Bluebook

Prefatory Note The attached document represents the most complete and accurate version available based on original copies culled from the files of the FOMC Secretariat at the Board of Governors of the Federal Reserve System. This electronic document was created through a comprehensive digitization process which included identifying the bestpreserved paper copies, scanning those copies, 1 and then making the scanned versions text-searchable. 2 Though a stringent quality assurance process was employed, some imperfections may remain. Please note that this document may contain occasional gaps in the text. These gaps are the result of a redaction process that removed information obtained on a confidential basis. All redacted passages are exempt from disclosure under applicable provisions of the Freedom of Information Act. 1 In some cases, original copies needed to be photocopied before being scanned into electronic format. All scanned images were deskewed (to remove the effects of printer- and scanner-introduced tilting) and lightly cleaned (to remove dark spots caused by staple holes, hole punches, and other blemishes caused after initial printing). 2 A two-step process was used. An advanced optimal character recognition computer program (OCR) first created electronic text from the document image. Where the OCR results were inconclusive, staff checked and corrected the text as necessary. Please note that the numbers and text in charts and tables were not reliably recognized by the OCR process and were not checked or corrected by staff. Strictly Confidential (FR) Class I FOMC MONETARY POLICY ALTERNATIVES Prepared for the Federal Open Market Committee By the staff Board of Governors of the Federal Reserve System Strictly Confidential (FR) Class I - FOMC August 16, 1996 MONETARY POLICY ALTERNATIVES Recent Developments (1) By the time of the July 2-3 FOMC meeting, market participants had mostly become convinced that no action to tighten reserve market conditions would be taken at that meeting. As a result, the decision to keep the federal funds rate at 5-1/4 percent prompted only modest declines in rates at short maturities and no reaction further along the yield curve. Maintaining the funds rate at that intended level over the intermeeting period, however, proved difficult at times in light of unpredictably high demand for reserves at the end of July and in early August, and perhaps pressures spilling over from the financing market. As a consequence, the federal funds rate averaged a shade more than its intended level over the intermeeting period.1 (2) Most market interest rates have declined 15 to 25 basis points, on net, over the intermeeting period (chart). Rates rose sharply in the days just after the July FOMC meeting as incoming data were read by market participants as indicating that the economy was straining its productive resources and pressures on labor costs were mounting. Futures quotes (chart) indicated a presumption that the funds rate would be hiked at the August FOMC meeting, and there was even some market chatter that an intermeeting move was a distinct possibility. While Chairman Greenspan's Humphrey-Hawkins' testimony 1. Reserve shortfalls--from the supply as well as the demand side--were met in part by borrowing at the discount window, so that adjustment plus seasonal borrowing averaged about $30 million over its allowance in the four maintenance periods completed since the July meeting. The allowance was raised twice, to $325 million, to reflect the normal upsurge in seasonal borrowing at this time of year. Chart 1 Treasury Interest Rates Percent [Daily Thirty-Year Bond .' Ten-Year Note "". .. **Te-.......Yr Ne.... * Three-Year Note 3 June 10 *-* 17 24 1 July 8 Federal Funds Futures Percent " ---. .. ** * .- 22 29 5 August 12 Week beginning Last observation is spot rate at 12:00 p.m. July 5 15 3-Month Eurodollar Futures Percent . *" July 3 August 16 August 16 IJul Aug Sep Oct Nov Dec 1996 Jan - SOp 1997 I Mar Dec -l Jun Last observation is spot rate at 12:00 p.m. Last observation is spot rate at 12:00 p.m. Real Interest Rates* Exchange Rates * Monthly Index ** . ' Ten-Year Dec 1S7 * . One-Year J F M A M J J A 1996 STreasury rate less median inflation expectations (Mich. Survey) J F M A M J J A 1996 *Index, Jan 1994=100 Weekly. Daily after July 3. Last observation is spot rate at 12:00 p.m. conveyed to the market the notion that inflation risks were clearly tilted to the upside, it also raised the possibility that the economy could settle into a sustainable growth path without policy action and it flagged several upcoming data releases as important in assessing that possibility. As those reports became available, they were seen, by and large, to be pointing to a slowing in demand growth and only a mild upturn in labor compensation, and a considerable decline in interest rates ensued. Market participants have mostly discounted the possibility of action at the upcoming FOMC meeting, and further-ahead futures quotes seem consistent with high odds that policy would be on hold for a considerable stretch. Yields on Treasury coupon securities have declined 25 to 35 basis points since the Chairman's testimony. While some of this decline probably reflects an easing of inflation expectations, the sharp rebound in equity prices in recent weeks-which were also helped by favorable earnings reports--and the easing of the dollar in foreign exchange markets support the assessment that much of the drop in interest rates represented a downward movement in real rates. The decline, reflecting a reassessment of the path of real rates needed to keep inflation pressures contained, likely reversed only a fraction of the run-up in long-term real rates since January. (3) The dollar's foreign exchange value has decreased 1-1/4 percent on a weighted-average basis since the July FOMC meeting. The dollar moved down 2-1/4 percent against the mark and 2 percent against the yen. Japanese and German monetary policies remained on hold dur- ing the period, and short-term interest rates in Japan and Germany were little changed. changed. Bond yields in Japan were also essentially un- Surprising the market by failing to reduce its RP rate, Bundesbank officials stated that above-target money growth is still a concern, although some of those officials apparently believe a further easing might still be possible. Despite disappointed expectations about German monetary policy, German bond yields decreased somewhat during the period, possibly reflecting a reduction in inflation and uncertainty premiums in German financial markets as doubts about the implementation of European Monetary Union resurfaced. The Desk did not intervene. (4) The expansion of the monetary aggregates slowed more abruptly in July than the staff had anticipated at the last FOMC meeting. M2 grew at a 2-1/4 percent pace last month, down from a 5-1/2 percent rate in June, but still remained in the upper portion of its annual range. Much of the weakness in July was accounted for by an unexpected drop in demand deposits, which had posted unusually strong growth in the first half of this year. Offsetting part of the recent slowdown, currency growth has picked up some, apparently fueled by shipments abroad. Contacts with currency shippers have indicated that much of this cash is destined for Russia, but growing worldwide acceptance of the new hundred dollar bill also may have played a role. 2 M2 apparently has not benefitted much from investors' recent skittishness about long-term investments. Net inflows to stock and bond funds fell off substantially in July, but little of that financial capital 2. M1 contracted at an 8-3/4 percent rate in July, but the initial effects of new sweep activity accounts for about all of that decline. Bolstered by strength in currency, the monetary base grew at a 7-1/2 percent rate last month and would have expanded at a 9-1/2 percent rate absent sweeps. appears to have been redirected toward money market mutual funds or retail deposits. (5) The weaker growth of M2 showed through to M3, which expanded at a 3-3/4 percent rate in July, about a percentage point slower than in the previous month. This slower growth opened a little room between M3 and the upper end of its annual range. Bank funding needs apparently were weak, with bank credit growing at only a 1 percent rate in July. Banks ran off their securities holdings at a 6-1/2 percent pace, even as lending diminished. The growth rates of both real estate and consumer loans edged lower, but the former seems to have been pulled down by a step-up in the pace of securitization. Banks continue to pull back from their aggressive stance in seeking consumer loans: In a recent survey, about half of the banks said that they tightened their standards for approving credit card applications and about a quarter tightened standards for other consumer installment loans. (6) Data on credit flows for July and early August, apart from those provided by commercial banks, are sparse. The available information suggests that the expansion of debt of nonfederal sectors has slowed in recent months. In the household sector, consumer credit growth fell off to around a 8-3/4 percent rate in the second quarter, and mortgage borrowing remained moderate. Net bond issuance by non- financial firms in July was a touch above its second-quarter rate, but most of this reflected lessened reliance on shorter-term borrowing. Credit continues to be readily available to business borrowers, with spreads in securities markets still narrow and banks continuing to 3. With inflows to capital market funds estimated to be weak and equity prices, on average, lower, M2 plus stock and bond funds likely was at a standstill in July, putting that measure about 7 percent above its level in the fourth quarter of 1995. -5- The runoff of the debt of state and offer accommodative loan terms. local governments persisted, with particularly hefty retirements bunched at the beginning of July. Surprisingly strong tax inflows allowed the Treasury to slash its borrowing in the second quarter, but borrowing has since picked up. Overall, domestic nonfinancial debt grew at a 4-3/4 percent pace in the second quarter. From the fourth quarter to June, debt of the nonfinancial sectors expanded a 4-3/4 percent pace, putting the aggregate a tad below the midpoint of its 3 to 7 percent annual range. MONEY, CREDIT, AND RESERVE AGGREGATES (Seasonally adjusted annual rates of growth) May June July QIV to July M1 Adjusted for retail sweeps -6.8 2.0 -0.5 7.9 -8.8 -0.5 -2.7 6.0 M2 -1.7 5.5 2.3 4.4 M3 3.0 4.7 3.7 5.8 Domestic nonfinancial debt Federal Nonfederal 3.7 1.8 4.4 3.8 2.5 4.3 Money and credit aggregates 4.7 3.7 5.0 1.5 Bank credit Reserve measures Nonborrowed reserves 2 -21.6 -8.3 -20.0 -9.2 Total reserves Adjusted for retail sweeps -20.8 -2.2 -2.5 13.9 -20.3 -2.8 -8.8 8.3 Monetary base Adjusted for retail sweeps 1.0 3.2 5.7 7.9 7.6 9.4 2.8 5.1 386 368 1150 1066 Memo: (Millions of dollars) Adjustment plus seasonal borrowing Excess reserves 860 1. QIV to June for debt aggregates. 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. Reserve data incorporate adjustments for discontinuities associated with changes in reserve requirements. Policy Alternatives (7) Reports since the last FOMC meeting have suggested that, on balance, aggregate measures of spending, production, and inflation are coming in fairly close to staff projections. Wage and total labor compensation figures, though, have seemed more clearly to point to an acceleration in recent quarters. Even with economic expansion pro- jected by the staff to slow to around the growth rate of potential output over the next year and a half, resource utilization would remain high. Moreover, the just-passed federal minimum wage hike, not previously assumed in the staff forecast, will add to future laborcost pressure on prices. As a result, the staff envisions that an uptrend in core CPI inflation will become apparent over the coming year, even after methodological improvements in that price measure. The increase in the CPI for 1997 in the staff forecast would be a little above the central tendency range of FOMC members in the Humphrey-Hawkins' report, even though the real growth and unemployment outcomes for 1997 would be consistent with the central tendencies for these measures. (8) Nonetheless, the Committee may well feel that it can afford to wait, as in alternative B, for additional data to accumulate to allow a more confident judgment concerning whether an underlying process of rising inflation seems to be taking hold. Arguably, the upturn in the compensation trend is not firmly established in a statistical sense, leaving questions about the level of the NAIRU. And even if wages have begun to accelerate, the profit share may be sufficiently high to cushion the extent to which faster increases in labor compensation are passed through to prices for a time. Even if the staff assessment of emerging price pressures is confirmed, with the economy still close to its potential, the pickup in inflation would be gradual. Consequently, as long as a slowdown in real GDP growth of the dimension foreseen by the staff still appears to be in train, the case for an immediate policy tightening may not be seen as compelling. While keeping policy on hold for a time in these cir- cumstances might imply the need for a greater tightening later to reverse the pickup in inflation, so long as the action were not postponed too long, a wrenching adjustment to output should be avoidable. (9) The decision at this FOMC meeting to leave the policy stance unchanged would accord with the current market consensus. Still, the elimination of the small perceived chance of a tightening at this FOMC meeting could cause interest rates to slip off, but only a bit, and the exchange value of the dollar would remain around recent levels. Over the next few weeks, when new information on the economy will be relatively sparse, market interest rates probably would be little changed. Subsequently, markets could be quite volatile in response to the heavier flow of economic news, as participants sort out its implications against the background of a Federal Reserve characterized by Chairman Greenspan as "especially vigilant to incipent inflation pressures." A partial retracing of the recent bond market rally cannot be ruled out, if, consistent with the staff forecast, incoming indicators suggest prospective inflation pressures. (10) The Committee instead may wish to implement the 25 basis point increase in the intended federal funds rate involved in alternative C. Especially in light of the recent low level of initial claims and the upside potential for inventory stocking, the Committee may question the staff forecast that economic activity is likely to downshift in the near term by enough to stabilize resource utilization. Alternatively, even if the Committee does expect growth in real aggregate demand soon to line up with that of potential output, it may be troubled by the strains on resource availability and the uptrend in core inflation embodied in the staff forecast. Particularly with the upward pressure on prices from the minimum wage hike, a rise in the nominal funds rate would be necessary at some point just to keep the real rate from falling and thus the stance of policy from effectively easing, unless the economy is appreciably weaker or output-price tradeoffs considerably more favorable than the staff predicts. An immediate tightening of 1/4 percentage point would increase the likelihood of holding the line against an upcreep in core inflation by better ensuring an eventual relief of pressures on resources. Such a tightening might be viewed as a fairly typical policy reaction to the revision to the outlook since the Committee last eased at the end of January. From the February monetary policy report to that in July, the members' central tendencies for real GDP growth and CPI inflation for 1996 were revised up by 1/2 and 1/4 points, respectively. In light of these revisions and their implications for the longer-term outlook, an immediate 25 basis point tightening, or perhaps one of 50 basis points, would be even more warranted if the Committee were seeking to move policy over time to a stance restrictive enough to put a downward tilt to the inflation rate in 1997 and beyond. (11) Given the recent adjustment to their expectations for monetary policy, market participants would be somewhat surprised by a Committee decision to raise its intended federal funds rate by 25 basis points, as under alternative C. Other short-term market rates would immediately adjust upward by a like amount. Because the likely -10- trajectory of short-term interest rates would be higher over the intermediate run than previously expected by the market, some increases in longer-term interest rates and in the exchange value of the dollar The size of the upward adjustments would depend in part would occur. on whether the market saw the policy firming as an isolated event or the first of a series of policy tightenings. Some market participants apparently sense that the Committee may require extra evidence to change direction in monetary policy, and hence might assume that Committee members now see the potential inflationary situation as having worsened appreciably and may be contemplating more than one small move. In that regard, the announcement accompanying the policy tightening presumably could provide some guidance to the market on these matters. (12) The debt of domestic nonfinancial sectors is projected by the staff to expand at about a 4-1/4 percent rate over the second half of this year, slower than the first-half pace and leaving growth for the year a little below the midpoint of its annual range. moderation is concentrated in the household sector. The Still-high fixed- rate mortgage costs should begin to bite more into residential housing activity and mortgage lending. Consumer credit should also decelerate over the second half in keeping with diminished growth in outlays on durables and a more cautious approach to such credit by both households and banks. Meanwhile, credit for business should remain avail- able on favorable terms both from banks and in securities markets. Business borrowing should continue to be moderate, supported by large equity retirements and inventory restocking. (13) The staff has revised down its projection of the growth of M2 and M3 for this year under the unchanged funds rate of the -11- greenbook forecast by 1/4 percentage point each to 4-3/4 percent and 5-3/4 percent, respectively (see table). The slight downward revi- sions primarily reflect weaker than expected money growth in July. The recent lull in M2 growth is not expected to persist, however. For one thing, demand deposits should return to a more normal pace of expansion. More fundamentally, M2 growth will be buoyed by moderate growth in nominal GDP while opportunity costs experience little further change. The projected strengthening in M2 is expected to show through to M3, but the pickup in M3 growth likely will be restrained to a degree by a sluggish projected advance in bank credit. M1 will continue to be depressed by additional sweeps; M1 adjusted for the initial effects of such sweeps is projected to grow at a 6-1/2 percent pace this year.4 Growth Rates of Money and Debt (percent, annual rates) July to December M2 M3 M1 Adjusted for sweeps Debt 1995-Q4 to 1996-Q4 5 5-1/2 4-3/4 5-3/4 -3 7 4-1/4 -2-3/4 6-1/2 4-1/2 1. June to December for domestic nonfinancial debt. 4. From July to December, the monetary base is projected to grow at a 6 percent annual rate. Abstracting from sweeps, the growth rate would be 8-1/2 percent. Alternative Levels and Growth Rates for Key Monetary Aggregates M2 M3 M1 Alt. B Alt. C Alt. B Alt. C Alt. B Alt. C 3730.7 3747.8 3755.0 3769.4 3785.1 3800.9 3817.0 3833.2 3730.7 3747.8 3755.0 3769.1 3783.8 3798.3 3813.3 3828.6 4705.1 4723.5 4738.2 4759.1 4780.2 4801.3 4822.9 4844.6 4705.1 4723.5 4738.2 4758.9 4779.4 4799.7 4820.6 4841.8 1117.2 1116.7 1108.5 1102.8 1100.4 1098.5 1096.6 1095.2 1117.2 1116.7 1108.5 1102.7 1099.9 1097.5 1095.0 1092.8 -1.7 5.5 2.3 4.6 5.0 5.0 5.1 5.1 -1.7 5.5 2.3 4.5 4.7 4.6 4.7 4.8 3.0 4.7 3.7 5.3 5.3 5.3 5.4 5.4 3.0 4.7 3.7 5.3 5.2 5.1 5.2 5.3 -6.8 -0.5 -8.8 -6.2 -2.6 -2.1 -2.1 -1.5 -6.8 -0.5 -8.8 -6.3 -3.0 -2.7 -2.7 -2.4 Quarterly Averages 96 Q1 96 Q2 96 Q3 96 Q4 5.9 4.1 3.4 5.0 5.9 4.1 3.3 4.7 7.2 5.4 4.4 5.4 7.2 5.4 4.4 5.2 -2.7 -0.6 -5.5 -2.6 -2.7 -0.7 -5.5 -3.1 Growth Rate From Dec-95 Jul-96 4.3 5.0 4.3 4.7 6.1 5.4 6.1 5.2 -2.5 -2.9 -2.5 -3.4 5.8 5.8 5.9 5.9 5.7 5.7 2.0 to 6.0 -2.7 -1.8 -2.8 -2.7 -1.8 -3.0 Levels in Billions May-96 Jun-96 Jul-96 Aug-96 Sep-96 Oct-96 Nov-96 Dec-96 Monthly Growth Rates May-96 Jun-96 Jul-96 Aug-96 Sep-96 Oct-96 Nov-96 Dec-96 To Jul-96 Dec-96 Jul-96 95 Q4 94 Q4 95 Q4 96 Q4 95 Q4 1996 Target Ranges: 4.4 4.4 4.0 4.0 4.7 4.6 1.0 to 5.0 -13- Directive Language (14) Presented below is draft wording for the operational paragraph that includes the usual options for Committee consideration. OPERATIONAL PARAGRAPH In the implementation of policy for the immediate future, the Committee seeks to DECREASE (SOMEWHAT/SLIGHTLY)/ maintain/INCREASE (SOMEWHAT/SLIGHTLY) the existing degree of pressure on reserve positions. In the context of the Com- mittee's long-run objectives for price stability and sustainable economic growth, and giving careful consideration to economic, financial, and monetary developments, somewhat (SLIGHTLY) 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 moderate growth in M2 and M3 over coming months. August 15, 1996 SELECTED INTEREST RATES (percent) Short-Term federal funds Treasury bills secondary market Long-Term COs secondary market comm. paper money market mutual bank prime U.S. govemment constant maturity yields corporate conventional home mortgages A-utility municipal secondary primary recently Bond market market S3-month 6-month -year 3-month 1-month loan -year 10-year 30-year offered Buyer 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 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 5.08 5.18 4.79 5.37 4.71 5.61 4.57 5.57 5.13 5.73 5.28 5.15 4.73 8.50 8.25 6.59 4.95 7.02 5.59 7.16 5.97 8.23 7.00 6.34 5.63 8.72 7.35 8.42 6.94 6.01 5.19 Monthly Aug Sep Oct Nov Dec 95 95 95 95 95 5.74 5.80 5.76 5.80 5.60 5.40 5.28 5.28 5.36 5.14 5.41 5.30 5.32 5.27 5.13 5.43 5.31 5.28 5.14 5.03 5.77 5.73 5.79 5.74 5.62 5.85 5.82 5.81 5.80 5.84 5.27 5.24 5.20 5.26 5.20 8.75 8.75 8.75 8.75 8.65 6.10 5.89 5.77 5.57 5.39 6.49 6.20 6.04 5.93 5.71 6.86 6.55 6.37 6.26 6.06 7.84 7.55 7.36 7.30 7.10 6.37 6.18 6.05 5.89 5.74 8.24 8.01 7.88 7.79 7.53 7.86 7.64 7.48 7.38 7.20 5.93 5.81 5.74 5.64 5.57 Jan Feb Mar Apr May Jun Jul Weekly Apr 96 96 96 96 96 96 96 5.56 5.22 5.31 5.22 5.24 5.27 5.40 5.00 4.83 4.96 4.95 5.02 5.09 5.15 4.92 4.77 4.96 5.06 5.12 5.25 5.30 4.82 4.69 5.06 5.23 5.33 5.48 5.52 5.39 5.15 5.29 5.36 5.36 5.46 5.53 5.56 5.29 5.39 5.40 5.38 5.45 5.44 5.05 4.85 4.76 4.75 4.74 4.76 4.81 8.50 8.25 8.25 8.25 8.25 8.25 8.25 5.20 5.14 5.79 6.11 6.27 6.49 6.45 5.65 5.81 6.27 6.51 6.74 6.91 6.87 6.05 6.24 6.60 6.79 6.93 7.06 7.03 7.09 7.31 7.75 7.90 8.02 8.13 8.07 5.72 5.73 6.07 6.20 6.22 6.25 6.15 7.45 7.51 8.07 8.32 8.46 8.59 8.56 7.03 7.08 7.62 7.93 8.07 8.32 8.25 5.44 5.31 5.51 5.73 5.77 5.92 5.98 24 96 5.24 4.92 5.04 5.20 5.35 5.38 4.73 8.25 6.11 6.54 6.80 7.90 6.16 8.26 7.92 5.74 May May May May May 1 8 15 22 29 96 96 96 96 96 5.30 5.22 5.26 5.22 5.19 4.99 5.00 5.00 5.02 5.04 5.06 5.13 5.10 5.12 5.13 5.28 5.37 5.30 5.26 5.33 5.35 5.38 5.36 5.35 5.34 5.39 5.40 5.39 5.37 5.37 4.75 4.73 4.74 4.74 4.74 8.25 8.25 8.25 8.25 8.25 6.15 6.36 6.24 6.20 6.25 6.61 6.85 6.72 6.65 6.69 6.85 7.06 6.91 6.84 6.88 8.22 8.01 7.92 7.90 8.08 6.32 6.32 6.17 6.10 6.17 8.56 8.43 8.37 8.38 8.54 7.99 8.24 8.08 8.01 8.03 5.76 5.80 5.78 5.75 5.76 Jun Jun Jun Jun 5 12 19 26 96 96 96 96 5.33 5.24 5.45 5.21 5.06 5.12 5.08 5.11 5.17 5.29 5.26 5.25 5.44 5.51 5.47 5.51 5.39 5.47 5.47 5.48 5.41 5.43 5.44 5.48 4.76 4.75 4.77 4.78 8.25 8.25 8.25 8.25 6.42 6.52 6.50 6.52 6.84 6.94 6.95 6.94 6.98 7.07 7.10 7.09 8.12 8.20 8.20 7.97 6.20 6.34 6.27 6.20 8.64 8.64 8.59 8.48 8.30 8.39 8.30 8.29 5.86 5.91 5.93 5.98 3 96 96 96 96 96 5.53 5.26 5.23 5.25 5.53 5.09 5.17 5.13 5.15 5.18 5.21 5.37 5.29 5.29 5.30 5.43 5.61 5.49 5.51 5.54 5.47 5.57 5.55 5.52 5.54 5.49 5.47 5.45 5.41 5.42 4.81 4.81 4.78 4.80 4.82 8.25 8.25 8.25 8.25 8.25 6.36 6.59 6.45 6.40 6.45 6.78 7.02 6.86 6.80 6.87 6.94 7.16 7.04 6.98 7.04 8.23 8.09 8.01 8.06 7.76 6.15 6.24 6.10 6.10 6.02 8.72 8.56 8.44 8.53 8.20 8.14 8.42 8.23 8.19 8.23 5.94 6.01 5.97 6.01 5.98 7 96 5.38 5.06 5.12 5.32 5.43 5.41 4.87 8.25 6.14 6.56 6.77 7.73 5.92 8.21 7.88 5.89 9 96 13 96 14 96 5.10 4.89 5.22 5.01 5.03 5.02 5.11 5.11 5.10 5.27 5.31 5.29 5.41 5.39 5.39 5.38 5.38 5.39 8.25 8.25 8.25 6.09 6.14 6.14 6.50 6.57 6.58 6.70 6.78 6.78 Jul Jul Jul Jul Jul Aug Daily Aug Aug Aug 10 17 24 31 fund fixed-rate fixed-rate ARM 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 of the statement week. Column 13 is the Bond Buyer revenue index. Column 14 isthe FNMA purchase yield, plus loan servicing fee, on 30-day mandatory delivery commitments. Column 15 is the average contract rate on new commitments for fixed-rate mortgages (FRMs) with 80 percent loan-to-value ratios at major institutional lenders. Column 16 isthe 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. Strictly Confidential (FR)- class Money and Credit Aggregate Measures AUGUST 19, 1996 Sesonally adjusted Money stock measures and liquid assets nontransactions Period Annual arowth rates(%) t Annually (Q4 to Q4) 1993 1994 M1 M2 1 2 Bank credit components In M2 In M3 only 3 4 FOMC Domestic nonfinancial debt to total loans M3 L and investments' U. m S. 2 gove ment other= 5 6 7 8 9 total' ~ 1 10.5 2.4 1.4 0.6 -2.4 -0.3 -0.5 6.2 1.0 1.6 1.4 2.6 5.0 6.8 8.4 5.7 4.1 5.1 -1.8 5.2 5.2 4.0 6.8 14.5 5.9 7.3 8.7 4.4 6.1 5.6 1995-Q3 1995-Q4 1996-Q1 -1.5 -5.1 -2.7 6.9 4.1 5.9 10.9 8.3 9.7 12.1 6.3 12.6 7.9 4.5 7.2 9.1 5.9 5.1 6.6 4.8 5.3 4.6 2.3 2.7 5.0 5.5 5.4 4.9 4.7 4.7 1996-Q2 -0.6 4.1 6.1 10.6 5.4 2.5 5.2 4.7 4.8 1995 Quarterly (average) Monthly 1995-JULY 0.9 6.3 8.8 12.3 7.5 10.7 5.7 4.3 3.1 3.4 -1.7 -3.8 -8.8 -3.0 -4.4 6.6 4.3 2.5 4.0 5.7 10.5 8.1 7.6 7.1 10.3 10.3 9.6 10.4 -0.1 -3.7 7.3 5.4 4.1 3.2 3.8 7.8 9.9 5.8 1.4 5.4 5.2 7.7 3.6 4.0 3.7 2.0 0.8 2.9 4.4 -0.4 5.9 5.1 5.2 6.8 4.5 4.8 3.9 4.6 6.2 3.2 -6.1 -2.0 10.0 -3.2 -6.8 -0.5 -8.8 4.8 5.4 11.7 1.9 -1.7 5.5 2.3 9.7 8.6 12.4 4.1 0.6 8.1 7.0 18.0 28.6 9.0 1.5 21.2 1.5 9.3 7.5 10.1 11.1 1.8 3.0 4.7 3.7 4.0 4.4 12.6 4.5 -1.0 9.6 4.6 -2.0 5.9 1.3 1.5 1.0 -2.0 7.6 11.2 3.6 1.8 2.5 5.2 6.2 4.3 4.8 4.4 4.3 3.3 6.6 6.1 4.5 3.7 3.8 1126.6 1123.6 3729.9 3735.9 2603.3 2612.3 956.3 957.5 4686.2 4693.4 5785.4 5807.2 3641.4 3659.3 3696.0 3707.0 10384.4 10425.9 14080.4 14132.9 MAY JONE 1117.2 1116.7 3730.7 3747.8 2613.5 2631.2 974.4 975.6 4705.1 4723.5 5802.5 3663.4 3668.1 3712.6 3720.2 10464.4 10502.1 14177.0 14222.4 JULY p 1108.5 3755.0 2646.5 983.2 4738.2 1 1118.0 3749.4 2631.4 972.4 4721.8 8 1106.0 3753.9 2647.9 983.2 4737.1 15 22 29 p 1102.6 1107.1 1111.3 3747.5 3754.0 3756.3 2645.0 2646.9 2645.0 984.1 984.1 983.7 4731.6 4738.1 4740.0 5 p 1108.0 3766.2 2658.2 982.4 4748.6 AUG. SEP. OCT. NOV. DEC. 1996-JAN. FEB. MAR. APR. MAY JUNE JULY p Levela (Sbillions). Monthly 1996-MAR. APR. Weekly 1996-JULY AUG. 3671.3 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 I FOMC Components of Money Stock and Related Measures AUGUST 19, 1996 Samonay4umted Money market urrency d epmand os Other checkable deposits Sa s deposit Small denomination time deposits. mutualfunds Retail' Institution- Large denomination time deposits' RP's Eurodollars Short-term Treasury securities Comm ial pape Bankers acceptances' 11 12 13 14 Svin b only 1 IreVjee 2 3 5 1 7 8 I 10 I a.j.Oions1I Annual (Q4) 1993 1994 1995 320.0 352.8 371.9 381.6 383.3 388.7 412.1 404.2 359.2 1215.1 1162.7 1123.8 792.3 812.2 934.6 356.5 383.1 460.1 196.3 182.9 225.2 334.8 358.9 414.3 155.3 175.9 184.3 66.1 81.7 91.6 170.7 179.8 339.5 381.2 184.5 468.7 367.3 368.5 369.5 388.5 389.3 389.4 380.8 377.2 372.4 1096.2 1101.6 1108.4 919.3 923.6 926.8 431.7 443.6 450.3 218.6 218.5 221.7 393.9 396.6 400.5 188.4 192.9 192.5 92.6 93.1 93.7 183.0 183.5 183.9 434.0 437.4 457.1 438.6 370.8 371.6 373.2 388.1 388.2 389.8 364.1 360.4 353.0 1116.1 1120.6 1134.6 930.2 935.5 938.1 455.0 460.1 465.1 223.7 224.8 227.2 409.8 415.5 417.5 190.0 185.3 177.6 92.9 90.7 91.2 184.2 184.5 184.8 465.9 464.5 475.6 437.1 13.4 12.6 11.9 1996-JAN. PEB. MAR. 373.6 373.3 375.2 393.5 397.4 407.1 343.2 337.8 335.4 1151.8 1164.5 1183.0 937.8 937.4 932.6 468.6 474.7 487.6 230.6 243.9 248.3 416.6 422.4 429.7 184.4 186.2 184.1 95.6 96.6 94.2 185.0 185.0 185.2 466.0 444.8 459.1 437.2 442.3 445.1 11.7 10.2 9.8 APR. MAY JUNE 376.0 406.3 409.6 332.4 930.4 928.6 928.2 488.7 487.4 496.0 245.6 243.5 249.4 432.2 437.6 443.6 182.9 195.1 183.6 96.8 98.2 99.1 456.9 427.7 461.0 473.0 10.3 10.7 315.0 1193.2 1197.5 1206.9 185.6 186.0 413.7 JULY p 382.6 410.6 306.8 1214.6 930.0 501.8 252.9 452.0 180.8 97.5 Monthly 1995-JULY ADO. SEP. OCT. NOV. DEC. 377.1 379.4 321.7 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 overnight and term. p preliminary 382.4 401.5 438.2 15.7 13.8 12.6 429.0 433.3 12.1 12.4 12.8 440.5 437.1 NET CHANGES IN SYSTEM HOLDINGS OF SECURITES Millions of dollars, not seasonally adjusted August 16, 1996 Treasury bills Period Treasurycoupons urchases 3 SNet Redemptions Net purchases | 1 change (-) 17,717 17.484 10,932 17,717 17.484 10,032 10,350 9.168 4,966 1995 --Q1 --02 Q3 ----04 4,470 842 5,621 4,470 842 4,721 2,549 100 2,317 1996 ---Q1 --02 3,399 1993 1994 1995 1995 August September October November December 433 409 1,350 4,271 ------900 35 3,399 433 409 450 4,271 over 10 5-10 1-5 1,899 4,168 3,818 1,239 3,457 3.606 3,122 STRICTLY CONFIDENTIAL (FR) CLASS II-FOMC 1 Redemptions Net (-) Change 1,065 5,974 -7,412 -1,023 621 370 485 -621 4,156 200 4,506 -850 8,314 541 8,965 -4,083 10,395 -15,979 8,644 1,228 787 -1,228 2,691 -1,336 5,952 -8,879 10,133 200 -485 400 4,591 311 563 -118 4,551 4,533 -2,984 608 -427 2,404 6,666 1,228 -1,228 -1,228 787 2,691 -12,623 -1,689 5,433 -505 4,174 6,463 7,118 1,884 1996 January February March 1,899 88 April May June July RPs total 35,374 31,975 16.970 485 2,317 ( 18,431 15,493 8,241 100 100 Net change outright holdings 767 2.337 1,476 1,138 100 1,884 479 Federal agencies redemptions 1,065 -108 2,697 -16 3,271 -52 3,311 --. Weekly May 1 8 -47 --- 15 22 29 June 5 12 19 -16 3,311 3,271 __- 26 July 3 ---- 10 17 24 31 August 7 14 -37 -- _ -15 2,476 1,279 Memo: LEVEL (bil. $)6 14 August 198.9 218.4 93.9 34.1 2,476 l' ___________________________ 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. -12.1 400.2 385.9 39.5 -15,158 2,610 -1,895 5,194 -4,427 2,584 -6,784 17,726 -8,919 5,399 476 5,130 -12,007 12.371 -9,379 160 4. Reflects net change in 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: August 14 within 1 year 1.4 1-5 0.5 5-10 0.5 over 10 0.0 total 2.4 

Federal Reserve (1996, August 19). Bluebook. Bluebooks, Federal Reserve. https://whenthefedspeaks.com/doc/bluebook_19960820

@misc{wtfs_bluebook_19960820,
  author = {Federal Reserve},
  title = {Bluebook},
  year = {1996},
  month = {Aug},
  howpublished = {Bluebooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/bluebook_19960820},
  note = {Retrieved via When the Fed Speaks corpus}
}