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. September 28, 1990 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 September 28, 1990 MONETARY POLICY ALTERNATIVES Recent Developments (1) Open market operations since the last Committee meeting have continued to be directed toward maintaining unchanged pressures on reserve conditions, with the expectation that federal funds would trade around 8 percent. In the three maintenance periods completed since then, federal funds traded generally in that area, although the rate spiked well above that level late on the last day of each of these periods. On two of those days, the Desk refrained from meeting projected reserve needs because federal funds were trading below 8 percent and markets were looking for signs of an easing of policy; the third instance arose from an unexpected shortfall in reserves. Largely reflecting the resulting heavy borrowing on those days, adjustment plus seasonal borrowing over the intermeeting period has averaged appreciably above the path of $500 million.1 So far in the current maintenance period, federal funds generally have traded somewhat above 8 percent. Pressures apparently arose from positioning in advance of the quarter-end statement date interacting with emerging cautious reserve management policies by money center banks worried about potential funding difficulties in the wake of heightened market concerns about bank soundness. 1. Actual borrowing in the three maintenance periods that ended in the intermeeting period was: $1,086 million (period ending August 22); $631 million (period ending September 5); and $700 million (period ending Borrowing is averaging $508 million thus far in the September 19). current maintenance period. (2) Concerns about the condition of banks intensified in recent days after reports of large losses and dividend reductions at several institutions and continued indications of a weak outlook for real estate markets and the economy more generally. Shifting perceptions of risk were reflected in a sharp increase over the intermeeting period in spreads between Treasury securities and private instruments in short-term markets, with Treasury bill yields falling as many as 40 basis points while returns on commercial paper and CDs rose about 1/8 percentage point. In addition, spreads on the longer-term debt of money center banks widened considerably, and share prices of these banks fell about 18 percent on average. Treasury bond yields moved higher on balance through most of the intermeeting period, tracking oil prices, whose increase was seen as leading to higher inflation. In the last few days, however, Treasury bond yields have retraced that rise amid optimism about the budget negotiations and concerns about financial fragility. Investment-grade corporate bonds were little changed on balance over the period, but with higher oil prices also presaging a sluggish real economy, spreads on below-investment-grade bonds widened significantly and broad stock price indexes moved down more than 5 percent. (3) The dollar has shown little net change on a weighted average basis, remaining near the lower levels reached by the last FOMC meeting. The dollar has declined by 5-1/2 percent against the yen since that meeting as Japanese short- and long-term rates rose by 35 and 50 basis points, respectively, in response to a tightening of monetary policy and to indications of continued robust economic growth. However, the dollar appreciated against sterling, which eased off when it became clear that, contrary to expectations, the United Kingdom was not going to enter the exchange rate mechanism of the EMS in September, and against the Canadian dollar, where an easing in monetary policy brought short-term rates down by one-half percentage point. On average, short-term interest rates abroad were about unchanged, while long-term rates rose by 20 basis points. (4) M2 accelerated in August to a 6-1/2 percent rate and is estimated to have about maintained that pace in September. As a result, M2 expansion in the June-to-September period has been about 1 percentage point above the 4 percent rate expected by the Committee, though remaining a little below the midpoint of its annual range. The recent strength of M2 seems attributable largely to the uncertainty engendered by the invasion of Kuwait and the consequent spike in oil prices. M2 received its greatest boost from a surge in money market mutual funds, as investors apparently switched out of the stock and bond markets. In addition, cur- rency growth surged in August and remained at a high level in September as demands from the Middle East were added to already strong flows to South America.2 By contrast, the retail deposit component of M2 has strength- ened relatively little in recent months, increasing at only a 2-1/2 percent rate over August and September. 2. With demand deposits also strong, M1 expanded in August and September at rates of 10-1/2 and 8-3/4 percent, respectively. The monetary base rose at double-digit rates in both months. (5) The strength of M2 showed through to M3. There was a pause through early September in RTC activity and its associated damping effects on M3; this aggregate was bolstered as well by considerable inflows to M3type money funds. The pickup in M3 growth was restrained, however, by large increases in government balances at banks. Some of these deposits were used to reduce managed liabilities, although a large share of them seemed to have funded lending to government securities dealers. M3 growth over August and September averaged 3-1/2 percent, about in line with the Committee's expectations, bringing expansion thus far this year to around 2 percent. (6) Growth of private credit likely has remained subdued in the last couple of months, reflecting both weak demand and adverse supply conditions. In bond markets, issuance by businesses and states and municipalities has been discouraged by rising rates; markets have been particularly unreceptive to below-investment grade business borrowers, and quality spreads in tax-exempt markets also have widened. Postponed bond issuance by better-rated businesses has been reflected in strength in commercial paper, but non-merger-related business borrowing at banks continues to be very sluggish. Little credit seems to be available for com- mercial real estate, and slowing loan growth in this area has contributed to a moderation in total real estate lending. On the other hand, consumer loans adjusted for securitizations have picked up, expanding at an 8 percent pace in recent months. Federal government borrowing accelerated sharply in the third quarter, swollen by needs to finance expected RTC -5- expenditures, helping to maintain growth in total nonfinancial debt around the 7 percent middle of its annual range. -6MONEY, CREDIT, AND RESERVE AGGREGATES (Seasonally adjusted annual rates of growth) Sept. pe QIV'89 to Sept. pe July Aug. M1 -0.3 10.4 8.8 4.8 M2 1.7 6.6 6.4 4.4 M3 0.9 4.6 2.5 1.9 Domestic nonfinancial debt 7.5 9.1 n.a. 6.9 Bank credit 6.9 10.3 3.9 6.3 Nonborrowed reserves -7.1 2.2 7.2 -0.2 Total reserves -8.2 8.7 3.4 0.3 Monetary base 6.4 13.2 14.9 9.0 (Millions of dollars) Adjustment plus seasonal borrowing 477 799 615 Excess reserves 862 872 864 Money and credit aggregates Reserves measures Memo: 2 pe - Preliminary estimate. n.a. - Not available. 1. Through August. 2. Reserves data for September incorporate assumptions of $500 million of adjustment plus seasonal borrowing and $950 million of excess reserves for the maintenance period ending October 3. 3. 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 (7) Three policy alternatives are given below for consideration by the Committee. Under alternative B, federal funds would continue to trade around 8 percent. Under alternatives A and C, federal funds trading would center around 7-1/2 and 8-1/2 percent, respectively. In view of the decline in the demand for seasonal credit that typically occurs during the fall, borrowing under alternative B would initially be specified at $450 million, a reduction of $50 million from the current level, and the assumption probably would need to be lowered another $50 to $100 million over the intermeeting period. Under alternatives A and C, the initial specification for borrowing would be $400 million and $500 million, respectively. Desk operations over the intermeeting period may need to take account of continued cautious reserve management by banks concerned about potential funding difficulties; those banks may want to carry a larger cushion of excess reserves and would be especially eager to avoid being seen at the discount window. (8) Financial market conditions over the intermeeting period will depend not only on the course of monetary policy and the market response to the usual array of macroeconomic and price data, but also on developments in three important areas of particular uncertainty. The first is the situation in the Persian Gulf and its implications for oil prices. Other things equal, bond yields and oil prices probably will continue to tend to move together, as the effects on inflation prospects and perhaps uncertainty dominate the impact of opposite changes in real rates associated with economic activity. Major changes in the outlook in this area also may affect money growth and risk premiums by feeding back on demands for liquidity and safety. (9) Reports of progress in budget negotiations have already contributed to a bond market rally in recent days, and further price gains are likely to follow an agreement that implied a significant degree of fiscal restraint over several years. The reaction of the bond market may reflect expectations about the System's response as well, for market participants would expect a monetary policy easing to be forthcoming after such an accord. Thus, other short-term interest rates also are likely to drop, even before any decline in the federal funds rate. On the other hand, if the budget stalemate continued with a resulting sequester--or possibly a deferral of the Gramm-Rudman-Hollings process--uncertainty about the ultimate direction of fiscal policy would be prolonged, contributing to volatility in financial markets. The potential reversion of the debt ceiling to a lower level on October 3 is a further complicating factor, which would disrupt Treasury financing and contribute to market volatility. (10) Finally, there is some risk that concerns about the health of banking and other financial institutions could intensify. The rapidity and size of the drop in bank stock and debt prices suggest that considerable negative news about these institutions already has been discounted, and some of the market movement of recent days may reflect institutional investors' reluctance to hold bank paper over the quarter-end statement date. Still, markets remain skittish, and even in the absence of new information confidence could erode further. With funding sources even -9- more expensive and additional pressures on capital constraining asset growth, affected institutions would likely curtail credit further and raise the price and nonprice terms on loans. could be affected as well. Monetary growth patterns Should banks encounter increasing resistance in raising uninsured funds, they could take steps to secure more stable funding by bidding more aggressively for retail deposits, especially small time deposits. These actions would lead to higher growth of M2 for a time, but M3 growth would be depressed somewhat further as banks cut back on asset expansion. (11) It appears that the expectation of an immediate easing of monetary policy is no longer so prevalent in the markets, although some relaxation still seems to be anticipated over coming months, partly reflecting an expected budget accord. The market response to unchanged policy under alternative B will depend crucially on budget developments in coming days. Should an inadequate agreement appear to be in train, rates could reverse some of the declines of recent days, but there would be no effect from holding monetary policy unchanged. As noted above, however, a significant budget agreement would extend the recent market rally and engender expectations of near-term policy action. In this case, maintaining unchanged money market conditions for an extended period would disappoint these expectations and cause rates to back up. (12) Barring an immediate, credible agreement that had already reduced interest rates, the decline in the federal funds rate under alter- native A would be expected to show through in other money market interest rates. Private rates might drop a little more than those on Treasury -10- bills if the lower rates were seen as lessening financial stresses. With market participants generally viewing the economy as weak, some decline in bond yields may accompany this policy action. In the absence of a cred- ible budget agreement or a lessening of tensions in the Middle East, any bond market rally would be quite limited, however, if the easing raised questions about the System's commitment to containing inflation. The dollar could come under renewed downward pressure in response to the reduction in U.S. interest rates. (13) The tightening of monetary policy under alternative C would be seen under current circumstances as signalling an aggressive stance against the inflationary consequences of the oil shock. is not anticipated by market participants. Such a tightening Given concerns about financial fragility, yields on private obligations could rise significantly, while the increase in bill rates could be limited by greater demands for safe assets. Perceptions that the central bank would not permit inflation to rise permanently as a result of the oil shock would hold down any increase in yields on longer-term instruments. (14) Growth in the monetary aggregates expected under the three alternatives is presented in the table below, along with implied growth on a fourth-quarter to fourth-quarter basis. (Detailed data are presented on the table and charts on the following pages.) Under all three alterna- tives, growth of money over the final three months of the year is expected to be somewhat slower than in August and September. With regard to M2, both the increased demand for U.S. currency in the Middle East that developed in the wake of the invasion of Kuwait and the flight from capital -11- markets into money fund shares are assumed to diminish over the remainder of the year. In addition, the recent pickup of RTC activity is expected to restrain deposit growth in the near term, as occurred in similar circumstances at the end of the second quarter. Alt. A Alt. B Alt. C 5-1/2 2-1/2 8 4 2 6 2-1/2 1-1/2 4 4-1/2 2 5-1/4 4-1/2 2 5 4 2 4-3/4 5-1/2 to 9-1/2 6 to 10 6-1/2 to 10-1/2 Growth from Sept. to Dec. M2 M3 M1 Growth from Q4'89 to Q4'90 M2 M3 M1 Associated federal funds rate ranges (15) Under alternative B, with some reversal of recent declines in bill rates, opportunity costs are not expected to be a significant influence on M2 growth over the next few months. Still, velocity would decline at a 2 percent annual rate since the 4 percent growth of M2 from September to December under this alternative would imply quarterly average growth of 4-3/4 percent. Money demand is not expected to react much over coming months to the sharp decline in nominal GNP growth in the fourth quarter; such a decline would not be seen as indicative of the behavior of permanent income, and nominal consumption spending is expected to remain strong. Under alternative A, the drop in opportunity costs would boost 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 3283.7 3301.8 3319.3 3283.7 3301.8 3319.3 3283.7 3301.8 3319.3 4072.3 4087.8 4096.2 4072.3 4087.8 4096.2 4072.3 4087.8 4096.2 809.2 816.2 822.2 809.2 816.2 822.2 809.2 816.2 822.2 3332.5 3348.1 3365.0 3330.3 3341.4 3352.5 3328.1 3334.7 3340.0 4104.4 4113.3 4122.9 4103.4 4110.6 4117.8 4102.4 4107.9 4112.7 827.7 832.9 838.5 827.0 830.8 834.4 826.3 828.7 830.3 1.7 6.6 6.4 1.7 6.6 6.4 1.7 6.6 6.4 0.9 4.6 2.5 0.9 4.6 2.5 0.9 4.6 2.5 -0.3 10.4 8.8 -0.3 10.4 8.8 -0.3 10.4 8.8 4.8 5.6 6.1 4.0 4.0 4.0 3.2 2.4 1.9 2.4 2.6 2.8 2.1 2.1 2.1 1.8 1.6 1.4 8.0 7.5 8.1 7.0 5.5 5.2 6.0 3.5 2.3 Quarterly Ave. Growth Rates 7.1 1989 Q4 6.4 1990 Q1 2.9 Q2 Q3 3.1 Q4 5.7 7.1 6.4 2.9 3.1 4.8 7.1 6.4 2.9 3.1 4.0 2.0 3.0 0.8 1.6 2.8 2.0 3.0 0.8 1.6 2.5 2.0 3.0 0.8 1.6 2.2 5.1 4.8 3.5 4.2 8.4 5.1 4.8 3.5 4.2 7.3 5.1 4.8 3.5 4.2 6.1 June 90 to Sept 90 Sept 90 to Dec. 90 4.9 5.5 4.9 4.0 4.9 2.5 2.7 2.6 2.7 2.1 2.7 1.6 6.3 7.9 6.3 5.9 6.3 3.9 Q4 Q4 Q4 Q4 Q4 Q4 4.7 4.2 4.6 4.2 4.4 4.7 4.7 4.2 4.4 4.2 4.4 4.4 4.7 4.2 4.1 4.2 4.4 4.0 1.9 1.8 2.0 1.9 1.9 2.1 1.9 1.8 2.0 1.9 1.9 2.0 1.9 1.8 1.9 1.9 1.9 1.9 4.2 4.2 5.3 4.3 4.8 5.6 4.2 4.2 5.1 4.3 4.8 5.1 4.2 4.2 4.8 4.3 4.8 4.6 Levels in billions 1990 July August September October November December Monthly Growth Rates 1990 July August September October November December 89 89 89 89 89 89 to to to to to to Q2 90 Q3 90 Q4 90 Aug. 90 Sept 90 Dec. 90 1990 Target Ranges: 3.0 to 7.0 1.0 to 5.0 Chart 1 ACTUAL AND TARGETED M2 Billions of dollars - Actual Level 3450 * Short-Run Alternatives -4 3400 SB V V 3350 OC ^ -, o o . d ' °^ 3300 3250 3200 -4 3150 I O I D N 1989 I I J I F I M I A I M I J J 1990 I I A I S I O I N 3100 D J 1991 Chart 2 ACTUAL AND TARGETED M3 Billions of dollars 4275 Actual Level * Short-Run Alternatives -1 4225 4175 * ,-- «*s OA *B sC ' - 4125 - 4075 -- 4025 c 3975 I O I D N 1989 I I J I F I I M A I M I J J 1990 I I A I S I I O N I D 3925 J 1991 Chart 3 M1 Billions of dollars 10% 875 f' --Actual Level ------ Growth From Fourth Quarter * Short-Run Alternatives -4 850 I . r B -- I -4 800 V 0% -'---------------------------------- - I I I O I D N 1989 825 ^ II I I I , ,-' ,-' ,' S 5% I J I I F I M I A I I I I I I I I M J I I A J 1990 I I 1 t I I J D N O S 1991 I l i 775 Chart 4 DEBT Billions of dollars 10750 Actual Level - - - Estimated Level * Projected Level -/ , I ' I 10500 ,,oI -- 10250 -^ # S ## #S -H 10000 -4 9750 I I I I O D N 1989 I I J I F I M I A I M I J I A J 1990 I- I S I --- O I N 9500 D J 1991 -13- demand for M2, further depressing velocity. Velocity would still decline under alternative C, though by less as opportunity costs widened with the rise in short-term market interest rates. Under all three alternatives, M2 would end the year a little below the midpoint of its 1990 range. (16) The slower growth of M3 reflects both softer demands for credit at depositories owing to weaker economic activity in the near term and continued restraint on lending by banks and thrifts. Under alterna- tive B, M3 is projected to expand at a 2 percent rate over the Septemberto-December period, nearly a percentage point less than over the preceding three months. Although slightly faster or slower growth rates would be expected under alternatives A and C, under all three alternatives this aggregate would be appreciably above the lower bound of its annual range. (17) Overall, the pace of lending in the months ahead is expected to remain relatively slack. Credit supply constraints are likely to continue to have their major effect on commercial real estate. In the household sector, home mortgage borrowing is likely to remain damped by depressed housing activity, and consumer credit should decelerate with the decline in spending on consumer durables. Although small businesses and those below investment grade may feel the effects of intensifying problems of the banks, investment grade borrowers should retain ready access to funds. Nonetheless, corporations may continue to delay bond issuance until long-term interest rates decline, to some extent substituting commercial paper issuance. The financial condition of some state and local governments may limit access to markets, reducing borrowing. In contrast, -14- federal borrowing should remain heavy, even if there were to be a significant budget package, bolstered by RTC expenditures and the boost in the deficit engendered by the weak economy. The growth of total domestic nonfinancial debt is expected to fall to a 5-1/2 percent pace for the September-to-December period, bringing the increase over the year to about 6-1/2 percent on a fourth-quarter to fourth-quarter basis, near the middle of the 5 to 9 percent monitoring range for this aggregate. -15- Directive Language (18) 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 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, slightly (SOMEWHAT) greater reserve restraint (WOULD) might or (SLIGHTLY) somewhat lesser reserve restraint would (MIGHT) be acceptable in the intermeeting period. The contemplated reserve conditions are expected to be consistent with June through] growth of M2 and M3 over the period from [DEL: September THROUGH DECEMBER at annual rates of about ____ AND ____ [DEL: 4 and 2-1/2]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 persistently outside [DEL: 6 to 10]percent. TO ____ a range of ____ October 1, 1990 SELECTED INTEREST RATES (percent) hiaft lr II federal funds Treasury bills secondary market 3 -month I B-mantblI I i '---L-(-- I--~- L i .n...u..l CDs -ear I a (------iL-I-- | ... comm I secondary paper market 3 -month I -mnt II--LII L market mutual 7 I i ...... I money I i bank prime an ' - - L..--. - Scorporate I US govelnment constant maturity yields Lvear 10 year -I I I 1 ' 10 A utility I convenlional home mortgages municipal I ecenly Bond I secondary marke 30-yr 1 ' 11 ' 12 1 ' 13 1 ' id primary market 1 I I al _I1 I I A 1A 89-- High Low 9.95 8.38 9.04 7.54 10.23 8.24 9.98 8.35 9.19 7.87 11.50 1050 9.77 7.60 9.46 7.78 9.26 7.85 10.47 9.26 7.95 7.19 11.73 992 11.22 968 941 8.34 90-- Low 8.33 8.03 7.96 7.35 8.58 7.86 8.48 7.90 806 7.46 10.50 10.00 9.09 7.90 9.07 7.94 9.13 8.00 10.50 9.55 7.81 7.33 10.99 10.07 10.67 9.80 8.63 8.26 Monthly Sep Oct Nov Dec 89 89 89 89 9.02 8.84 8.55 8.45 7.75 7.64 7.69 7.63 8.78 8.60 8.39 8.32 8.87 8.66 8.47 8.61 8.60 8.56 8.33 8.22 10.50 10.50 10.50 10.50 8.25 8.02 7.80 7.77 8.19 8.01 7.87 7.84 8.15 8.00 7.90 7.90 9.55 9.39 9.28 9.36 7.52 7.48 7.39 7.31 10.44 10.19 10.06 10.06 10.13 9.95 9.77 9.74 8.71 8.62 8.51 8.39 Jan Feb Mar Apr May Jun Jul Aug 90 90 90 90 90 90 90 90 8.23 8.24 8.28 8.26 8.18 8.29 8.15 8.13 7.64 7.74 7.90 7.77 7.74 7.73 7.62 7.45 8.16 8.22 8.35 8.42 8.35 8.23 8.10 8.05 7.94 7.95 10.11 10.00 10.00 8.13 8.39 8.63 7.99 7.98 7.96 7.64 7.49 1000 10.00 10.00 10.00 10.00 8.78 7.97 8.20 8.22 8.32 8.32 8.24 8.21 8.09 7.99 8.69 8.40 8.26 8.22 8.21 8.47 8.59 8.79 8.76 8.48 8.47 8.75 8.26 8.50 8.56 8.76 8.73 8.46 8.50 8.86 9.63 9.84 9.92 10.09 10.04 9.85 9.96 10.29 7.43 7.52 7.53 7.62 7.59 7.47 7.40 7.57 10.30 10.49 10.61 10.75 10.68 10.37 10.26 10.41 990 10.20 10.27 10.37 10.48 10.16 10.04 10.10 8.39 8.46 853 8.55 8.59 850 8.43 8.35 8.26 8.30 8.28 8.28 7.71 7.71 7.70 7.78 8.22 8.23 8.22 8.26 8.16 8.19 8.21 8.24 7.66 7.65 7.66 7.66 1000 10.00 10.00 1000 8.41 8.38 8.40 8.45 8.48 8.46 8.48 854 8.47 8.43 8.45 8.51 9.78 9.83 9.89 9.92 7.49 7.46 743 748 10.34 10.37 10.43 10.33 1010 10.12 10.16 1015 850 850 8.50 845 90 90 90 90 8.33 8.28 8.14 8.05 7.73 7.76 7.61 7.53 8.25 8.25 8.12 8.00 8.25 7.67 7.65 765 7.59 10.00 10.00 10.00 10.00 8 32 8 42 8.26 8.21 843 8.53 8.47 8.50 8.42 8.52 8.49 8.56 10.00 9.94 9.99 9.94 7.43 740 7.40 7.38 10.36 10.28 10.23 10.18 10.06 1011 9.99 9.98 8.46 845 8.39 841 Aug 1 90 Aug 8 90 Aug 15 90 Aug 22 90 Aug 29 90 8.03 8.07 8.13 8.30 8.08 7.50 7.35 7.42 7.53 7.50 7.93 7.86 7.89 8.04 8.10 7.91 7.90 7.97 8.06 8.07 7.55 7.49 7.49 7.51 7.47 1000 10.00 10.00 10.00 10.00 8.09 8.10 8.10 8.30 8.41 8.38 8.62 8.67 8.82 8.95 8.44 8.71 8.78 8.95 9.06 10.07 10.22 10.34 10.50 10.31 7.33 7.51 7.53 7.80 7.70 10.07 10.37 10.46 10.71 10.46 9.84 10.08 10.05 10.29 10.24 8.38 8.39 8.31 8.36 8.30 Sep 5 90 Sep 12 90 Sep 19 90 Sep 26 90 8.25 8.12 8.18 8.26 7.40 7.40 7.37 7.36 7.97 7.96 8.00 8.21 7.98 7.99 8.06 8.21 7.47 7.47 7.46 7.47 10.00 10.00 10.00 10.00 8.27 8.25 8.22 8.35 8.87 8.83 8.87 8.99 9.00 8.96 9.02 9.13 10.23 10.28 10.35 10.25 7.68 7.64 7.73 7.81 10.42 10.41 1049 10.48 1019 10.13 10.16 10.22 8.29 8.26 8.30 8.28 Daily Sep 21 90 Sep 27 90 Sep 28 90 8.22 8.21 7.36 7.23 7.14 8.16 8.27 8.22 10.00 8.05p 8.18 8.27 8.18 8.31 8.28 8.20 p 8.99 8.91 8.82p 9.13 9.05 8.96 p High Weekly Jun 6 90 Jun 13 90 Jun 20 90 Jun 27 90 Jul Jul Jul Jul 4 11 18 25 7.33 7.23 7.17 7.24 7.20 7.17 8.24 8.10 7.99 1000 10.00 NOTE Weekly data for columns 1 through 11 re salemen week averges Data In column 7 are aken from Donoghues Money Fund Report Columns 12 13 and 14 are 1 day quotes for Friday Thursday or Frday. respectively following the end of the sumn wek Column 13 Is the Bond Buyer revenue Index Column 14 Is the FNMA purchase yield. plus loan servicing lee on 30-day mandaory dellvely commitments Column 15 Is the average contract ale on new commlmenls forllxed-ralemorgao(FRMs) whSO percenl loan-to value ratios at major Institutional lenders Column 1 Is the average Inlial contract rate on new commments for 1 year. adjustable rate morgages(ARMs) at major Insttutonal lenders ofering both FRMs and ARMs with the same number of discount points p - premlnmary dais Money and Credit Aggregate Measures Strictly Seasonally adjusted OCT. Money stock measures and liquid assets Period Ml M2 nontranmactiont components in M? 3 S2 in M3 only 4 _ Confidential (FR) Bank credit M3 L 5 6 total loans and Investments 1, 1990 Domestic nonfinancial debt U S government' other' total' 7 8 9 10 ANN. GROWTH RATES I() : ANNUALLY IQ4 TO 94) 1987 1988 1989 6.3 4.3 0.6 4.3 5.2 4.6 3.6 5.5 5.9 12.0 10.6 -1.3 5.8 6.3 3.3 5.5 7.1 4.7 7.9 7.8 7.5 9.0 8.0 7.4 10.0 9.5 7.8 9.7 9.2 7.7 QUARTERLY AVERAGE 1989-4th QTR. 1990-lst QTR. 1990-2nd QTR. 1990-3rd QTR. pe 5.1 4.8 3.5 41 7.1 6.4 2.9 3 7.7 7.0 2.6 2 -16.6 -10.2 -7.4 -4 2.0 3.0 0.8 1 3.2 3.2 1.4 8.1 5.3 6.5 10.2 6.8 9.5 6.4 5.9 5.9 7.3 6.1 6.8 MONTHLY 1989-SEP. OCT. NOV. DEC. 3.8 8.0 2.0 8.2 6.4 6.9 7.3 7.6 7.1 6.7 9.0 7.5 -22.4 -19.3 -9.2 -10.4 0.1 1.4 3.9 4.0 1.7 2.5 4.1 5.7 6.8 11.4 7.1 1.5 11.7 10.2 11.7 3.6 5.9 6.6 6.6 5.1 7.3 7.4 7.8 4.8 1990-JAN. FEB. MAR. APR. MAY JUNE JULY AUG. SEP. pe 0.0 10.0 5.1 3.7 -2.8 6.0 -0.3 10.4 9 3.7 9.2 5.7 2.3 -2.2 2.6 1.7 6.6 6 4.8 8.9 5.9 1.9 -2.0 1.5 2.4 5.3 6 -7.3 -12.5 -15.7 -3.8 -2.9 -6.0 -2.3 -3.8 -14 1.4 4.8 1.4 1.1 -2.4 0.9 0.9 4.6 3 0.9 2.9 4.9 2.9 -6.9 5.1 2.9 2.9 9.2 10.0 5.2 3.2 7.1 6.9 10.3 4.1 8.4 12.8 7.4 7.2 14.3 13.6 19.1 5.2 6.7 6.9 6.5 4.5 4.2 5.6 6.0 5.0 7.1 8.3 6.7 5.2 6.6 7.5 9.1 LEVELS ($BILLIONS) : MONTHLY 1990-APR. MAY JUNE JULY AUG. 807.3 805.4 809.4 809.2 816.2 3277.9 3271.8 3279.0 3283.7 3301.8 2470.6 2466.4 2469.5 2474.5 2485.5 796.0 794.1 790.1 788.6 786.1 4073.9 4065.9 4069.1 4072.3 4087.8 4928.6 4900.4 4921.3 4933.1 2646.7 2653.8 2669.4 2684.7 2707.8 2329.1 2343.0 2370.9 2397.8 2436.0 7681.5 7710.5 7737.8 7773.7 7812.6 6 13 20 27 813.0 815.1 818.3 815.7 3290.5 3298.2 3305.1 3303.5 2477.5 2483.2 2486.8 2487.8 790.8 785.7 782.2 786.6 4081.3 4083.9 4087.4 4090.1 3 10 p 17 p 820.0 820.7 820.7 3316.7 3317.7 3316.1 2496.7 2497.0 2495.4 784.7 779.9 777.6 4101.4 4097.6 4093.7 MEEKLY 1990-AUG. SEP. 1. 10010.6 10053.6 10108.7 10171.5 10248.6 Oebt 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)- F O MC Class II Components of Money Stock and Related Measures seasonally adjusted unless otherwise noted Small Period .__I LEVELS I(BILLIONSI : ANNUALLY (4TH QTR.) 1987 1988 1989 1__ t I 2 1 i -I : -1 denomi- Overnight RPs and Eurodollars NSA' I 4 nation time Savings deposits MMDAs deposits' I I I 5 - 6 1 7 Money market mutual funds general Institu. purpose tions and broker/ only dealer it 9 1, 1990 Large Shortterm Treasury securities denomi- Term nati6n time deposits' I 1 10 Savingt bonds Eurodollars NSA' 1 1 ii 195.0 210.7 220.8 291.5 287.6 279.5 260.5 280.4 283.1 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 86.7 101.5 482.3 538.0 560.7 107.4 123.2 105.1 218.6 219.3 278.5 278.1 276.0 278.4 78.5 75.2 468.2 471.9 404.0 405.5 1130.0 1132.6 287.8 295.9 101.4 101.6 570.5 565.6 OCT. NOV. DEC. 220.0 220.4 221.9 280.0 278.8 279.7 280.8 282.8 285.7 75.7 75.3 77.4 475.3 480.8 483.7 406.1 407.9 409.0 1135.9 1138.5 1142.3 302.7 309.0 312.4 101.1 101.1 102.3 1990-JAN. FEB. MAR. 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 1146.4 318.6 325.3 325.9 APR. MAY JUNE 230.1 231.6 233.4 277.8 274.5 274.5 291.8 291.5 293.8 79.8 83.9 82.5 498.8 500.0 501.2 415.8 415.0 415.8 1147.7 1149.0 1147.1 JULY AUG. 235.4 238.3 274.8 278.0 291.3 291.9 83.9 82.7 502.4 505.5 416.3 416.3 1148.3 1149.6 MONTHLY 1989-AUG. SEP. 1. 2. 3. 4. Currency 1 Other checkable deposits Demand deposits OCT. ' [i 12 I 1 t3 T 4 Bank er acceptances Commercial paper' I 1 15 I I iR 92.4 102.7 80.2 99.8 108.8 116.8 261.9 267.0 322.3 258.4 326.2 349.7 44.5 40.7 40.6 117.6 113.9 89.8 85.5 115.0 115.7 300.3 311.5 354.3 350.3 42.6 41.0 562.7 561.0 558.3 109.6 108.9 96.9 80.1 79.3 81.1 116.2 116.8 117.5 317.6 318.8 330.6 350.0 351.3 347.9 40.0 40.5 41.2 103.2 103.7 105.4 554.5 93.6 96.9 95.2 74.1 68.8 67.2 117.7 118.2 119.1 334.3 330.4 347.8 343.3 544.1 344.7 342.7 40.7 38.3 37.0 325.8 320.4 321.9 106.8 107.3 107.3 538.3 535.3 532.7 94.8 95.8 98.7 66.0 67.5 64.3 119.9 120.7 121.5 341.5 328.9 346.6 357.5 349.6 349.4 35.8 35.3 34.6 325.1 333.8 108.9 114.0 530.4 524.0 97.1 99.1 64.0 65.5 122.4 356.9 348.7 32.8 550.1 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 mutual funds and thrift institutions. p-preliminary September 28, 1990 Treasury bills Pe ri od 1987 1988 1989 Period NRedpn Net purchases Redmptions (-) Treasurycoupons Not purchases 3 4 Nt Nt change 9,329 2,200 12.730 3,905 5,435 -11,263 ---Q1 ---02 --- 03 ---Q4 -3,842 2,496 -6,450 9,264 2.200 2,400 3,200 4,930 -6.042 96 -9,650 4,333 1990 ---01 -3,799 10,892 1,400 -5,199 10,892 -1,414 8.794 1,883 1,400 3,530 -1,065 -3,277 543 5,796 3,365 1,732 287 4,197 1,000 400 ---02 1989 October November December 1990 January February March April May June July August ~.. -. purchases 5-10 1-5 13,233 7,635 1,468 1989 STRICTLY CONFIDENTIAL (FR) CLASS II-FOMC NET CHANGES IN SYSTEM HOLDINGS OF SECURITES 1 Millions of dollars, not seasonally adjusted 3,359 2,176 327 100 50 Redemptions ( over 10 9,779 4,685 946 2,441 1,404 258 1,858 1,398 284 -228 1,361 -163 -24 -20 287 -9 284 - - 100 100 500 - Net Change Federal agencies Net change outright redemptions holdings total 5 Net RPs 20,994 6 17,366 9,665 1,315 276 587 442 14,513 -10,390 -11,033 1,557 -1,683 -248 2,104 -172 -369 188 125 99 31 -6,477 2,075 -9,921 3,934 -5,591 924 -893 3,877 200 150 .- 78 -5,000 10,964 -4,061 509 -3,368 5,419 1,883 463 -453 3,867 -2,065 -3,677 742 5,818 3,365 1,782 254 4,160 -8,435 4,417 -43 -1,260 -378 2,146 2,863 1,110 32 -1 68 33 321 4,727 -4,620 2,483 37 201 624 486 25 52 3,997 -2.210 -4,157 3,283 -2,814 5,264 1,883 30 1 -2.065 -3,677 543 5,796 3,365 1,732 287 4,197 78 33 37 Weekly July July 1 July 68 65 July August August August August August September September September Memo: LEVEL (bil $) 7 September 26 3,077 3,077 3,077 481 481 481 117.5 25.1 59.7 13.2 24.5 246.4 ' 1. Change from end-of-period to And-of-period 2. Outright transactions in market and with foreign accounts a 3. Outnght transactions in mar"et and vwth'orlg ccounts, and short-term notes acquired in exchange for maturing bills Excludes matunty shirts and rollovers of maturing Issues. 4 Weekly net purchases of Treasury couoons are summed overall maturites. 5. Reflects net change in redemptions (-) of Treasury and agency securities. 6. Includes change In RPs (+), matched sale-piurchase transactions (-), and matched purchase sale transactions (+). 7. The levels of agency issues were as follows: with.in September 26 1 year 2.4 1-5 2.6 I 5-10 .1 over 10 0.2 total 6.3 4,774 -,202 3,762 -6.1 

Federal Reserve (1990, October 1). Bluebook. Bluebooks, Federal Reserve. https://whenthefedspeaks.com/doc/bluebook_19901002

@misc{wtfs_bluebook_19901002,
  author = {Federal Reserve},
  title = {Bluebook},
  year = {1990},
  month = {Oct},
  howpublished = {Bluebooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/bluebook_19901002},
  note = {Retrieved via When the Fed Speaks corpus}
}