larger drain in bank reserves. (9) Projections of growth in the monetary aggregates for March to June are presented below for the three alternatives, together with implied growth from the fourth-quarter base to June. (Detailed data are pre- sented on the table and charts on the following pages.) Under all three alternatives, monetary growth would remain subdued, largely reflecting 1. The funds rate range suggested for alternatives B and C is a percentage point above the 7 to 11 percent range now in the directive, better centering the range on current (alternative B) or somewhat higher (alternative C) expected funds rates. recent increases in market interest rates and slow adjustment of offering rates on liquid accounts. In addition, the thrift situation is expected to depress growth of the broader aggregates in the second quarter, though to a lesser extent than in the first quarter. The reduced impact should result from a tendency for the most concerned depositors to flee first, and assumes no new information that would exacerbate depositors' fears, such as a Congressional stalemate on the proposed legislation. It also assumes no greater regulatory pressure on thrift deposit offering rates; changes in the average own rate on M2 components are likely to respond in more typical ways to changes in market rates, although the level of opportunity costs should remain unusually wide. M2 growth rates under the alternatives are a bit lower than would be suggested by various models of money demand given the staff GNP forecast. At the M3 level, further sub- stitutions of FHLB advances for deposits and restraint on asset growth at thrifts are expected to have a continuing but diminishing effect on growth.2 2. Tax payments are not expected to have much impact on the pattern of monetary growth over the March-to-June period, in contrast to the last two years. There are no extraordinary influences on tax payments this year and current seasonal adjustment factors capture expected tax- and refund-related deposit swings. However, M2 and M3 growth is expected to be depressed slightly in May by a transfer of the government securities trading operation of a major bank dealer, with associated RP financing, to a nonbank affiliate. RP liabilities of nonbank dealers are not included in the definition of the money aggregates. Alt. A Alt. B Alt. C 3 5 -1/2 2 4-1/2 -2 Growth from March to June M2 M3 M1 4 5-1/2 1 Growth from QIV'88 to June M2 M3 Ml Associated federal funds rate ranges (10) 3-1/4 4-3/4 1/2 2-3/4 4-1/2 -1/4 7 to 11 8 to 12 2-1/4 4-1/4 -1 8 to 12 The existing structure of interest rates appears to incor- porate some expectation that monetary policy may be a little firmer in the near term than is assumed under alternative B. As a consequence, with federal funds continuing around 9-3/4 percent or even a little above under alternative B, money market rates might tend to decline a bit. Three- month Treasury bills at the current level of 9 percent would seem appropriately priced in relation to the prevailing federal funds rate under usual supply and demand conditions; but if strong retail demands continue, these rates also might edge lower, especially once the early-April cash management bill is absorbed. The dollar might come under some downward pressure as short-term rates softened and the prospects for further nearterm monetary tightening in the United States were reassessed. Given recent mixed signals about the strength of the expansion, bond markets are 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 1989 January February March 3066.0 3070.3 3081.4 3066.0 3070.3 3081.4 3066.0 3070.3 3081.4 3923.2 3933.5 3953.8 3923.2 3933.5 3953.8 3923.2 3933.5 3953.8 786.2 787.4 786.9 786.2 787.4 786.9 786.2 787.4 786.9 April May June 3090.4 3099.7 3113.1 3089.1 3096.3 3104.5 3087.8 3092.9 3095.9 3971.0 3987.8 4008.2 3970.3 3985.8 4003.2 3969.6 3983.8 3998.2 787.0 787.5 789.1 786.5 786.2 786.1 786.0 784.9 783.1 -1.3 1.7 4.3 -1.3 1.7 4.3 -1.3 1.7 4.3 1.6 3.2 6.2 1.6 3.2 6.2 1.6 3.2 6.2 -6.1 1.8 -0.8 -6.1 1.8 -0.8 -6.1 1.8 -0.8 3.5 3.6 5.2 3.0 2.8 3.2 2.5 2.0 1.2 5.2 5.1 6.1 5.0 4.7 5.2 4.8 4.3 4.3 0.2 0.7 2.4 -0.6 -0.5 -0.2 -1.4 -1.7 -2.8 Quarterly Ave. Growth Rates 1988 Q2 6.9 Q3 3.8 Q4 3.6 1989 Q1 2.1 Q2 3.7 6.9 3.8 3.6 2.1 3.1 6.9 3.8 3.6 2.1 2.6 7.2 5.7 5.0 3.8 5.3 7.2 5.7 5.0 3.8 5.0 7.2 5.7 5.0 3.8 4.8 6.4 5.2 2.3 -0.3 0.5 6.4 5.2 2.3 -0.3 -0.3 6.4 5.2 2.3 -0.3 -1.1 Dec. 88 to Mar. 89 Mar. 89 to June 89 1.6 4.1 1.6 3.0 1.6 1.9 3.7 5.5 3.7 5.0 3.7 4.5 -1.7 1.1 -1.7 -0.4 -1.7 -1.9 Q4 Q4 Q4 Q4 5.2 2.9 2.4 3.2 5.2 2.6 2.4 2.7 5.2 2.3 2.4 2.2 6.3 4.6 4.2 4.8 6.3 4.5 4.2 4.6 6.3 4.3 4.2 4.3 4.3 0.1 -0.2 0.4 4.3 -0.3 -0.2 -0.3 4.3 -0.7 -0.2 -0.9 Monthly Growth Rates 1989 January February March April May June 87 88 88 88 to to to to Q4 88 Q2 89 Mar. 89 June 89 1989 Target Ranges: 3.0 to 7.0 3.5 to 7.5 Chart 1 ACTUAL AND TARGETED M2 Billions of dollars 3300 Actual Level - - - Estimated Level Short-Run Alternatives -- 3250 -- , stimted .. eve 3200 s" S S s o ° -- I 3150 s os -- 3100 C' -1 3050 -1 3000 I O I N 1988 I D I I J F M I A I M I J 1989 I J I A i S I O 2950 N D Chart 2 ACTUAL AND TARGETED M3 Billions of dollars 4250 -- Actual Level - Estimated Level * Short-Run Alternatives 4200 V 4150 A 4100 4050 4000 3950 3900 3850 3800 0 N 1988 D J F M A M J 1989 J A S O N D Chart 3 M1 Billions of dollars Actual Level - - - Estimated Level ------ Growth From Fourth Quarter * Short-Run Alternatives ,' 5% -4 900 I I I V -- 875 I I f VfS 010% -- 850 5% 5% ' ..-- - 825 -- 800 ~ ~ L V ---- -' * ---- . .. -- - - - - - -. . . .. . . . -1 775 II O II N 1988 II D I I J I I I F I I M I A I I I M I J I I I J 1989 I I A I S I I I O I N D Chart 4 DEBT Billions of dollars 10000 Actual Level * Projected Level 10.5% -I i.5% 9750 9500 - 9250 -4 9000 8750 I O I N 1988 I D I J I F I M I A I M I J I J 1989 I A I S I O I N D -11- likely to be especially sensitive to incoming information about developments in the economy. Should the incoming data point more clearly to continued strength in the economy and prices, consistent with the greenbook forecast, bond yields would be unlikely to fall with an unchanged System policy stance and could even move higher. (11) Growth in M2 under alternative B, at 3 percent from March to June, would be stronger on average than over the first three months of this year. As discussed above, deposit weakness at thrifts is expected to continue, but to abate. In addition, with short-term market rates moving a bit below current levels and rates on deposits edging higher in response to previous increases in market rates, opportunity costs would be narrowing, rather than rising as in recent months. Even so, the lagged effects of earlier substantial increases in opportunity costs would continue to restrain M2 growth and result in a 4-1/2 percent increase in its velocity in the second quarter, somewhat faster than in the second half of 1988. M1 would continue about flat over the March-to-June period as outflows of transactions deposits about match growth in currency; consequently, its velocity would increase at around the projected 7-3/4 percent increase in nominal GNP. (12)- M3 is projected to grow at a 5 percent annual rate over the March-to-June period under alternative B, somewhat faster than from December to March. Commercial banks are expected to continue issuing substantial amounts of large CDs to fund still strong merger-related loan demands. At thrifts, even if asset growth doesn't pick up, M3 could still be boosted relative to earlier this year as less weakness in retail -12- deposits is reflected in reduced reliance on FHLB advances. Contributing to the pickup in M3 growth would be a resumption of inflows to institution-only money funds as their returns catch up to market rates. On a quarterly average basis, M3 would grow at a 5 percent rate, implying an increase of 2-1/2 percent in its velocity. (13) In credit markets, the smaller role of thrifts in acquiring and perhaps even originating mortgage loans is not expected to have a material impact on overall mortgage debt growth, which is projected to taper off only a little in the second quarter in response to the recent climb in mortgage rates. Business borrowing should diminish as corporate restructuring activity and associated borrowing to finance share retirements fall off somewhat from the record first-quarter pace. Reflecting elevated bond rates and investor concern about event risk, firms are likely to continue to focus their credit demands on bank loans and shorter-term paper. Aggregate growth in the debt of nonfinancial sectors is projected at an 8 percent annual rate over the second quarter, bringing expansion through June to around the middle of its 6-1/2 to 10-1/2 percent annual monitoring range. (14) The extent of immediate policy tightening embodied in alter- native C is more than currently seems to be built into market interest rates. In response to the federal funds rate moving into the 10-1/4 per- cent area, other short-term market rates would be expected to rise somewhat less; the prime rate would be hiked again, probably by 1/2 percentage point. The dollar would be expected to firm. Bond rates are likely to increase under this alternative, but the extent of any rise might be -13- limited, and over time yields could drop back, if market participants saw the tightening action as reducing the risks of greater inflation and raising the odds on an appreciable moderation in economic growth. With the further rise in market rates, M2 would expand at a 2 percent annual rate over the March-to-June period under alternative C, only a bit faster than the December-to-March pace. Growth at this rate would place this aggregate noticeably below its 3 to 7 percent growth cone by June. Higher market rates along with the lagged adjustment of offering rates on M3 type-money market mutual funds would weaken inflows to such funds. M3 expansion, at 4-1/2 percent over the March-to-June period, while picking up some from the sluggish rate of recent months, would remain in the lower portion of its long-run range. (15) With the lower money market rates of alternative A, M2 growth would strengthen to a 4 percent pace, lifting it above the lower bound of its growth cone by June. its range. M3 would move more into the middle portion of The decline in other short-term market rates might be less than the one-half point drop in the federal funds rate, depending on perceptions of the sustainability of the policy easing. fall substantially. The dollar could Investors are likely to be confounded by this policy action, which would be seen as reversing the thrust of policy over the past year. Unless subsequent data suggested substantial weakness in the economy and price pressures, inflation expectations and bond yields ultimately could rise under this alternative. -14- Directive language (16) Draft language for the operational paragraph, including the usual options and updating, is shown below. OPERATIONAL PARAGRAPH In the implementation of policy for the immediate future, the Committee seeks to DECREASE SOMEWHAT/maintain/INCREASE SOMEWHAT 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 of M2 and M3 over the period from December through March THROUGH JUNE at annual rates of about ____ [DEL: 2]and ____ [DEL: 3-1/2] percent, respectively. The Chairman may call for Committee consultation if it 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 TO ____[DEL: to 11]percent. 7 persistently outside a range of ____ SELECTED INTEREST RATES (percent) March 27, short-, re--. ----federal funds Treasury bills-secondary market-- 3 month 6 month -- U.S. Govt. constant--maturity yields---- 12 month 1989 -Long-Tern cds sec mkt 3-month comm. paper 1-month money market mutual fund bank prime loan 3-year 10-year 30-year --conventional home----ortgagessec mkt primary market corp. A utility rec off muni. Bond Buyer fixedrate fixedrate ARM 8.87 6.38 8.16 5.61 8.26 5.81 8.40 6.15 9.33 6.58 9.41 6.50 8.18 6.03 10.50 8.50 9.16 7.33 9.36 8.16 9.42 8.40 10.73 9.63 8.34 7.64 11.33 9.98 10.81 9.84 8.54 7.49 89--High Low 9.86 9.06 8.93 8.16 8.96 8.28 8.94 8.27 10.23 9.17 9.98 9.00 8.94 8.28 11.50 10.50 9.76 9.11 9.46 8.98 9.26 8.81 10.47 10.00 7.95 7.55 11.73 10.78 10.98 10.55 9.02 8.53 Monthly MIR 88 APR 88 MAY 88 JUN 88 JUL 88 AUG 88 SEP 88 OCT 88 NOVY88 DEC 88 JAN 89 FEB 89 6.58 6.87 7.09 7.51 7.75 8.01 8.19 8.30 8.35 8.76 9.12 9.36 5.70 5.91 6.26 6.46 6.73 7.06 7.24 7.35 7.76 8.07 8.27 8.53 5.91 6.21 6.56 6.71 6.99 7.39 7.43 7.50 7.86 8.22 8.36 8.55 6.28 6.56 6.90 6.99 7.22 7.59 7.53 7.54 7.87 8.32 8.37 8.55 6.63 6.92 7.51 7.94 8.35 8.23 8.36 8.78 9.25 9.20 9.51 6.57 6.80 7.07 7.41 7.72 8.09 8.09 8.12 8.38 9.31 9.03 9.29 6.00 6.10 6.20 6.50 6.80 7.10 7.40 7.50 7.60 8.00 8.30 8.50 8.50 8.84 9.00 9.29 9.84 10.00 10.00 10.05 10.50 10.50 10.93 7.50 7.83 8.24 8.22 8.77 8.57 8.43 8.72 9.11 9.20 9.32 8.37 8.72 9.09 8.92 9.06 9.26 8.98 8.80 8.96 9.11 9.09 9.17 8.63 8.95 9.23 9.00 9.14 9.32 9.06 8.89 9.02 9.01 8.93 9.01 9.91 10.23 10.61 10.41 10.40 10.45 10.26 10.11 10.12 10.08 10.09 10.25 8.08 8.22 8.30 8.14 8.15 8.16 7.96 7.78 7.80 7.88 7.63 7.72 10.12 10.44 10.73 10.62 10.64 10.87 10.62 10.41 10.56 10.98 10.97 11.03 9.93 10.20 10.46 10.46 10.43 10.60 10.48 10.30 10.27 10.61 10.73 10.65 7.52 7.58 7.71 7.85 7.84 8.01 8.14 8.12 8.15 8.39 8.55 8.65 Meekly DEC 7 88 DEC 14 88 DEC 21 88 DEC 28 88 8.59 8.51 8.87 8.86 7.97 8.00 8.16 8.13 8.16 8.25 8.23 8.26 8.18 8.34 8.40 8.33 9.22 9.27 9.33 9.21 9.26 9.27 9.41 9.30 7.85 7.95 8.09 8.18 10.50 10.50 10.50 10.50 9.00 9.05 9.05 10.02 9.10 9.16 9.16 9.10 9.13 9.12 8.98 9.02 8.96 10.15 9.98 10.12 7.96 7.94 7.82 7.71 10.72 11.08 11.00 11.33 10.46 10.71 10.68 10.77 8.35 8.43 8.45 8.45 88--High Low 7.24 . 8.44 JAN JAN JAN JAN 4 89 11 89 18 89 25 89 9.22 9.08 9.13 9.06 8.16 8.28 8.24 8.25 8.28 8.46 8.34 8.29 8.40 8.49 8.33 8.27 9.17 9.23 9.24 9.17 9.18 9.04 9.04 9.00 8.39 8.28 8.35 8.37 10.50 10.50 10.50 10.50 9.23 9.33 9.17 9.11 9.19 9.25 9.06 8.99 9.05 9.06 8.90 8.84 10.19 10.11 10.05 10.00 7.73 7.66 7.55 7.56 11.19 10.99 10.92 10.78 10.80 10.81 10.71 10.60 8.53 8.54 8.58 8.54 FEB FEB FEB FEB 1 89 8 89 15 89 22 89 9.16 9.10 9.27 9.39 8.34 8.49 8.53 8.50 8.38 8.48 8.55 8.53 8.34 8.44 8.54 8.56 9.18 9.27 9.47 9.55 9.03 9.08 9.23 9.31 8.40 8.36 8.44 8.51 10.50 10.50 10.93 11.00 9.13 9.18 9.35 9.33 8.99 8.98 9.19 9.23 8.81 8.83 9.06 9.07 10.10 10.27 10.24 10.37 7.58 7.63 7.82 7.83 10.85 10.97 11.05 11.25 10.55 10.56 10.69 10.78 8.56 8.61 8.68 8.73 MAR MAR HAR MAR 1 89 8 89 15 89 22 89 9.80 9.83 9.83 9.86 8.66 8.62 8.71 8.93 8.68 8.66 8.74 8.96 8.71 8.64 8.76 8.94 9.91 9.93 10.03 10.23 9.70 9.78 9.81 9.96 8.65 8.74 8.84 8.94 11.43 11.50 11.50 11.50 9.47 9.39 9.55 9.76 9.36 9.27 9.31 9.46 9.17 9.10 9.13 9.26 10.29 10.34 10.47 10.43 7.85 7.79 7.78 7.95 11.20 11.27 11.73 11.69 10.91 10.86 10.98 11.22 8.91 8.93 9.02 9.30 Daily MAR 17 89 MAR 23 89 MAR 24 89 9.81 9.92 8.85 9.04 H 8.92 9.02 A 8.94 8.93 R 10.26 10.18 K 9.97 9.9 E 11.50 11.50 11.50 9.76 9.76 C 9.49 9.43 L 9.30 9.23 0 9.88p S T NOTEs Meekly data for oolumin 1 through 11 are statement week verages. Data in column 7 re taken from Donoghue's Money Fund Report. Columns 12, 13 and 14 are 1-day quotes for Friday, Thursday or Friday, respectively, following the end of the statement eek. Column 13 is the Bond Buyer revenue inde). Column 14 is the FNMA purchase yield, plus loan servicing fee, on 30-day mandatory delivery commitments. Colun 15 is the average contract rate on new comitments for fixed-rate mortgagesl FRs) with 80 percent loan-to-value ratios at a sample of savings and loans. Column 16 is the average initial contract rate on new ommitments for 1-year, adjustable-rate mortgagesIARs) at SILs offering both FRHNand ARMs with the same number of discount points. Strictly Conlidential (FR)Clas II FOMC Money and Credit Aggregate Measures Seasonally adjusted MAR. Money stock measures and liquid assets Period Ml ANN. GROWTH RATES (%) ANNUALLY IQ( TO Q4) 1986 1987 1988 QUARTERLY AVERAGE 1988-1st QTR. 1988-2nd QTR. 1988-3rd QTR. 1988-4th QTR. MONTHLY 1988-FEB. MAR. APR. MAY JUNE JULY AUG. SEP. OCT. NOV. DEC. 1989-JAN. FEB. p LEVELS (BILLIONS) MONTHLY 1988-OCT. NOV. DEC. 1989-JAN. FEB. p MEEKLY 1989-FEB. MAR. 6 p 13 p M2 B___ank credit M3 Domestic nonfinanclal debt' total loans and L U.S. government' other' total' investments in M3 only _ 1 in M2 3 15.6 6.4 4.3 9.3 4.2 5.2 7.3 3.5 5.5 3.2 6.4 5.2 2.3 6.1 6.9 3.8 3.6 7.2 7.1 3.3 4.1 2.7 5.8 11.6 -0.2 8.4 9.3 -0.2 2.0 2.6 1.8 5.5 8.3 7.5 8.5 3.8 5.3 10.2 8.1 7.4 5.2 4.3 2.6 3.2 2.1 2.9 8.4 3.5 14.8 -6.1 1.8 -1.3 1.7 0.3 1.7 12.4 785.4 2256.7 2272.5 2279.2 837.6 841.3 848.5 3879.7 3900.5 3917.9 4618.7 4649.6 4689.3 2392.6 790.2 3042.2 3059.1 3069.4 2089.1 2101.5 2114.7 6781.3 6841.9 2408.0 786.2 787.4 3066.0 3070.3 2279.7 2282.9 857.3 863.2 3923.2 3933.5 4691.6 2412.8 2441.8 2122.1 2139.6 6930.6 787.1 784.1 789.1 788.8 3063.6 3065.9 3072.7 3076.2 2276.5 2281.8 2283.6 2287.4 859.3 858.2 870.2 864.3 3922.9 3924.0 3942.9 3940.5 791.5 784.0 3083.4 3078.1 2291.9 2294.1 865.4 873.5 3948.8 3951.6 4 5 6 7 9.1 5.7 6.3 8.2 5.5 7.3 9.7 7.9 7.3 14.7 9.0 8.1 12.9 10.0 8.9 6.8 7.2 5.7 5.0 6.6 8.5 7.4 6.1 5.6 9.8 7.5 5.7 8.0 8.3 7.1 8.0 8.0 8.7 8.8 9.0 8.0 8.6. 8.4 8.8 9.7 7.9 7.6 4.8 6.6 7.1 4.3 3.3 5.3 6.4 5.4 8.2 8.2 10.5 7.6 4.6 11.8 5.6 2.6 5.8 8.0 10.2 9.2 8.9 9.4 11.5 9.2 7.7 6.6 10.6 15.3 7.2 3.0 6.0 5.5 9.9 11.9 5.3 7.1 7.5 7.5 7.5 9.0 9.7 8.7 8.8 8.6 7.8 9.0 10.7 7.8 8.3 9.3 8.6 8.1 8.1 8.1 8.9 8.8 8.1 9.9 7.7 1.6 3.2 0.6 10 8 : 4.3 2.3 2.1 2.8 6.7 4.0 8.2 11.8 10.6 9.1 8.3 13.1 10.2 9.4 4.1 8.4 11.6 17.6 11.9 7.9 14.2 5.3 10.3 8.3 1.0 9.8 4.7 3.7 2.4 7.7 10.2 4.2 9.9 14.4 13.3 9.8 8.7 6.9 10.1 : 786.6 I 1. nontransactions components 27, 1989 L __ __ L __ __ ± __ __ 2400.6 J. __ _ _ _ __ 6886.3 6989.4 _ _ 8870.3 8943.4 9001.0 9052.7 9129.0 Debt data are on a monthly average basis, derived by averaging end-of-month levels of adjacent months, and have been adjusted to remove discontinuities. p-preliminary pe-preliminary estimate Strictly Confidential (FR)Class II FOMC Components of Money Stock and Related Measures seasonally adjusted unless otherwise noted MMDAs NSA Swings deposits denomination time deposits' 3 4 5 6 7 294.5 292.0 288.4 229.1 260.8 280.9 77.9 81.3 76.5 569.1 529.9 505.6 361.8 416.7 430.8 859.5 900.8 1017.6 207.6 219.7 236.1 84.7 87.2 86.5 440.8 481.6 534.7 82.6 110.0 126.5 81.0 92.2 104.5 89.8 99.6 108.7 282.5 266.2 279.7 229.8 257.0 323.9 37.5 44.6 40.8 199.4 200.7 288.1 288.4 265.4 267.5 78.0 74.5 523.6 525.5 418.8 421.5 942.4 952.8 231.0 234.8 98.7 97.4 492.3 496.3 114.2 112.0 85.5 90.0 102.5 103.4 257.3 255.6 274.2 280.3 41.0 41.1 APR. MAY JUNE 202.4 203.4 204.7 290.3 288.1 271.2 272.2 274.7 75.6 80.4 80.8 524.2 520.5 523.2 423.3 425.2 427.6 963.4 971.0 975.7 235.8 231.8 228.9 91.9 90.0 86.3 499.2 502.4 507.8 114.7 121.0 124.3 89.1 91.8 93.1 104.4 105.3 106.0 262.3 265.1 258.3 287.6 297.8 300.4 41.4 41.1 40.7 JULY AUG. SEP. 206.4 207.0 208.6 290.4 289.9 77.6 79.9 77.3 522.0 517.7 511.4 429.7 430.9 430.5 981.0 988.3 998.7 229.6 288.8 278.5 278.3 279.0 230.8 231.0 84.8 84.0 83.7 514.0 519.4 526.7 125.6 123.8 122.4 96.2 103.8 105,0 106.8 107.4 107.9 269.8 274.6 275.2 309.8 311.3 308.8 40.7 41.2 41.7 OCT. NOV. DEC. 209.7 210.5 211.8 288.9 287.7 288.6 279.4 281.0 282.3 75.9 75.4 78.2 507.5 506.7 502.7 429.2 431.8 431.3 1009.7 1017.8 1025.3 231.3 237.4 239.6 84.6 87.4 87.6 532.0 534.4 537.7 125.2 128.9 125.3 102.3 103.8 107.3 108.4 108.7 109.1 277.0 276.3 285.9 312.3 323.7 335.8 41.3 40.5 40.6 213.4 214. 284.0 284.8 281.2 280.8 81.6 79.1 495.1 485.1 427.8 424.7 1035.9 1048.5 242.0 247.9 89.3 89.6 544.3 551.4 126.8 129.8 102.2 101.4 109.7 283.6 334.9 40.2 Other checkable Currency deposits deposits 1 2 179.4 194.9 210.7 MONTHLY 1988-FEB. MAR. LEVELS ($BILLIONSI : ANNUALLY (4TH QTR.) 1986 1987 1988 1989-JAN. FEB. 3. 4. 27, 1989 Overnight RPe and Eurodollwrs NSA' Demand Period 1. 2. MAR. p 289.8 mutual funds, NSA ger.ral tIntitutions purpose and broker only dealr 8 denomination time deposits' Term RPs NSA Term Eurodollars NSA' Savings bonds Shortterm Treasury securities 10 11 12 13 14 Commercial paper I5 Bankers cceptances 16 Net of money market mutual fund holdings of these items. Includes retail repurchase agreements. All IRA and Keogh accounts at commercial banks and thrift institutions are subtracted from small time deposits. Excludes IRA and Keogh accounts. Net of large denomination time deposits held by money market p-preliminary mutual funds and thrift institutions. March 27, 1989 Treasury bills Net 2 purchases Period 2,400 7,700 3,500 1,000 9,029 2,200' 1987--03 Q4 4,690 4,334 8,229 1988--Q1 02 03 Q4 319 423 1,795 5,098 2,200 1,280 375 3,599 1,125 1989--January February -154 -3,688 Mar. Memo: 2,200 515 1988--July August Septeber October November December Feb. " Redrptions (-) 15,468 11,479 18,096 20,099 12,933 7,635 1983 1984 1985 1986 1987 1988 Jan. STRICTLY CONFIDENTIAL (FR) CLASS II-FOMC NET CHANGES IN SYSTEM HOLDINGS OF SECURITIES 1 Millions of dollars, not seasonally adjusted 600 1,600 Treasury coupons NRedemet purchases 3 Net change within -year 5-10 1-5 236 2,441 1,404 3,566 3,440 4,185 1,476 17,366 15,099 2,356 2,639 619 493 596 445 3,610 5,059 1,092 -800 3,661 -175 1,017 -975 6,737 1,084 1,824 562 3,903 3,905 5,435 1,896 1,938 2,185 893 9,779 4,686 -3,539 4,334 143 1,449 3,779 14,596 19,099 -1,881 423 1,795 5,098 het change Redmptions (-) 383 441 293 158 1,858 1,398 484 826 1,349 190 3,358 2,177 13,068 over 10 890 236 358 Federal agencies Net change outright redemptions () holdin g total 16,342 6,964 18,619 20,178 20,994 14,513 -5,445 1,450 3,001 10,033 -11,033 1,557 12 -1,433 9,323 2,533 -3,011 -3,514 5,220 1,393 7,030 1,717 8,776 515 515 1,280 375 3,599 1,125 -10 1,280 300 3,585 4,892 -754 -5,288 -- -3 - Net RP -1,541 -5,941 -1,655 8,989 -6,150 3,096 562 3,903 -20 -23 -225 -925 -5,553 -6,813 100 100 4,882 -4,141 -225 1,512 2,079 4 11 18 25 -20 -134 -20 -134 -20 -282 -6,394 1 8 15 22 -30 -3,272 -210 -118 -630 -3,872 -810 -518 -653 -3,872 -518 -3,729 -9,969 8,276 -1,097 -58 -58 3,040 1 8 15 22 -1,075 4,259 -375 1,945 -1,005 6 LEVEL (bil.$) March 22 111.9 28.9 Change from end-of-period to end-of-period. Outright transactions in market and with foreign accounts. Outright transactions in market and with foreign accounts, and short-ter notes acquired in exchange for maturing bills. Excludes maturity shifts and rollovers of maturing coupon issues. 52.0 12.8 120.6 27.0 239.3 -4.3 .. 4. Reflects net change and redemptions| (-) of Treasury and agency securities. 5. Includes change in RPs (+), matched sale-purchase transactions (-), and matched purchase sale transactions (+). 6. The levels of agency issues were as follows: within 1-year 1-5 5-10 over 10 total 2.2 3.4 1.0 .2 6.8 

Federal Reserve (1989, March 27). Bluebook. Bluebooks, Federal Reserve. https://whenthefedspeaks.com/doc/bluebook_19890328

@misc{wtfs_bluebook_19890328,
  author = {Federal Reserve},
  title = {Bluebook},
  year = {1989},
  month = {Mar},
  howpublished = {Bluebooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/bluebook_19890328},
  note = {Retrieved via When the Fed Speaks corpus}
}