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 - March 22, 1996 FOMC MONETARY POLICY ALTERNATIVES Recent Developments (1) Following the January 30-31 meeting, the Federal Reserve announced that it was easing money market conditions a bit further; the discount rate was cut 1/4 percentage point to 5 percent and the federal funds rate was lowered a like amount to 5-1/4 percent. The effective federal funds rate has averaged close to that rate over the intermeeting period, but has shown a bit more variation than usual around the intended rate, perhaps partly reflecting the effects of low levels of required operating balances stemming from the spread of sweep programs. (2) The easing move had been mostly anticipated, and shortterm market rates dropped slightly in its wake, while long-term rates were about unchanged. Since then, most rates have moved higher, and by substantial amounts, as incoming data have contradicted market expectations that the economy would be quite soft for a time and monetary policy consequently would be eased further. Rates on federal funds futures contracts, which in late January suggested a high probability of further ease not only at the January meeting but thereafter as well, are now essentially flat through the summer (chart). Longer-term Treasury rates are up around 60 basis points over the intermeeting period, returning yields to their levels of late last summer. By far, the largest increases in forward one-year interest rates have occurred in the intermediate range, tending to support the 1. Rates on three-month Eurodollar futures actually tilt up after June, but this pattern probably reflects liquidity premiums more than firm expectations of policy tightening. Chart 1 Treasury Interest Rates Percent Federal Funds Futures "... Percent ' March 21 January 30 I I J F M A M J J 1995 Weekly. Daily after Jan. 30. A S O N D J Jan F M 1996 3-Month Eurodollar Futures Percent Feb I I Mar Apr I I Il Jul Jun May Aug Basis Points Change in Forward Rates Since January 30 1 F Q- March 21 January 30 Mar Jun 1996 Sep Dec Mar 1997 Jun 3 10 30 Years Ahead Implied Treasury Bond Volatility Percent Exchange Rates Jan. 301 J M M J S N J 1994 Weekly. Daily after Jan. 30. M M J 1995 S N J M 1996 J M M J S N J 1994 *Index, Jan 1994=100 Weekly. Daily after Jan. 30. MM J 1995 S N J M 1996 view that much of the rise in rates owed to evidence of unanticipated cyclical strength. Likely adding to the upward revision to expected future short-term rates was the dimming prospect for long-term deficit reduction. Given that both of these factors would tend to boost real interest rates over time, and given little in the way of surprising inflation news over the intermeeting period, it seems likely that the upward movement in nominal interest rates primarily reflected a rise in real rates. Despite the apparent increase in real interest rates, equity prices on net are up considerably since the last meeting, after having moved more or less in concert with bond prices for more than a year. The recent disparate movements may reflect a shift in inves- tors' appetites for stocks or a more optimistic outlook for earnings-though professional stock analysts have been trimming their profit forecasts of late. (3) The dollar's weighted average foreign exchange value declined over the first part of the intermeeting period, but has risen since late February, partly in association with increases in U.S. interest rates. the last meeting. On balance, the dollar is down about 1 percent since From one perspective, the lack of net dollar ap- preciation despite higher U.S. interest rates is not surprising, as ten-year bond rates in major foreign countries other than Japan are up 40 to 65 basis points over the intermeeting period, roughly in line with the increase in U.S. rates. From another, however, the reasons for the rise in foreign interest rates are not entirely clear, since they appeared to respond unusually strongly to movements in U.S interest rates after the March 8 employment report. To be sure, an im- proved economic outlook in a few countries, notably excepting Germany, and growing doubts that the fiscal discipline associated with the budget goals currently in the Maastricht treaty will ever be realized may have contributed to rate increases abroad. The Desk did not intervene. (4) Private credit flows continue at a moderate pace, but there are some hints that underlying demands for credit have slowed a bit. Bank lending has fallen off in February and March, even taking into account increased securitizations of bank loans. Business loans decelerated in February and declined in early March despite a sharply reduced pace of corporate bond issuance associated with the back-up in long-term interest rates. Although nonfinancial business borrowing in money and capital markets has been supported by financing requirements associated with elevated merger and corporate restructuring activity, credit needs to bridge the gap between internal funds and capital expenditures are estimated to have become quite small as inventory investment has declined. The weakness in bank business lending likely does not reflect a reduced availability of credit. For example, the Survey of Terms of Bank Lending showed that spreads on business loans continued to narrow in early February. Consumer credit growth re- mained fairly robust in January, but more recent bank data adjusted for securitizations suggest that consumer borrowing has downshifted a bit. Bank Call Report data from late 1995 show that delinquency rates on household loans, particularly credit cards, have deteriorated further, possibly restraining growth of consumer debt by damping both demand and supply. (5) Both of the broad monetary aggregates have strengthened in recent months and have moved above their growth cones. To some extent, the pickup in growth mirrors the decline in short-term interest rates in late 1995 and early 1996. Money market mutual funds, whose rates adjust with a lag to market rates, have been particularly strong. M2 has been supported as well in the past three months by an unusual surge in demand deposits, which is only partly attributable to increases in mortgage refinancings. The brisk advance in M2 has come in the face of strong inflows to stock and bond mutual funds, which appear to have paused only briefly in reaction to recent market volatility. 2 M2 is estimated to have grown faster than nominal income in the first quarter, extending the recent string of velocity declines. As in the previous few quarters, the growth of M2 was some- what faster than that predicted by the standard money demand model. (6) The surge in demand deposits has pushed M1 growth well into positive territory in March, its first monthly advance since July 1995. Currency growth also picked up in March, to an 8 percent pace, reportedly reflecting strong foreign demand associated with uncertainties in Taiwan and Russia.3 sweep The introduction of additional programs, however, caused balances to continue to contract. Adjusted for in other checkable deposits retail sweeps, M1 has expanded at an 8-3/4 percent rate since the fourth quarter, while the base has risen 5 percent. 2. M2 plus stock and bond funds is estimated to have expanded at a 7 percent rate in February and apparently strengthened sharply in March along with M2. 3. The monetary base contracted at a 4 percent rate in February and rebounded to a 8-1/4 percent rate in March, reflecting additional required reserves against demand deposits in that month and the pickup in currency growth. Total reserves declined at a 14-1/2 percent rate in February and expanded at a 17 percent rate in March. MONEY, CREDIT, AND RESERVE AGGREGATES (Seasonally adjusted annual rates of growth) Jan. Feb. Mar. QIV to Mar. Money and credit aggregates M1 -6.2 7.9 -2.1 5.5 11.2 17.5 -0.3 8.8 M2 4.7 5.3 11.1 6.5 M3 7.2 10.0 11.0 7.9 2.0 -3.8 4.1 5.4 6.5 5.0 ---- 4.0 1.3 4.9 8.5 3.3 -- 5.2 Nonborrowed reserves 2 -11.1 -14.4 17.0 -3.1 Total reserves Adjusted for OCD sweeps -15.8 12.1 -14.4 1.2 17.0 34.8 -4.1 15.3 Monetary base Adjusted for 0CD sweeps 0.4 4.1 -4.1 -2.0 8.2 11.7 2.1 5.0 38 35 35 1485 849 1045 Adjusted for OCD sweeps Domestic nonfinancial debt Federal Nonfederal Bank credit Reserve measures Memo: (Millions of dollars) Adjustment plus seasonal borrowing Excess reserves 1. 2. QIV to February for debt aggregates and bank credit. 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. Reserve figures for March incorporate assumptions of $1 billion for excess reserves and $50 million for adjustment and seasonal borrowing in the maintenance periods ending March 27 and April 10. Reserve data incorporate adjustments for discontinuities associated with changes in reserve requirements. Policy Alternatives (7) Sorting through the estimated effects of bad weather, government shutdowns, and strikes, the economic data released since the January FOMC meeting suggest that the economy is now operating about where the staff had anticipated, albeit with a little more final demand and correspondingly less inventory stocking. While longer-term interest rates have moved sharply higher in recent weeks, the rise has been only a little larger and sooner than had been built into the last staff forecast. On balance, financial conditions still seem conducive to moderate expansion of spending, and the staff forecast anticipates that output growth will settle around its potential rate over the next two years with the federal funds rate maintained at 5-1/4 percent. This pace of economic activity should keep the unemployment rate steady, in the vicinity of 5-1/2 to 5-3/4 percent. With employment and production a touch above their long-run potential levels, increases in labor compensation and prices edge higher. The outcomes for real GDP growth and CPI inflation envisioned by the staff for 1996 are at the high end of the central tendencies of the forecasts provided by Board members and Reserve Bank presidents at the time of the last meeting. (8) An unchanged policy stance, as in alternative B, would probably be preferred if the Committee concurred with the staff's assessment of the economy, viewed potential risks as about evenly balanced, and was willing to accept the possibility of a slight intensification of price pressures. Of course, this alternative might be even more attractive if the Committee saw smaller odds of rising inflation, as it did in January judging from the CPI forecasts submitted by the members. Moreover, in light of the unusual number of temporary disruptions and distortions to economic activity in the last few months and the difficulties in understanding the implications of the recent movements of stock and bond prices, a pause might be favored to allow sufficient time to establish a firmer bearing on the likely course of spending and inflation, even if the Committee saw the risks to the outlook as possibly tilted to one side or the other. (9) With market participants apparently expecting no policy action over the next few months, maintenance of current reserve conditions, as under alternative B, would elicit little reaction in credit markets. Capital market prices could remain volatile as incoming information continues to be difficult to interpret in the wake of the winter's economic disruptions. Although the anticipated softening of many indicators in March, such as payroll employment and industrial production, might boost markets for a time, data consistent with the staff forecast would seem, on balance, to imply little net change in longer-term yields. Market participants have largely discounted any chance of a multi-year budget agreement before the elections, so a renewal of meaningful negotiations on long-term deficit reduction has the potential to raise bond and stock prices. Absent such a develop- ment or unanticipated changes in policy abroad, the foreign exchange value of the dollar probably would remain around its current level. (10) Given the staff's assessment of the economy, the 1/2 percentage point easing in reserve market conditions offered under alternative A would boost the economy marginally further beyond its potential and tilt the inflation rate up a bit more noticeably. With the latter outcome apparently inconsistent with the Committee's strategy for achieving its long-run goals, adopting alternative A would seem to require that, relative to the staff, Committee members expect somewhat weaker spending or better inflation. For example, policy relaxation might be seen as buying further insurance against the risk that the recent rise in bond yields would truncate the apparent strengthening in activity this year or as attaching weight to the possibility that the NAIRU is lower. (11) In light of the uncertainty about the current economic situation and the widespread expectation that System policy is on hold, it is difficult to gauge how market participants would react to the 1/2 percentage point of policy ease envisioned under alternative A. It is safe to say that most of the decline in the federal funds rate would carry through to other shorter-term market rates. Market participants might read the action, coming on the heels of 1/4 point moves at two successive meetings, as revealing the judgment of policy makers either that the economy could work with a thinner margin of unused capacity without higher inflation or that aggregate demand is weaker than most analysts are now expecting. With market participants particularly uncertain about the economy, they might give the Committee the benefit of the doubt, at least for a while, and infer from the policy action that the economic situation had changed. In that cir- cumstance, intermediate- and long-term rates could fall significantly. Alternatively, this policy easing might be seen to reflect a misreading of the economic situation or evidence that the Committee was willing to tolerate upside risks to inflation in the interest of stimulating growth for a time. Should this interpretation predominate, infla- tion expectations would rise; although real interest rates probably would fall, the prices of debt instruments could come under downward pressure. Under all these scenarios, the foreign exchange value of the dollar would weaken, and especially so if inflation expectations deteriorated. (12) A 1/2 percentage point tightening in reserve conditions, as under alternative C, might be favored if the Committee agreed with the staff forecast but viewed its outcome for inflation as undesirable, particularly if the Committee wanted to make some progress toward price stability. Indeed, given that the economy is already operating at or beyond many estimates of its potential, the Committee might see significant upside risks to the inflation forecast. In this regard, the recent behavior of asset prices and some financial aggregates could potentially be signalling inflationary pressures. Part of the rise in bond yields might be associated with higher inflation expectations, and the gains in equity markets have the potential to provide excessive stimulus to spending. Moreover, the broad monetary aggregates have been growing rapidly of late, suggesting ample liquidity in household balance sheets and readily available funds for depositories. Relative to the staff forecast, a 1/2 percentage point firming in reserve conditions would take a little pressure off resource markets, raising the odds that the inflation rate would not tend to drift higher. (13) The 50 basis point tightening of alternative C would catch market participants unawares and show through to instruments at the shortest maturities. The response further along the term struc- ture of interest rates could also be substantial, as the action would likely be interpreted as suggesting that the Federal Reserve saw considerable inflation risks. Even so, the rise in longer-term rates likely would reflect a significant real component and the dollar would tend to increase on exchange markets and stock prices to weaken. -10- (14) As shown in the table below, over the next six months the staff expects some rebound in the growth of nonfederal sector debt to around the pace of earlier in the year, but a modest slowing in broad money growth. In the staff outlook, credit conditions are an- ticipated to remain favorable, although banks may adopt a little additional caution, particularly with regard to their consumer lending. Consumer debt growth is expected to slow some, but should still be fairly robust, while the expansion of home mortgage debt stays near its recent pace. As long-term yields stabilize in the staff forecast, bond offerings should pick up, in part to finance the ongoing wave of merger activity. Bank business lending is likely to recover, but, reflecting the lessened need to finance inventory accumulation, to a moderate growth pace. On net, domestic nonfinancial sector debt should expand at a 5 percent annual rate over the March-to-September period, remaining comfortably within its 3-to-7 percent annual range. * Growth of Money and Debt (percent at annual rates) March to September M2 M3 M1 1995 QIV to September 5 5 1/2 5-3/4 6-1/4 1/4 Adjusted for sweeps Debt Federal Nonfederal * 6-1/2 7-1/2 5 5-1/4 5 5 4-1/2 5 Assumes an unchanged federal funds rate. Alternative Levels and Growth Rates for Key Monetary Aggregates M2 Alt. A Levels in Billions Feb-96 Mar-96 Apr-96 May-96 Jun-96 Jul-96 Aug-96 Sep-96 M3 Alt. B Alt. C Alt. A Alt. B M1 Alt. C Alt. A Alt. B Alt. C 3690.8 3725.0 3746.1 3761.7 3778.6 3796.9 3813.7 3829.9 3690.8 3725.0 3744.9 3758.0 3772.4 3788.4 3803.6 3818.5 3690.8 3725.0 3743.6 3754.2 3766.1 3779.9 3793.5 3807.1 4636.1 4678.6 4702.0 4720.0 4739.3 4760.3 4780.5 4800.8 4636.1 4678.6 4701.2 4717.7 4735.4 4755.1 4774.5 4794.0 4636.1 4678.6 4700.5 4715.3 4731.5 4750.0 4768.6 4787.3 1117.0 1127.5 1132.3 1132.8 1134.0 1135.3 1136.3 1137.0 1117.0 1127.5 1131.9 1131.3 1131.4 1131.1 1130.7 1130.2 1117.0 1127.5 1131.4 1129.8 1128.8 1127.0 1125.2 1123.4 5.3 11.1 6.8 5.0 5.4 5.8 5.3 5.1 5.3 11.1 6.4 4.2 4.6 5.1 4.8 4.7 5.3 11.1 6.0 3.4 3.8 4.4 4.3 4.3 10.0 11.0 6.0 4.6 4.9 5.3 5.1 5.1 10.0 11.0 5.8 4.2 4.5 5.0 4.9 4.9 10.0 11.0 5.6 3.8 4.1 4.7 4.7 4.7 -2.1 11.2 5.2 0.5 1.3 1.3 1.1 0.7 -2.1 11.2 4.7 -0.6 0.1 -0.3 -0.4 -0.6 -2.1 11.2 4.2 -1.7 -1.1 -1.9 -1.9 -1.9 Quarterly Averages 96 Q1 96 Q2 96 Q3 5.6 7.1 5.5 5.6 6.7 4.8 5.6 6.3 4.1 6.9 7.2 5.1 6.9 7.0 4.8 6.9 6.8 4.5 -2.6 4.2 1.1 -2.6 3.7 -0.3 -2.6 3.1 -1.7 Growth Rate From Mar-96 To Sep-96 5.6 5.0 4.4 5.2 4.9 4.6 1.7 0.5 -0.7 95 Q4 95 Q4 Mar-96 Sep-96 6.5 6.1 6.5 5.7 6.5 5.3 7.9 6.4 7.9 6.2 7.9 6.0 -0.3 0.9 -0.3 0.2 -0.3 -0.5 93 94 95 95 95 94 95 96 96 96 0.6 4.0 5.6 6.4 6.1 0.6 4.0 5.6 6.2 5.8 0.6 4.0 5.6 6.0 5.4 1.6 5.9 6.9 7.1 6.5 1.6 5.9 6.9 7.0 6.3 1.6 5.9 6.9 6.9 6.1 2.4 -1.8 -2.6 0.8 0.9 2.4 -1.8 -2.6 0.5 0.3 2.4 -1.8 -2.6 0.3 -0.4 Monthly Growth Rates Feb-96 Mar-96 Apr-96 May-96 Jun-96 Jul-96 Aug-96 Sep-96 Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q1 Q2 Q3 1996 Target Ranges: 1.0 to 5.0 2.0 to 6.0 -12- (15) The waning impetus imparted by past policy easings is expected to damp growth in the broad monetary aggregates relative to their recent rapid pace. Still, both M2 and M3 should expand faster than nominal income for the next two quarters. The staff is antici- pating M2 to grow at a 5 percent rate from March to September, leaving the aggregate somewhat above its 1-to-5 percent annual range. With bank credit remaining sluggish, M3 is expected to slow to a 5 percent rate over the next six months and thus edge back toward the upper end of its 2-to-6 percent annual range. The continued spread of retail sweep programs is likely to pull down M1 further, although a pickup in currency shipments abroad associated with the introduction of the redesigned $100 bill next week should provide some offset in coming months. 4 4. The staff assumes that about $6 billion of new sweep arrangements will be implemented each month of the forecast period. As a result, total reserves are projected to fall about $2-1/2 billion over the next six months, or 9-1/4 percent at an annual rate; in not seasonally adjusted terms, the projected decline is $2 billion. With currency growth projected to increase, the monetary base is expected to pick up some, and over the March-to-September period its expansion is projected at a 9-3/4 percent annual rate. -13- Directive Language Presented below is draft wording for the operational (16) includes the usual options for Committee consideration. paragraph that OPERATIONAL PARAGRAPH In the implementation of policy for the immediate future, the Committee seeks to decrease slightly(SOMEWHAT)/MAINTAIN/INCREASE WHAT) the existing degree of pressure positions-, the [DEL: taking account discount rate.] long-run ments, on reserve possible reduction in In the context of the Committee's objectives for price stability and sustain- able economic tion to of a (SLIGHTLY/SOME- growth, and giving careful considera- economic, financial, slightly (WOULD/MIGHT) or restraint would meeting period. and monetary develop- (SOMEWHAT) greater reserve slightly (SOMEWHAT) lesser restraint reserve (MIGHT) be acceptable in the interThe contemplated reserve conditions are expected to be consistent with moderate growth in M2 and M3 over coming months. March 25,1996 SELECTED INTEREST RATES (percent) Short-Term federal funds Treasury bills secondary market Long-Term CDs secondary market comm. paper money market mutual bank prime U.S. government constant maturity yields 3-month 1-month fund loan 3-year 1 2 3 4 5 6 7 8 9 _ 3-month I 6-month I 1-year fixed-rate fixe-rate RM offered Buyer 10 11 12 13 14 15 16 10-year I 30-year 1 corporate conventional home mortgages A-utility municipal secondary primary recently Bond market market 95 -- High -- Low 6.21 5.40 5.81 4.89 6.31 5.05 6.75 4.98 6.39 5.55 6.10 5.73 5.61 5.16 9.00 8.50 7.80 5.36 7.85 5.68 7.89 6.06 8.81 6.98 6.94 5.65 9.57 7.40 9.22 7.11 6.87 5.53 96 -- High -- Low 5.61 5.09 5.03 4.79 5.02 4.71 5.16 4.57 5.48 5.13 5.73 5.28 5.15 4.73 8.50 8.25 5.94 4.95 6.40 5.59 6.70 5.97 7.87 7.00 6.13 5.63 8.16 7.35 7.83 6.94 5.60 5.19 95 95 95 95 95 95 95 95 95 95 5.98 6.05 6.01 6.00 5.85 5.74 5.80 5.76 5.80 5.60 5.73 5.65 5.67 5.47 5.42 5.40 5.28 5.28 5.36 5.14 5.89 5.77 5.67 5.42 5.37 5.41 5.30 5.32 5.27 5.13 6.03 5.88 5.65 5.33 5.28 5.43 5.31 5.28 5.14 5.03 6.15 6.11 6.02 5.90 5.77 5.77 5.73 5.79 5.74 5.62 6.07 6.06 6.05 6.05 5.87 5.85 5.82 5.81 5.80 5.84 5.51 5.54 5.51 5.46 5.39 5.27 5.24 5.20 5.26 5.20 9.00 9.00 9.00 9.00 8.80 8.75 8.75 8.75 8.75 8.65 6.89 6.68 6.27 5.80 5.89 6.10 5.89 5.77 5.57 5.39 7.20 7.06 6.63 6.17 6.28 6.49 6.20 6.04 5.93 5.71 7.45 7.36 6.95 6.57 6.72 6.86 6.55 6.37 6.26 6.06 8.40 8.31 7.89 7.60 7.72 7.84 7.55 7.36 7.30 7.10 6.32 6.22 6.16 6.07 6.21 6.37 6.18 6.05 5.89 5.74 8.90 8.71 8.32 7.96 8.03 8.24 8.01 7.88 7.79 7.53 8.46 8.32 7.96 7.57 7.61 7.86 7.64 7.48 7.38 7.20 6.45 6.35 6.14 5.87 5.83 5.93 5.81 5.74 5.64 5.57 Jan Feb Weekly Dec Dec Dec Dec 96 96 5.56 5.22 5.00 4.83 4.92 4.77 4.82 4.69 5.39 5.15 5.56 5.29 5.05 4.85 8.50 8.25 5.20 5.14 5.65 5.81 6.05 6.24 7.09 7.31 5.72 5.73 7.45 7.51 7.03 7.08 5.44 5.31 6 13 20 27 95 95 95 95 5.75 5.73 5.90 5.48 5.31 5.30 5.15 4.89 5.21 5.20 5.13 5.05 5.06 5.08 5.03 4.98 5.68 5.67 5.65 5.55 5.83 5.85 5.88 5.81 5.21 5.21 5.22 5.16 8.75 8.75 8.71 8.50 5.37 5.43 5.44 5.36 5.68 5.72 5.78 5.71 6.06 6.06 6.12 6.06 7.10 7.13 7.10 6.98 5.65 5.79 5.79 5.71 7.56 7.54 7.55 7.40 7.18 7.15 7.23 7.11 5.53 5.55 5.64 5.55 Jan Jan Jan Jan Jan 3 10 17 24 31 96 96 96 96 96 5.35 5.53 5.61 5.44 5.53 4.96 5.03 5.02 4.97 4.97 4.96 5.00 4.92 4.87 4.87 4.91 4.91 4.84 4.78 4.75 5.48 5.44 5.43 5.37 5.30 5.73 5.61 5.58 5.53 5.50 5.15 5.11 5.04 5.03 5.01 8.50 8.50 8.50 8.50 8.50 5.25 5.28 5.23 5.14 5.16 5.60 5.70 5.69 5.59 5.65 5.97 6.07 6.10 6.02 6.06 7.08 7.17 7.00 7.11 7.22 5.63 5.79 5.70 5.77 5.69 7.47 7.42 7.37 7.54 7.35 7.02 7.08 7.02 7.00 7.02 5.46 5.45 5.48 5.37 5.37 Feb Feb Feb Feb 7 14 21 28 96 96 96 96 5.21 5.09 5.17 5.31 4.85 4.79 4.80 4.85 4.77 4.71 4.78 4.81 4.62 4.57 4.71 4.81 5.16 5.13 5.14 5.14 5.29 5.28 5.29 5.28 4.91 4.84 4.81 4.78 8.25 8.25 8.25 8.25 5.05 4.95 5.14 5.35 5.67 5.63 5.86 6.01 6.13 6.07 6.29 6.44 7.18 7.28 7.47 7.45 5.67 5.67 5.76 5.86 7.41 7.49 7.78 7.82 7.02 6.94 7.32 7.41 5.33 5.19 5.34 5.38 Mar Mar Mar 6 96 13 96 20 96 5.57 5.24 5.36 4.89 4.93 5.02 4.82 4,97 5.02 4.85 5.06 5.16 5.17 5.28 5.33 5.31 5.34 5.41 4.79 4.73 4.79 8.25 8.25 8.25 5.43 5.81 5.94 6.01 6.30 6.40 6.41 6.63 6.70 7.80 7.87 7.76 5.88 6.13 6.10 8.09 8.16 8.06 7.38 7.83 7.81 5.40 5.55 5.60 Daily Mar Mar 15 96 21 96 Mar 22 96 5.42 5.21 5.18p 5.01 4.94 4.97 5.04 5.01 5.02 5.21 5.11 5.12 5.31 5.32 5.33 5.40 5.44 5.45 8.25 8.25 8.25 6.01 5.82 5.85 6.46 6.28 6.32 6.75 6.62 6.65 Monthly Mar Apr May Jun Jul Aug Sep Oct Nov Dec NOTE: Weekly data for columns 1 through 11 are statement week averages. Data in column 7 are 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 ol the statement week. Column 13 is the Bond 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 new commitments lor fixed-rate mortgages (FRMs) with 80 percent loan-to-value ratios at major institutional lenders. Column 16 is the average initial contract rate on new commitments for 1-year, adjustablerate mortgages (ARMs) at major institutional lenders offering both FRMs and ARMs with the same number of discount points. p - preliminary data Strictly Confidential (FR)- Class II FOMC Money and Credit Aggregate Measures MARCH 25, 1996 Seasonally adjusted Period Money stock measures and liquid assets Bank credit nontransactions components total loans M2 M1 1 2 In M2 In M3 only 3 4 M3 L S 6 total loans and Domestic nonfinancial debt' U. S investments' government 7 a 2 other2 total' 9 10 Annual arowth rates(%): Annually (Q4 to Q4) 1993 1994 1995 10.5 2.4 -1.8 1.4 0.6 4.0 -2.4 -0.3 6.7 -0.5 6.2 14.2 1.0 1.6 5.9 1.4 2.6 7.2 5.0 6.8 8.5 8.4 5.7 4.4 4.1 5.0 5.9 5.2 5.2 5.5 Quarterly(average) 1995-Q1 1995-Q2 1995-Q3 1995-Q4 -0.1 -0.5 -1.5 -5.1 1.0 3.8 6.9 3.9 1.6 5.8 10.9 8.1 19.9 16.9 12.2 5.4 4.5 6.3 8.0 4.2 6.1 7.3 9.1 5.7 7.9 14.5 6.0 4.8 5.1 5.4 4.6 2.3 5.4 7.6 4.7 5.3 5.4 7.0 4.6 4.5 Monthly 1995-FEB. MAR. APR. MAY JUNE JULY AUG. SEP. OCT. NOV. DEC. -1.5 0.9 2.6 -5.2 -1.8 0.9 -1.7 -3.8 -8.8 -3.0 -4.5 -0.0 1.7 3.4 4.9 10.3 6.3 6.6 4.4 2.3 3.6 5.5 0.7 2.1 3.8 9.7 16.1 8.8 10.5 8.2 7.4 6.5 9.9 14.8 17.7 16.6 19.5 10.7 12.5 10.2 9.6 9.5 -2.2 -5.1 2.8 4.8 6.0 7.7 10.4 7.5 7.4 5.4 3.8 2.4 3.3 7.1 7.8 7.3 6.0 8.6 10.8 7.8 9.9 5.5 0.9 5.1 4.5 9.1 28.2 7.4 7.2 4.5 5.2 7.7 4.0 3.4 3.6 10.5 7.2 0.7 6.2 8.6 4.3 2.0 0.8 2.9 4.4 -0.4 5.9 5.2 9.2 10.0 4.0 2.7 5.6 4.5 4.8 6.8 5.0 7.1 5.7 7.0 9.0 5.2 3.1 4.7 3.5 4.3 6.2 3.6 -6.2 -2.1 4.7 5.3 9.5 8.6 17.3 28.9 7.2 10.0 4.5 8.5 3.3 -3.3 4.2 2.2 Levels (Sbillioni2 Monthly 1995-OCT. NOV. DEC. 1131.8 1129.0 1124.8 3632.8 3643.6 3660.2 2501.0 2514.6 2535.4 915.6 913.9 910.0 4548.4 4557.5 4570.2 5652.4 5656.7 5680.7 3578.3 3588.5 3599.4 3632.6 3645.8 3644.6 10126.1 10183.9 10226.7 13758.7 13829.6 13871.3 1996-JAN. FEB. p 1119.0 1117.0 3674.5 3690.8 2555.5 2573.8 923.1 945.3 4597.6 4636.1 5702.2 3625.0 3635.1 3634.7 10262.4 13897.1 5 12 19 26 1119.2 1114.3 1114.2 1117.4 3677.4 3682.3 3690.6 3698.7 2558.3 2568.0 2576.4 2581.3 927.3 947.0 945.9 952.4 4604.7 4629.3 4636.5 4651.1 4 p 11 p 1129.8 1123.0 3719.5 3720.1 2589.6 2597.1 951.5 952.9 4671.0 4673.0 1996-JAN. FEB. Weekly 1996-FEB. MAR. p 1. 2. Adjusted for breaks caused by reclassifications. 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 pe preliminary preliminary estimate Strictly Confidential (FR)Class II FOMC Components of Money Stock and Related Measures MARCH 25. 1996 Seaonaly adjusted Money market Period urrency Demand des Other checkable deposits 1 2 3 Savins, Small denomination2 time deposits Retail 4 5 6 mutual funds Institution- Large denomination time deposits' RP's " 8 9 , Eurodollar Savings bond Short-term re r securities Commercial ppe 11 12 13 Bankers acceptances only Levels 7 10 14 (5Dbillionals) Annual (Q4) 1993 1994 1995 320.0 352.8 371.9 381.6 383.3 388.7 412.1 404.2 359.1 1215.1 1162.7 1123.7 792.3 812.2 933.1 356.5 383.1 460.1 196.3 182.9 224.7 334.8 358.9 414.2 155.3 175.9 184.1 66.1 81.7 90.1 170.7 179.8 184.5 339.5 381.2 469.1 382.4 401.5 438.4 15.7 13.8 12.6 Monthly 1995-PEB. MAR. 359.0 362.3 383.5 382.9 396.8 394.8 1118.0 1102.5 857.5 877.7 390.8 390.2 188.4 195.0 371.8 377.6 191.9 191.1 86.4 87.2 180.5 180.7 400.2 411.1 414.9 420.9 13.5 13.7 APR. MAY JUNE 365.0 367.6 367.0 382.1 382.1 386.5 395.1 387.4 382.0 1091.2 1089.5 1097.0 893.4 906.1 913.7 393.3 401.6 418.8 199.4 203.7 213.2 381.0 384.5 387.7 192.1 197.2 191.7 90.1 91.1 91.8 181.2 181.7 182.4 412.0 405.5 414.7 430.6 437.0 428.9 13.4 12.0 11.0 JULY AUG. SEP. 367.3 368.5 369.5 388.5 389.3 389.4 380.8 377.2 372.4 1096.2 1101.6 1108.4 919.4 923.7 927.0 431.7 443.6 450.3 218.6 218.5 221.7 394.0 396.7 400.5 188.4 192.9 192.5 92.6 93.1 93.7 183.0 183.5 183.9 434.2 437.5 457.2 429.0 433.3 438.6 12.1 12.4 12.8 OCT. NOV. DEC. 370.8 371.6 373.2 388.1 388.2 389.8 364.1 360.3 353.0 1116.1 1120.6 1134.5 929.8 933.8 935.7 455.0 460.1 465.1 223.6 224.0 226.4 409.8 415.5 417.4 189.9 185.2 177.3 92.2 89.3 88.9 184.2 184.5 184.8 465.7 464.8 476.7 440.7 437.3 437.1 13.4 12.6 11.9 373.6 373.3 393.5 397.4 343.0 337.5 1151.8 1165.5 935.0 933.6 468.6 474.7 229.7 243.1 416.5 421.8 184.6 187.4 92.3 93.0 185.0 470.6 437.2 11.7 1996-JAN. FEB. p 1. 2. 3. 4. 5. 6. Includes money market deposit accounts. 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, depository institutions, U.S. government, and foreign banks and official institutions. Net of money market mutual fund holdings of these items. Includes both overnightand term. p preliminary STRICTLY CONFIDENTIAL (FR) CLASS II-FOMC NET CHANGES IN SYSTEM HOLDINGS OF SECURITES 1 Millions of dollars, not seasonally adjusted March 22, 1996 Treasurycoupons I Period 1993 1994 1995 17,717 17,484 10,932 ----900 1994 --Q1 ---Q2 ---Q3 --Q4 2,164 6,639 1,610 7,071 -------- 1995 --Q1 ---Q2 --Q3 --04 4,470 842 5,621 --- 1995 March April May June July August September October November December --900 1,223 1,238 10,350 9,168 390 4,966 4,168 3,818 1,239 3,457 3,606 3,122 2,164 6,639 1,610 7,071 1,413 2,817 2,530 2,408 1,103 1,117 938 660 618 896 840 1,252 4,470 842 4,721 17,717 17,484 10,032 18,431 15,493 8,241 35,374 31,975 16,970 5,974 -7,412 -1,023 2,665 4,754 4,157 3,916 4,418 11,086 5,654 10,818 -11,663 4,179 -8,530 8,602 2,549 100 2,317 -621 4,156 200 4,506 -850 8,314 541 8,965 -4,083 10,395 -15,979 8,644 2,549 4,156 100 200 -485 400 4,591 -83 4,136 -30 4,208 -333 311 563 -118 4,551 4,533 4,774 -2,758 2,474 10,678 -13,602 -2,984 608 -427 2,404 6,666 -1,228 -1,228 4,470 433 409 1,350 4,271 2,317 --- 1996 January February Weekly December 20 27 January 3 10 17 24 31 February 7 14 21 28 March 6 13 20 Memo: LEVEL (bil. $) 6 March 20 767 2,337 1,476 1,228 - --- --- 219.2 1. Change from end-of-period to end-of-period. 2. Outright transactions in market and with foreign accounts. 3. Outright transactions in market and with foreign accounts, and short-term notes acquired in exchange for maturing bills. Excludes maturity shifts and rollovers of maturing issues. ~--~--- - - . - 32.2 5,804 1,191 4,220 -6,458 -2,199 -9,687 5,695 -6,148 2,020 1,625 8,217 -6,519 11,648 -15,123 1,228 -1,228 -10.9 391.8 378.4 37.8 4. Reflects net change in redemptions (-) of Tre asury and agency securities. 5. Includes change in RPs (+), matched sale-pu rchase transactions (-). and matched purchase sale transactions (+). 6. The levels of agency issues were as follows: within March 20 1 year 1.5 -12,623 -1,689 1-5 0.5 5-10 0.5 over lO 0.0 total 2.5 

Federal Reserve (1996, March 25). Bluebook. Bluebooks, Federal Reserve. https://whenthefedspeaks.com/doc/bluebook_19960326

@misc{wtfs_bluebook_19960326,
  author = {Federal Reserve},
  title = {Bluebook},
  year = {1996},
  month = {Mar},
  howpublished = {Bluebooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/bluebook_19960326},
  note = {Retrieved via When the Fed Speaks corpus}
}