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. August 17, Strictly Confidential (FR) 1990 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 August 17, 1990 MONETARY POLICY ALTERNATIVES Recent Developments (1) Pressures on reserve positions were eased slightly in midJuly in response to indications that conditions in credit markets had tightened further. With money growth lagging and activity showing no signs of picking up, such a tightening was viewed as potentially exerting undue restraint on an already sluggish economy. In an effort to offset the effects of this influence, the borrowing assumption was reduced by $50 million to $400 million and the federal funds rate dropped by 1/4 percentage point to near 8 percent, where it generally has remained over the balance of the intermeeting period.1 (2) Largely in reaction to the System's easing of reserve conditions, short-term interest rates dropped about 30 basis points between the July FOMC meeting and the end of that month. The decline in rates also seemed to reflect some expectation of an additional easing in response to data portraying a weaker trajectory for the economy. unchanged on balance through the end of July. Bond yields were But the Iraqi invasion of Kuwait at the beginning of August and the prospect of higher energy prices propelled long-term rates upward in volatile trading. The rise in rates 1. More recently, to take account of the continued upswing in seasonal borrowing, the objective for adjustment plus seasonal borrowing was increased to $500 million in two $50 million steps; actual seasonal credit has risen to about $425 million. In the three maintenance periods completed since the July meeting, adjustment plus seasonal borrowing averaged close to the levels built into the reserve paths. In the first eight days of the current maintenance period, however, borrowing has averaged $630 million, elevated by disruptions to reserve flows stemming from an extended power outage in New York, which also seemed to have put some upward pressure on the federal funds rate in recent days. was spurred by concerns about inflation, in light of the experience of the 1970s oil shocks, as well as by a heightened sense of uncertainty about the financial and economic outlook and pessimism about prospects for a budget accord. Bond yields are up as much as 1/2 percentage point since the end of July and broad measures of stock prices, some of which had reached record highs earlier in the intermeeting period, are down about 8 percent over the same period. Short-term market interest rates, which dipped briefly when the events in the Middle East prompted an apparent increased preference for liquidity, have backed up recently, partly on disappointing inflation readings taken before the jump in oil prices. On balance since the July meeting, most money market rates are down 15 to 25 basis points. Although Treasury securities benefited from a flight to quality for a time in early August, there has been little net change in spreads between money market rates, or between rates in longer-term markets. (3) The easing of short-term interest rates in the United States and some signs of tightening abroad, along with expectations that these divergent trends would continue, appeared to contribute to the decline in the dollar on foreign exchange markets since the last Committee meeting. Short-term interest rates rose about 1/4 percentage points in both Japan and in Germany over the period. Long-term rates in those countries in- creased 80 and 25 basis points, respectively, and their stock markets posted substantial losses after the runup in oil prices. The dollar's depreciation, which was interrupted for a time after the invasion of Kuwait, totalled about 5-1/4 percent on a weighted average basis over the intermeeting period. The price of gold surged above $400 per ounce in recent weeks, likely reflecting both safe-haven motives and inflation worries. The U.S. Treasury accounted for about $400 million against marks. These purchases along with some made earlier enabled the Treasury to unwind on July 31 a $2 billion warehousing operation with the System, leaving $7 billion outstanding on that facility. (4) Money growth remained sluggish in July. M2 increased at a 1-1/4 percent rate last month and M3 hardly rose at all, below the 3 and 1 percent rates, respectively, that the Committee had expected for the June-to-September period. of their annual ranges. Both aggregates remained in the lower portions M1 and M2 growth in July was held down--by about 3-1/2 and 1 percentage points, respectively--by the introduction of a reserve-avoidance practice at one bank holding company. Even abstracting from this effect, however, M2 growth in July remained low relative to econometric model forecasts. One possible contributor to this weakness was the flurry of RTC activity at the end of June, working its way through deposit flows and asset stocks. Data for early August suggest 2. Revisions to data on RPs and IRA/Keogh deposits at thrift institutions going back as far as mid-1989 have boosted the levels of M2 and M3 in July by $7-3/4 and $12 billion, respectively. The revisions will not have a significant effect on June-to-September growth rates, but they did add about 1/4 percentage point to growth rates of both M2 and M3 from the fourth quarter of 1989 through July. 3. The subsidiary banks of a large regional bank holding company began, in effect, sweeping OCDs into large time deposits each night, thereby reducing transaction deposits and required reserves. that growth in the aggregates is rebounding. Apart from the cessation of the shift in OCDs to large time, the strengthening of M2 in August could be reflecting the narrowing of opportunity costs on money assets, as short-term market interest rates have dropped markedly from their peaks in the spring. In addition, the sharp fall in prices in capital markets reportedly prompted large transfers from bond and stock funds into money market mutual fund shares. (5) The growth of private sector credit in July remained at the more moderate pace established this year. nesses evidently slackened last month: Borrowing by nonfinancial busi- Gross bond issuance dropped back from June's high level, outstanding commercial paper declined, and C&I loans edged down. Responses to the Federal Reserve's latest survey of senior loan officers provide additional evidence that banks have become increasingly selective in recent months in granting credit to businesses and have tightened both price and nonprice terms further. The tightening of terms seems to have spread to larger firms; banks have become especially selective on commercial real estate loans. Only a few banks, how- ever, reported any tightening of standards for single-family home mortgages, and banks on balance signalled another small increase in their willingness to make consumer loans. appears to have been quite soft. Nevertheless, household borrowing Consumer installment credit barely edged up in June, and consumer loans at banks remained weak in July, even ab- stracting from the securitizations that removed large blocks of credit card receivables from bank balance sheets. Similarly, what little current information is available suggests that mortgage credit growth has remained -5- noticeably below last year's pace. By contrast to the other nonfinancial sectors, federal debt growth has stayed rapid, boosted by the funding needs of the thrift bailout. As a result, the debt aggregate apparently has remained around the midpoint of its 5 to 9 percent annual range. -6- MONEY, CREDIT, AND RESERVE AGGREGATES (Seasonally adjusted annual rates of growth) May June July QIV'89 to July Ml -2.8 6.0 -0.3 3.5 M2 -2.3 2.6 1.2 3.7 M3 -2.4 0.8 0.5 1.4 Domestic nonfinancial debt 5.6 7.4 n.a 6.8 1/ Bank credit 3.3 7.1 5.4 5.7 -14.5 -2.6 -7.2 -1.4 -9.8 -1.0 -8.3 -1.1 3.5 7.6 6.4 7.5 459 536 477 962 774 852 Money and credit aggregates Reserves measures 2/ Nonborrowed reserves-Total reserves Monetary base Memo: (Millions of dollars) Adjustment plus seasonal borrowing Excess reserves n.a. - Not available. 1. Through June. 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. -7- Policy Alternatives (6) The three usual options for monetary policy over the coming intermeeting period are discussed below beginning on page 9. The choice among those options is complicated by the potential adverse effects on U.S. economic performance of the recent surge in oil prices and by uncertainties about their future course. An increase in the price of imported oil transfers real income and wealth to foreign suppliers, reducing domestic demand, and thereby tending to depress real output. The shift in demand cannot be offset by policy actions without additional adverse price consequences; higher energy prices constitute a supply shock that presents less favorable attainable combinations of economic activity and inflation in the short run. Price pressures arise not only directly from the rising prices of final energy products, but also indirectly as higher costs for energy inputs are passed through to prices of other goods and services. Price effects will be amplified if heightened inflationary expectations or pressures to recoup real wage losses add an upward thrust to nominal labor costs. Finally, for as long as energy supplies are reduced, labor produc- tivity and the economy's potential output associated with a fully employed labor force will be lowered, with the amount of the reduction dependent on the adaptability of the capital stock to less energy-intensive production methods. (7) In the face of the less favorable set of inflation and output choices, and of uncertainty about how the economic responses would evolve--especially should the higher oil prices persist--one approach might be to try to limit the odds of either a cumulating shortfall of -8- output or a sustained acceleration in inflation. This objective would be fostered by maintaining growth of nominal spending along the path previously thought consistent with policy objectives. self-correcting characteristics over time. This strategy has For example, a large increase in prices would necessarily involve an offsetting sizeable shortfall in output, and the resulting slack in the economy would over time counter any tendency for inflation to accelerate; the deceleration of inflation in turn implies a strengthening in the rate of change of output, ultimately limiting its shortfall, as nominal income growth is maintained. As it happens, simulations of the staff's large-scale macro model suggest that nominal GNP can be maintained along its baseline path by following essentially the same monetary policy as in the absence of the oil price shock. To a first approximation, the same path for short-term interest rates in the face of a $10 per barrel increase in the price of oil would lower real output 1 percent after a year and raise the GNP deflator 1 percent (though the increase in the CPI would be appreciably greater). With the same pattern of nominal GNP and opportunity costs, the public's demand for M2 also would be unaltered. (8) Should the Committee wish to place more weight on countering risks of recession, seeking to ensure continued moderate economic growth, it could run an easier policy than otherwise. Such a policy would accept not only a once-and-for-all increase in the price level associated with higher oil prices but also the risk of some ratcheting up of inflation expectations and inflation itself for an extended period. On the other hand, if the Committee saw greater risks of a substantial pickup in inflation or attached more importance to avoiding significant deviations from a path toward price stability, a tighter policy than otherwise would be appropriate. Under this policy, economic slack would be greater, especially in the near term, but this would establish a downtrend in the inflation rate sooner. These alternatives would be most relevant should oil prices be expected to persist at their current high levels, or to go higher. A sense that oil price increases might reverse fairly soon would argue for tempering any such policy response to the oil shock. (9) The three short-run monetary policy alternatives presented below embody unchanged, decreased, and increased pressures in the reserve market. Under alternative B, federal funds would continue to trade around 8 percent in association with an initial specification for adjustment plus seasonal borrowing at the discount window of $500 million. Under alterna- tive A, the drop in the federal funds rate to 7-1/2 percent would accompany a reduction in borrowed reserves to roughly $450 million, while the 8-1/2 percent federal funds rate under alternative C would correspond to about $550 million in borrowing. With adjustment borrowing likely to remain subdued, as generally has been the case this year, and with seasonal borrowing anticipated to begin its normal annual downtrend later in the intermeeting period, technical reductions in the borrowing specification may be needed to keep the federal funds rate around its intended trading area under each of the alternatives. (10) Projected growth rates for the monetary aggregates associated with the alternatives are indicated in the table below. and charts on the following pages show more detailed data.) (The table -10- Alt. A Alt. B Alt. C 4-1/2 2-3/4 4-1/2 4 2-1/2 4 3-1/2 2-1/4 3-1/2 4-1/4 2 4-1/4 4 1-3/4 4 4 1-3/4 4 5-1/2 to 9-1/2 6 to 10 6-1/2 to 10-1/2 Growth from June to September M2 M3 M1 Growth from Q4'89 to September M2 M3 M1 Associated federal funds rate ranges Market participants no longer seem to be expecting a near- (11) term easing in policy, and short-term rates would be unlikely to move substantially on balance with federal funds remaining near 8 percent under alternative B. Absent a significant change in oil prices, long-term interest rates may stay around recent elevated levels. Scope for a rally in bond markets seems to exist should a budget accord involving significant deficit reduction be reached after all, counter to current investor skepticism. The exchange value of the dollar would be unlikely to retrace much, if any, of its decline since the last Committee meeting. (12) M2 growth is expected to pick up in August and September to a 5-1/4 percent average rate, bringing its expansion from June to a 4 percent rate, 1 percentage point faster than the pace specified by the Committee at its last meeting. In addition to the special factors producing more rapid growth of OCDs and money market funds in August relative to July, the acceleration in M2 owes to the narrowing of opportunity costs Alternative Levels and Growth Rates for Key Monetary Aggregates M2 Levels in billions 1990 April May June July August September Monthly Growth Rates 1990 April M3 Ml Alt. A Alt. B Alt. C Alt. A Alt. B Alt. C Alt. A Alt. B Alt. C 3277.0 3270.6 3277.6 3277.0 3270.6 3277.6 3277.0 3270.6 3277.6 4072.3 4064.0 4066.7 4072.3 4064.0 4066.7 4072.3 4064.0 4066.7 807.3 805.4 809.4 807.3 805.4 809.4 807.3 805.4 809.4 3280.8 3297.2 3313.4 3280.8 3296.9 3309.3 3280.8 3296.6 3305.2 4068.5 4084.5 4093.9 4068.5 4084.1 4092.2 4068.5 4083.7 4090.5 809.2 814.1 818.4 809.2 814.0 817.4 809.2 813.9 816.4 2.3 2.3 2.3 1.2 1.2 1.2 3.7 3.7 3.7 -2.3 2.6 -2.3 2.6 -2.3 2.6 -2.4 0.8 -2.4 0.8 -2.4 0.8 -2.8 6.0 -2.8 6.0 -2.8 6.0 1.2 6.0 5.9 1.2 5.9 4.5 1.2 5.8 3.1 0.5 4.7 2.8 0.5 4.6 2.4 0.5 4.5 2.0 -0.3 7.3 6.3 -0.3 7.1 5.0 -0.3 6.9 3.7 6.9 7.1 6.3 2.8 2.7 6.9 7.1 6.3 2.8 2.5 6.9 7.1 6.3 2.8 2.3 4.0 2.0 2.9 0.7 1.4 4.0 2.0 2.9 0.7 1.4 4.0 2.0 2.9 0.7 1.3 1.8 5.1 4.8 3.5 3.2 1.8 5.1 4.8 3.5 3.0 1.8 5.1 4.8 3.5 2.9 Mar. 90 to June 90 June 90 to Sept 90 July 90 to Sept 90 0.9 4.4 6.0 0.9 3.9 5.2 0.9 3.4 4.5 -0.2 2.7 3.8 -0.2 2.5 3.5 -0.2 2.3 3.3 2.3 4.5 6.9 2.3 4.0 6.1 2.3 3.5 5.4 Q4 89 to Q2 90 4.6 4.6 4.6 1.8 1.8 1.8 4.2 4.2 4.2 Q4 89 to Q3 90 4.0 3.9 3.9 1.7 1.7 1.6 3.9 3.8 3.8 Q4 89 to July 90 Q4 89 to Aug. 90 3.7 4.0 3.7 4.0 3.7 4.0 1.4 1.8 1.4 1.7 1.4 1.7 3.5 3.9 3.5 3.9 3.5 3.9 Q4 89 to Sept 90 4.2 4.0 3.9 1.9 1.8 1.8 4.2 4.0 3.9 May June July August September Quarterly Ave. Growth Rates 1989 Q3 Q4 1990 Q1 Q2 Q3 1990 Target Ranges: 3.0 to 7.0 1.0 to 5.0 Chart 1 ACTUAL AND TARGETED M2 Billions of dollars -- Actual Level * Short-Run Alternatives 7% - 3450 -1 3400 9' - 3350 -- 3300 -1 3250 - 3150 ^'' I O N 1989 3200 a I IS I D J a a F I M A M I I J J 1990 I I I I I I I A i S I I I I O N 3100 D Chart 2 ACTUAL AND TARGETED M3 Billions of dollars S Actual Level * Short-Run Alternatives 4250 4200 4150 4100 --'' 4050 4000 V 3950 O N 1989 D J F M A M J J 1990 A S O N D Chart 3 M1 Billions of dollars - n -Actual Level ------ Growth From Fourth Quarter * Short-Run Alternatives 875 .' 10% -1 850 4. p I -1 825 I -p p p I 4. 4. .4 II O I N 1989 I D I I i J I F I I M I I A I I I M I I J I I J 1990 I I A I I I I S O - 800 -- 775 I I N D Chart 4 DEBT Billions of dollars 10750 Actual Level * Projected Level -- 10500 10250 -- 10000 -1 9750 O N 1989 I I I' D J I F I M I A I M I I J J 1990 I A I S I I O N 9500 D -12- over recent months. Even so, weak credit growth at depository institu- tions is likely to continue to foster lower offering rates on small time deposits and restrain growth of core deposits. Later in the quarter, the RTC is expected to undertake a spate of resolutions, and the renewal of transfers of deposits to banks should result in additional abrogations of brokered deposit contracts and more downward pressure on offering rates. Quarterly average growth of M2 would be held to only 2-1/2 percent, and M2 velocity this quarter would increase at a 3 percent rate, the same as in the second quarter; the increases in velocity in both quarters are about 2-1/2 percentage points larger than projected by M2 demand models.4 (13) Under alternative B, M3 over August and September is pro- jected to expand at a 3-1/2 percent average rate, implying growth of 2-1/2 percent from June to September. The pickup in M3 does not reflect a pro- jected acceleration in credit at depository institutions. Rather, it re- flects some strength in elements of this aggregate that are not direct funding sources to such institutions--money market mutual funds and termEurodollar deposits.5 Bank lending is projected to stay subdued as banks continue to exercise extra caution in extending credit, while thrift balance sheets will shrink further, especially as RTC activities pick up over the balance of the quarter. Even so, the debt of nonfederal sectors 4. The somewhat stronger incoming data for M2, including revisions to past months, have led the staff to revise its projection for M2 growth consistent with the greenbook forecast to 4 percent for 1990, from 3-1/2 percent in the last bluebook. Nominal GNP growth for 1990 is now expected to be lower than in the previous greenbook, but its effects on M2 demand are about offset by the slight reduction in short-term nominal interest rates and opportunity costs. 5. Data revisions, along with faster money fund inflows, have led to an upward revision to projected M3 growth for 1990--from 1-1/2 to 2 percent. -13- is projected to continue to grow at a 6 percent rate over the third quarter, about in line with nominal income. Federal debt growth, on the other hand, is expected to balloon to a 14 percent annual rate over the three months, as RTC working capital needs boost federal marketable borrowing to a record $68 billion level (n.s.a.). Total domestic non- financial debt growth as a consequence is projected at 7-3/4 percent over the three months, keeping this aggregate around the midpoint of its annual range. The easing of reserve market conditions under alternative A (14) would engender a like-sized decline in short-term interest rates. response of long-term interest rates to an easing is unclear. The If incoming information suggests sluggish economic growth or tighter credit conditions, inflation concerns may not be heightened further by the policy easing, and bond yields would fall. However, especially in the context of the oil price shock, if the easing were interpreted as signalling greater concern by the FOMC with maintaining output growth than with containing inflation, the decline in the dollar could be particularly sharp, and bond yields could rise. M2, and to a lesser extent M3, would be a bit stronger under alternative A than with an unchanged funds rate; the staff projects growth rates from June to September of 4-1/2 percent for M2 and 2-3/4 percent for M3. (15) Under alternative C, a considerable backup in short-term rates would appear likely, as a monetary policy tightening would fly in the face of market expectations. Long-term rates might rise only a little, as the increase in real interest rates would be at least partly -14- offset by a lessening in inflation expectations. The moderation in inflation expectations would accompany a further downward adjustment of market participants' outlook for real economic activity--as the effects of higher real rates were reinforced by an even more cautious attitude of lenders--and evidence that the Federal Reserve was leaning against the price effects of the oil shock. The dollar could find renewed strength on foreign exchange markets as interest differentials moved in favor of dollar investments. M2 and M3 growth over the third quarter would be restrained to 3-1/2 and 2-1/4 percent, respectively. -15- Directive Language (16) Draft language for the operational paragraph, including the usual options, 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 progress toward price stability, 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 June through September at annual rates of about and 1] percent respectively. ___ AND ____3 [DEL: 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 TO federal funds rate persistently outside a range of ____ ____ 610] [DEL: to percent. August 20, 1990 SELECTED INTEREST RATES (percent) I ShortTerm S CDs federal funds _ 1 I_ S .. Treasury bills secondary market onh2 1-aa nth 3 secondary I marketl | 4 L 5 ) Long Term money comm paper market mutual -. monh und 6 7 I corporate bank prime jloan . 8 US government constant malurtly yields 3-ym 9 vear _Buye 30-vea 1 10 I 11 conventional home mortgages A ulliy J municipal I secondary I markel recently Bond oeed 12 Illxd 13 I latle 1 primary market lied aIe | 15 89 -- High Low 9.95 8.38 9.04 7.54 8.96 7.15 10.23 8.24 9.19 7.87 11.50 10.50 9.77 7.60 9.46 7.78 9.26 7.85 10.47 9.26 7.95 7.19 11.73 9,92 11.22 9.68 90 -- High Low 8.33 8.03 7.96 7.35 7.97 7.16 8.58 7.86 8.06 7.49 10.50 10.00 9.09 7.90 9.07 7.94 9.03 8.00 10.34 9.55 7.79 7.33 1099 1007 10.67 9.80 8.64 8.78 8.60 8.39 8.32 8.67 8.60 8.56 8.33 8.22 10.50 10.50 10.50 I 10.50 10.50 1 8.13 8.25 8.02 7.80 7.77 8.11 8.19 8.01 7.87 7.84 8.12 8.15 8.00 7.90 7.90 9.55 9.55 9.39 9.28 9.36 7.36 7.52 7.48 7.39 7.31 1038 1044 1019 1006 10,06 9.99 10.13 9.95 9.77 9.74 Monthly Aug Sep Oct Nov Dec 89 89 89 89 89 8.99 9.02 8.84 8.55 8.45 7.90 7.75 7.64 7.63 7.61 7.65 7.45 7.25 7.21 Jan Feb Mar Apr May Jun Jul 90 90 90 90 90 90 90 8.23 8.24 8.28 8.26 8.18 8.29 8.15 7.64 7.74 7.90 7.77 7.74 7.73 7.62 7.38 7.55 7.76 7.80 7.73 7.53 7.40 8.16 8.22 8.35 8.42 8.35 8.23 8.10 8.05 7.94 7.95 7.99 7.98 7.96 7.64 10.11 10.00 10.00 10.00 10.00 10.00 10.00 1 8.13 8.39 8.63 8.78 8.69 8.40 8.26 8.21 8.47 8.59 8.79 8.76 8.48 8.47 8.26 8.50 8.56 8.76 8.73 8.46 8.50 9.63 9.84 9.92 10.09 10.04 9.85 9.96 7.43 7.52 7.53 7.62 7.59 7.47 7.40 1030 1049 10.61 1075 1068 10.37 10.26 990 10.20 10.27 10.37 10.48 10.16 10.04 Weekly May 2 90 May 9 90 May 16 90 May 23 90 May 30 90 8.12 8.20 8.16 8.22 8.19 7.84 7.80 7.66 7.71 7.74 7.97 7.84 7.66 7.67 7.64 8.58 8.45 8.29 8.30 8.27 7.66 7.66 7.70 7.70 7.68 10.00 10.00 10.00 10.00 10.00 9.09 8.83 8.60 8.62 8.56 9.07 8.89 8.68 8.69 8.65 9.03 8.88 8.66 8.65 8.63 10.16 10.02 10.02 9.98 9.87 7.79 7.66 7.51 7.49 7.50 10.80 1063 10.68 10.60 10.36 10.67 10.54 10.37 10.33 10.29 Jun 6 Jun 13 Jun 20 Jun 27 90 90 90 90 8.26 8.30 8.28 8.28 7.71 7.71 7.70 7.78 7.54 7.51 7.53 7.59 8.22 8.23 8.22 8.26 7.66 7.65 7.66 7.66 10.00 10.00 10.00 10.00 8.41 8.38 8.40 8.45 8.48 8.46 8.48 8.54 8.47 8.43 8.45 8.51 9.78 9.83 9.89 9.92 7.49 7.46 7.43 7.48 10.34 1037 10.43 10.33 10.10 10.12 10.16 10.15 Jul Jul Jul Jul 90 90 90 90 8.33 8.28 8.14 8.05 7.73 7.76 7.61 7.53 7.49 7.58 7.37 7.33 8.25 8.25 8.12 8.00 7.67 7.65 7.65 7.59 10.00 10.00 10.00 10.00 8.32 8.42 8.26 8.21 8.43 8.53 8.47 8.50 8.42 8.52 8.49 8.56 10.00 9.94 9.99 9.94 7.43 7.40 7.40 7.38 10.36 10.28 10.23 10.18 10.06 10.11 9.99 9.98 Aug 1 90 Aug 8 90 Aug 15 90 8.03 8.07 8.13 7.50 7.35 7.42 7.24 7.16 7.17 7.93 7.86 7.89 7.55 7.49 7.49 10.00 10.00 10.00 8.09 8.10 8.10 8.38 8.62 8.67 844 8.71 8.78 10.07 10.22 10.34 7.33 7.51 7.53 10.07 1037 10 46 9.84 10.08 10.05 8.05 8.44 8 .10p 7.40 7.48 7.47 7.16 7.29 7.29 7.89 7.98 8.06 10.00 10.00 10.00 8.12 8.23 8.27 p 8.68 8.76 8.80 p 8.79 8.91 8.95 p 4 11 18 25 Daily Aug 10 90 Aug 16 90 Aug 17 90 7.69 7.30 7.43 7.43 7.97 8.03 8.10 ARM | 16 NOTE Weekly data for columns 1 through I1 are statement week averages Data In column 7 are taken from Donoghues Money Fund Repon Columns 12 13 and 14 are I -day quotes forFriday Thursday or Friday respectvely following Ihe end ofthe statement week. Column 13 is theBond Buyer revenue Index Column 14 is the FNMA purchase yield. plus loan servicing fee on 30- day mandatory delivery commitments Column 15 Is the average contract rate on nev commrtments for fxed-rate mongages(FRMs with 80 percent loan -tovalue ratios at major Institullonal lenders Column 16 is the average Initial contract rate on new commntents o 1-year adjustable rate monrgagesARMs) at major nslltutional lenders offering both FRMs and ARMs with the same number ofdiscouni points p -- prelUmnary data Strictly Confidential (FR) Money and Credit Aggregate Measures Class II Seasonally adjusted AUG. Mi Period M2 nontranmactlons components In M3 only 4 1990 Domestic nonfinancial debt' Bank credit Money stock measures end liquid asets 20, L total loah and U.S. government' other' total' 5 6 Investments 7 8 9 10 M3 1 2 in M2 3 6.3 4.3 0.6 4.3 5.2 4.6 3.6 5.5 5.9 12.0 10.6 -1.2 5.8 6.3 3.3 5.5 7.1 4.7 7.9 7.7 7.2 9.0 8.0 7.4 10.2 9.4 8.3 9.9 9.1 8.1 QUARTERLY AVERAGE 1989-3rd QTR. 1989-4th QTR. 1990-1st QTR. 1990-2nd QTR. 1.8 5.1 4.8 3.5 6.9 7.1 6.3 2.8 8.7 7.7 6.8 2.6 -6.5 -16.5 -10.6 -7.6 4.0 2.0 2.9 0.7 4.5 3.2 3.1 1.6 7.0 7.7 5.0 6.2 4.6 9.5 8.1 10.2 8.1 7.8 6.4 5.5 7.3 8.2 6.8 6.6 MONTHLY 1989-JULY AUG. SEP. OCT. NOV. DEC. 8.4 2.0 3.8 8.0 2.0 8.2 9.8 7.6 6.4 6.9 7.3 7.6 10.4 9.5 7.1 6.7 9.0 7.5 -3.7 -19.8 -22.3 -19.3 -9.0 -10.1 6.8 1.6 0.2 1.4 3.9 4.0 6.5 3.7 1.7 2.5 4.1 5.8 7.9 7.1 5.5 11.4 7.4 1.8 -0.1 9.1 10.9 9.5 11.0 3.6 8.4 7.7 5.9 8.5 9.2 6.1 6.5 8.1 7.1 8.7 9.6 5.6 0.0 10.0 5.1 3.7 -2.8 6.0 -0.3 3.5 9.1 5.6 2.3 -2.3 2.6 1.2 4.6 8.7 5.8 1.8 -2.1 1.5 1.7 -8.0 -13.1 -16.2 -3.6 -2.9 -6.7 -2.1 1.2 4.6 1.3 1.2 -2.4 0.8 0.5 0.7 2.6 4.8 3.0 -6.2 6.0 2.7 8.4 9.2 5.1 3.3 7.1 5.9 5.4 11.3 14.9 7.7 6.6 13.5 5.9 6.4 5.1 5.5 5.3 5.5 5.8 7.5 7.4 6.0 5.6 7.4 804.8 807.3 805.4 809.4 809.2 3270.6 3277.0 3270.6 3277.6 3280.8 2465.8 2469.6 2465.2 2468.2 2471.6 797.7 795.3 793.4 789.0 787.6 4068.3 4072.3 4064.0 4066.7 4068.5 4914.9 4927.1 4901.6 4926.1 2623.8 2635.0 2642.2 2657.9 2670.9 2325.9 2340.9 2353.8 2380.2 7621.2 7656.2 7690.0 7725.2 9947.1 9997.1 10043.8 10105.4 2 9 16 23 30 p 817.7 810.3 807.7 807.6 809.2 3285.4 3283.0 3282.8 3278.0 3278.1 2467.8 2472.7 2475.0 2470.3 2468.9 783.1 788.2 782.5 790.5 790.4 4068.5 4071.2 4065.3 4068.5 4068.6 6 p 813.0 3289.2 2476.2 789.2 4078.4 INN. GROWTH RATES 1%) : ANNUALLY (Q4 TO Q4) 1987 1988 1989 1990-JAN. FEB. MAR. APR. MAY JUNE JULY p LEVELS ($BILLIONS) MONTHLY 1990-MAR. APR. MAY JUNE JULY p MEEKLY 1990-JULY AUG. 1. : Debt data are on a monthly average basis, derived by averaging end-of-month levels of adjacent months, discontinuities. p-preliminary pe-preliminary estimate and have been adjusted to remove Strictly Confidential (FR)Class II FOMC Components of Money Stock and Related Measures seasonally adjusted unless otherwise noted Small . Period Currency Demand deposits checkable deposits RPs and Eurodollars MMDAs Savings deposits NSA' Large Savings bonds term Treasury Commercial paper' nation time general purpose Institu' tions nation time Term RPs Term Eurodollars deposits' and broker/ dealer' 8 only deposits' NSA' NSA' 9 10 ItI 12 13 14 15 accpances securities 87.6 83.3 76.1 529.3 504.9 479.9 416.2 428.2 407.7 903.6 1021.6 1138.9 220.5 237.5 308.0 87.2 86,7 101.5 482.3 538.0 560.7 107.4 123.2 105.1 92.4 102.7 80.4 99.8 108.8 116.8 261.9 267.0 322.3 258.4 326.2 349.7 44.5 40.7 40.6 274.5 276.0 278.4 81.0 463.9 468.2 471.9 403.3 404.0 405.5 1122.4 1130.0 1132.6 277.7 287.8 295.9 99.0 101.4 101.6 574.7 124.1 117.6 113.9 91.8 89.8 85.6 114.3 115.0 115.7 297.2 300.3 311.5 349.5 354.3 350.3 41.9 42.6 41.0 280.0 278.8 279.7 280.8 282.8 285.7 75.7 75.3 475.3 480.8 483.7 406.1 407.9 409.0 1135.9 1138.5 1142.3 302.7 309.0 312.4 101.1 101.1 102.3 562.7 561.0 77.4 558.3 109.6 108.9 96.9 80.2 79.5 81.4 116.2 116.8 117.5 317.6 318.8 330.6 350.0 351.3 347.9 40.0 40.5 41.2 224.6 226.6 228.4 277.3 280.2 279.3 285.4 287.0 289.5 81.9 82.8 82.4 485.0 489.4 494.9 410.2 413.6 414.6 1143.0 1142.6 1146.4 318.1 325.0 103.2 103.7 105.4 554.2 549.6 543.6 93.6 96.9 95.2 74.4 68.8 67.0 117.7 118.2 119.1 334.3 330.2 347.7 343.3 344.7 342.7 40.7 38.3 37.0 APR. MAY JUNE 230.1 231.6 233.4 277.8 274.5 274.5 291.8 291.5 293.8 79.8 83.7 82.0 498.8 500.0 501.2 415.8 415.0 415.8 1147.7 1149.0 1147.1 324.8 319.4 321.0 106.8 107.3 107.3 537.7 534.7 531.9 94.8 95.6 98.4 65.9 67.6 64.4 119.9 120.7 121.5 341.7 331.7 352.3 357.5 349.9 351.4 35.7 35.2 34.3 JULY p 235.4 274.8 291.2 82.0 502.4 416.2 1148.4 324.1 108.9 530.2 96.9 63.0 3 195.0 210.7 220.8 291.5 287.6 279.5 260.5 280.4 283.1 MONTHLY 1989-JULY AUG. SEP. 217.8 218.6 219.3 279.6 278.5 278.1 OCT. NOV. DEC. 220.0 220.4 221.9 1990-JAN. FEB. MAR. 78.5 75.2 7 1990 6 2 1. 2. 3. 4. Money market 20, 5 1 LEVELS I$BILLIONS) : ANNUALLY (4TH QTR.) 1987 1988 1989 4 AUG. 324.5 570.5 565.6 Net of money market mutual fund holdings of these items. Includes retail repurchase agreements. All IRA and Keogh accounts at commercial banks and thrift institutions are subtracted from small Excludes IRA and Keogh accounts. Net of.large denomination time deposits held by money market mutual funds and thrift institutions. p-preliminary 16 time deposits. STRI'.TLY CONFIDENTIAL (FR) CLASS II-FOMC ET CRUnGS IN g8Tra KDIMS or saCRITIES1 Millions of dollars, not seasonally adjusted August 20, 1990 Treasury bills Treasury coupon.s tont Period 2Nt 1 purchases uduMptions (-) Net change within 1-year | epupurchases p 5-10 1-5 1984 1985 1986 1987 1988 1989 11,479 18,096 20,099 12,933 7,635 1,466 7,700 3,500 1,000 9,029 2,200 12,730 3,779 14,596 19,099 3,905 5,435 -11,264 1989--01 Q2 Q3 04 -3,842 2,496 -6,450 9,263 2,200 2,400 3,200 4,930 -6,042 96 -9,650 4,333 -228 1,361 -163 -24 1990--01 02 -3,799 10,892 1,400 -5,199 10,892 1989--October Novaeber December -1,414 -8,794 -1,883 1,400 3,530 -2,814 5,264 1,883 1990--January February March April May June July -1,065 -3,277 543 5,796 3,365 1,732 287 1,000 400 0 0 June 6 13 20 27 3,593 11 1,080 413 July 4 11 18 25 ovr 10 Net change - outright holdins total Nat BPs 1,450 3,001 10,033 -11,033 1,557 -1,683 -248 2,104 -172 -369 -6,477 2,075 -9,921 3,934 -5,591 924 -893 3,877 100 100 200 150 -4,999 10,964 -4,061 509 -24 -524 155 -3,368 5,419 -1,883 463 -453 3,867 -2,065 -3,677 543 5,796 3,365 1,732 287 -2,065 -3,677 742 5,818 3,533 1,782 254 8,435 4,417 -43 -1,260 -378 2,146 2,863 3,593 11 1,080 413 278 11 1,080 413 2,234 -408 -1,921 1,464 68 65 -715 68 33 -321 4,727 -4,620 2,483 201 624 486 203 3,997 -2,210 113.8 - Net change agencies rdemptions (-) 6,964 18,619 20,178 20,994 14,513 -10,391 1,938 2,185 893 9,779 4,686 946 236 358 236 2,441 1,404 258 284 August 1 8 15 Memo: lEL (bil.$) August 15 Fedral 3,440 4,185 1,476 17,366 9,665 1,315 826 1,349 190 3,358 2,177 327 441 293 158 1,858 1,398 284 ) ton Redemptions (-) 25.4 - 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, short-term notes acquired in exchange for maturing bills. maturity shifts and rollovers of maturing coupon issues. Excludes 59.5 13.2 24.5 122.5 24.3 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 101 total Aug. 15 2.4 2.8 I 1.1 I 0.2 1 6.4 

Federal Reserve (1990, August 20). Bluebook. Bluebooks, Federal Reserve. https://whenthefedspeaks.com/doc/bluebook_19900821

@misc{wtfs_bluebook_19900821,
  author = {Federal Reserve},
  title = {Bluebook},
  year = {1990},
  month = {Aug},
  howpublished = {Bluebooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/bluebook_19900821},
  note = {Retrieved via When the Fed Speaks corpus}
}