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) September 20, Class I - FOMC 1996 MONETARY POLICY ALTERNATIVES Recent Developments (1) The Committee's decision to leave the funds rate unchanged at the August meeting was anticipated by market participants and thus had little effect on market interest rates. With incoming information on balance confirming earlier indications that the economic expansion was moderating and inflation remaining subdued, the asymmetric tilt in the directive was not utilized and the intended funds rate was maintained at 5-1/4 percent during the intermeeting period. rate. Federal funds have generally traded near the intended Indeed, despite further reductions in required operating balances owing to new sweeps of retail deposits, volatility of the daily effective funds rate around its intended rate remains relatively low; some unpredictable late-in-the-day tightness in the funds rate has occurred, however. (2) In the weeks following the FOMC meeting, market interest rates rose somewhat (chart), reversing their declines of early August, as output growth was seen to have more momentum than had been anticipated and press reports suggested increased concern among Committee members about the outlook for inflation. Credit markets rallied in mid-September on favorable inflation reports and sluggish retail sales data, but gave back part of their gains, particularly at the short end, after a wire service reported that a number of Reserve Banks had requested discount rate increases. On balance over the intermeeting period, short-term interest rates have risen about 10 to 15 basis 1. In the two maintenance periods completed since the last FOMC meeting, borrowing has averaged about $50 million above its allowance of $325 million. Chart 1 TREASURY INTEREST RATES Daily .Day 30-Year Bond .*-- .- . . .. .. Retail Discount Se es -, -- .... 7.5 7.0 - . 6.5 ....4-** ........... ...... Rate St 1ry ..-- 10-Year Note ".. Per'cent CPV Augus Chicago FAC Emlort M min tes FOMC 'rt NAPM Q2 GDP Dur. Goods 6.0 3-Year Note 5.5 3-Month Bill 5.0 * J~ ~ * J- I - I I * I * 12 August 29 July * 4.5 1. 16 September FUTURES CONTRACTS Federal Funds INFLATION EXPECTATIONS Percent Percent 1 Sept. 5 .' Sept. 20 .* e y * " Aug I I Sep August 19 I Oct I Nov I Dec 1996 I Jan 1997 Feb JFMAMJASONFMAMJASONDFMAMJASOND 1995 1996 EXCHANGE RATES 3-Month Eurodollar Percent Index Mark* Y * August 19 '''* ,°.. .° ^*^^r - Yen' Trade-Weighted Dollar Index (3/73= 100 Sep Dec 1996 Mar Jun Sep 1997 Dec ia J I F M I A M 1996 SIndex, Jan 1996=100 Weekly. Daily beginning August 19. II J J A S -2- points, while intermediate- and long-term rates are up 20 to 25 basis points. Recent surveys of short- and long-term inflation expectations (available through August for professional forecasters and September for households) show essentially no evidence of a rise (chart). Federal funds futures contracts now suggest a two-thirds chance of a 1/4 point increase in the funds rate at the September FOMC meeting, while Eurodollar futures rates seem to imply only a modest amount of tightening through next year, once likely term premiums are taken into account (chart). Equity markets rebounded over the period, with major indexes up around 2 to 3 percent to record highs; small-cap stocks rose smartly but remained below records set earlier this year. (3) Reflecting in part the increase in U.S. interest rates, the dollar's weighted-average exchange value rose almost 1 percent over the intermeeting period (chart). Declines in market interest rates abroad also contributed to a firmer dollar, as foreign ten-year rates fell 15 basis points and three-month rates dropped 25 basis points, on average. Official lending rates were lowered by several central banks, including the Bundesbank and the Bank of Canada. Canadian, German, and U.K. stock indexes recovered to or exceeded previous highs, while those in Japan, France, and Italy remained well below recent peaks, as investors were apparently less optimistic about prospects for economic activity in the latter group of countries. ; the Desk again did not intervene. (4) Broad money growth picked up in August, but by somewhat less than projected at the time of the last FOMC meeting. M2 grew at a 3-3/4 percent rate, leaving it in the upper portion of its 1 to 5 percent annual range. Liquid deposits continued to run off, but at a slower pace than in July. 2 Retail money funds grew rapidly, as their yields eased more gradually than market rates in early August. Small time deposits, whose rates had increased appreciably in spring and early summer in lagged response to upward movements in market rates, posted a solid gain. Little substitution between these M2 components and capital market mutual funds was evident, as stock fund flows resumed in strength and bond fund flows also picked up in August. 3 (5) Despite a decline in bank credit, M3 accelerated to a 5 percent growth rate in August, leaving it somewhat below the upper end of its 2 to 6 percent annual range. With favorable yield spreads, institutional money funds posted robust growth. Large time deposits also grew rapidly, as banks continued to shift markedly away from reliance on overseas sources of funding. Data for early September suggest a further acceleration in both M2 and M3. (6) Growth of the debt of nonfederal sectors has moderated a bit in recent months. The rate of increase in consumer credit has remained below that earlier this year; the less ebullient expansion of such credit primarily reflects more moderate increases in spending on consumer durables and repayments of earlier loans, but strains on household balance sheets and less generous loan supplies also may be 2. M1 declined at a 10 percent rate in August. After adjusting for the initial effects of new sweep programs, M1 was up at a 4-1/2 percent rate. Currency growth moderated to a 7-1/2 percent pace, while both demand deposits and NOW accounts fell sharply because of new sweeps. The monetary base rose at a 6-1/4 percent rate, or at a 9-3/4 percent rate after adjusting for sweeps. 3. The effects of capital losses in July on the August monthaverage value of assets in stock mutual funds restrained the growth rate of M2 plus stock and bond funds to only 1 percent in August. restraining borrowing some. Comprehensive data on residential mort- gage borrowing lag substantially; real estate lending by banks posted a solid gain in August, but, rather than additional overall strength in home mortgage borrowing, this may reflect shifts to adjustable-rate Business borrow- financing, which banks tend to hold on their books. ing has slackened somewhat, particularly in commercial paper and corporate bond markets, as hefty profits are perhaps funding a larger share of business investment spending. Commercial and industrial lending at banks has strengthened in early September, and bank business lending in the third quarter is running ahead of its pace earlier this year, perhaps reflecting the financing of higher levels of inventories. Loan supply conditions are still quite favorable for busi- nesses, and quality spreads in securities markets remain at historically low levels. Outstanding state and local debt has resumed its decline since mid-year, owing to continued retirement of advancerefunded debt and a slackened pace of new issues. On the other hand, federal borrowing has picked up a little this summer. Growth of total nonfinancial debt for the year has edged down to around the midpoint of its annual range. MONEY, CREDIT, AND RESERVE AGGREGATES (Seasonally adjusted annual rates of growth) June July Aug. QIV to Aug. -0.5 8.0 -8.8 -0.3 -9.9 4.5 -3.4 5.9 M2 5.3 1.9 3.7 4.2 M3 4.5 2.6 5.1 5.5 Domestic nonfinancial debt Federal Nonfederal 5.0 2.1 6.0 5.3 6.0 5.0 3.4 4.4 3.1 5.1 4.0 5.5 Bank credit 1.5 1.0 -1.0 2.8 Money and credit aggregates M1 Adjusted for retail sweeps Reserve measures Nonborrowed reserves -8.3 -20.0 -20.5 -10.3 Total reserves Adjusted for retail sweeps -2.5 14.0 -20.3 -2.3 -21.1 8.1 -10.0 8.4 Monetary base Adjusted for retail sweeps 5.7 7.9 7.6 9.5 6.2 9.7 3.2 5.7 386 368 334 1150 1065 965 Memo: (Millions of dollars) Adjustment plus seasonal borrowing Excess reserves 1. 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) The staff has read the mixed economic data since the August FOMC meeting as still consistent with growth moderating to a pace about in line with the economy's potential, assuming that the Committee's policy stance remains unchanged through the forecast period. The outlook for output growth and the unemployment rate for the rest of 1996 and 1997 is essentially the same as in the last Greenbook and remains broadly consistent with the central tendencies of the Committee members' forecasts for these variables made in July. Recent core inflation data have been a shade lower than the staff anticipated, but resource utilization remains high enough in the staff forecast to put some upward pressure on increases in labor costs and prices. With crude energy prices likely to be more elevated for a time than had been assumed and a hike in the minimum wage further boosting costs and prices, the staff's projection for consumer price inflation remains around the upper ends of the Committee members' central tendencies for both years. However, the underlying profile of inflation going forward under the staff forecast may be slightly more adverse than Committee members were expecting in July, because they may not have fully incorporated upcoming technical adjustments in the consumer price index at the time they were surveyed. (8) The Committee thus might view such an inflation outcome as unacceptable. Nonetheless, there are reasons why the Committee might choose the unchanged federal funds rate of alternative B for the upcoming intermeeting period. Although labor markets are tight and wages accelerating, the extent and timing of any feedthrough of this acceleration to overall compensation and ultimately prices remain uncertain. Real interest rates are in the neighborhood of levels that over the past fifteen years have been associated on average with little change in inflation, and the growth of money and credit has been moderate, suggesting perhaps that if the stance of policy is stimulative, it may not be greatly so. Indeed, the staff forecast has only a gradual pickup in core inflation, which in any event will start from a level in the third quarter that is probably lower than the Committee had anticipated. In these circumstances, waiting to assess better the economic situation might not incur much risk of a significant deterioration in inflation expectations, provided the delay were not too long, because containing inflation will still be possible before it has risen appreciably above the general level of recent years. Moreover, the soft cast to the recent trend of retail sales and continued surprisingly favorable readings on broad price indexes may lead the Committee to consider the staff forecast as too pessimistic about likely inflation pressures. If so, inflation is more apt to be kept within acceptable bounds without policy adjustment. (9) With market participants apparently placing greater than even odds on policy tightening at this meeting, interest rates would likely decline and the dollar weaken on foreign exchange markets if the unchanged policy of alternative B were adopted. Even before the discount rate story earlier this week, markets had built in close to 50/50 odds of a slight policy tightening, and alternative B probably would trigger rate declines that not only reversed the increases associated with the story, but some of those registered earlier in the intermeeting period as well. Many would likely view the Committee as merely delaying policy action until the November meeting rather than changing its fundamental assessment of the potential inflation threat, and this reaction would tend to limit the decline in long-term rates. There is a risk that policy inaction would induce some in the market to question the Committee's commitment to holding down inflation, or its willingness to take forward-looking action to do so, which would tend to boost inflation expectations. Given uncertainties about the outlook and the perceived lack of a policy consensus within the Federal Reserve, markets are likely to remain highly sensitive to new economic data and to indications of Committee members' inclinations. (10) A tightening of policy at this Committee meeting, whether by 50 basis points, as assumed in alternative C, or by only 25 basis points, would improve the chances that price pressures would be contained and inflation outcomes would be consistent with the Committee members' expectations in July. In the alternative scenarios in the Greenbook, an increase of one percentage point in the federal funds rate over the next year is sufficient to tilt core inflation down. A 25 or 50 basis point tightening at this meeting could be seen either as a first installment in moving more deliberately toward lower inflation, or as a more limited action aimed at holding the line. With labor markets tight and wage gains already strengthening, the Committee may see it as only a matter of time before total compensation puts sufficient pressure on profit margins to prompt businesses to raise their prices faster. Especially if aggregate demand has more momentum than in the staff forecast, waiting for very long to tighten, given the lags in the effects of monetary policy, risks embedding some rise in inflation and inflation expectations into the economy and financial markets. That result would necessitate more aggressive and potentially disruptive policy action at a later date to return inflation to recent levels. (11) Markets participants do not have a 25 basis point firming at this FOMC meeting fully built into the structure of interest rates, and would be considerably surprised by a 50 basis point hike. Thus, some of the former and the bulk of the latter would be matched by a rise in short-term rates. The impact on intermediate- and long- term rates is less certain, especially because the firming would constitute a reversal in the direction of policy. Such policy reversals in the past have often resulted in fairly large movements in intermediate- and long-term rates. However, in light of signs of moderat- ing aggregate demand and damped inflation, as well as statements in the Committee's published minutes, much market commentary has accepted the notion that a reversal in the direction of policy could be limited in scope. Still, policy action of any size will probably lead market participants to revise their view of the path of policy and build in some expectations of additional tightenings. A 1/4 point firming is more likely to leave them skittish as they expect further action soon, while the larger tightening would have a greater immediate impact on rates. The statement accompanying the announcement of the policy change might be able to reduce the chance that the market would come to extrapolate sizable further increases in the funds rate. (12) Borrowing by domestic nonfinancial sectors in the staff forecast is expected to remain moderate over the final months of the year. Households are anticipated to use consumer credit at around the reduced pace of recent months while growth in mortgage indebtedness probably will decelerate in keeping with a slowdown in home buying. Elevated debt burdens and further selective tightening of consumer credit availability should act as a mild restraint on household borrowing. Business debt growth is likely to strengthen a bit in the -10- near term in keeping with inventory restocking and some levelling off of cash flow. Credit is expected to remain readily available to businesses from banks and securities markets; firms with access to the bond market will probably concentrate their borrowing there, especially if bond rates do not rise much from recent levels. With growth in federal debt fairly subdued, debt of domestic nonfinancial sectors is expected to expand at a 4-1/4 percent pace over the final four months of 1996, implying growth of about 5 percent for the year as a whole. (13) In view of slower-than-expected M2 and M3 growth in recent months, the staff has revised down projected growth for those aggregates in 1996. M2 is now expected to increase at a 4-1/2 percent rate this year and M3 at a 5-3/4 percent rate under alternative B, somewhat below the upper ends of their growth ranges for the year. Over the August-to-December period, the expansion of M2 is projected to pick up to about a 4-3/4 percent pace, broadly in line with GDP growth under alternative B. The pickup in M2 should show through to M3, and growth in the latter is forecast to strengthen to a 6 percent rate over the final four months of this year, abetted by a strengthening of the expansion of bank credit. Continued large sweeps of other checkable deposits and demand deposits will distort measured M1. In- deed, M1 is projected to run off at about a 5 percent annual rate over the August-to-December period, while expansion of sweep-adjusted M1 increases to a 6-1/2 percent rate. -11- Growth Rates of Money and Debt (Percent, annual rates) August to December 4-3/4 Adjusted for sweeps Debt 6-1/2 4-1/4 1995:Q4 to 1996:04 4-1/2 5-3/4 -4 6 Alternative Levels and Growth Rates for Key Monetary Aggregates M2 M3 M1 Alt. B Alt. C Alt. B Alt. C Alt. B Alt. C 3740.0 3745.8 3757.2 3772.5 3787.3 3801.5 3815.7 3740.0 3745.8 3757.2 3772.5 3786.0 3797.7 3809.4 4714.5 4724.6 4744.8 4771.3 4794.0 4816.7 4839.6 4714.5 4724.6 4744.8 4771.3 4793.2 4814.3 4835.6 1116.7 1108.5 1099.4 1093.5 1088.0 1084.9 1081.6 1116.7 1108.5 1099.4 1093.5 1087.5 1083.5 1079.0 Monthly Growth Rates Jun-96 Jul-96 Aug-96 Sep-96 Oct-96 Nov-96 Dec-96 5.3 1.9 3.7 4.9 4.7 4.5 4.5 5.3 1.9 3.7 4.9 4.3 3.7 3.7 4.5 2.6 5.1 6.7 5.7 5.7 5.7 4.5 2.6 5.1 6.7 5.5 5.3 5.3 -0.5 -8.8 -9.9 -6.4 -6.0 -3.4 -3.7 -0.5 -8.8 -9.9 -6.5 -6.5 -4.5 -4.9 Quarterly Averages 96 Q1 96 Q2 96 Q3 96 Q4 5.8 3.9 2.9 4.6 5.8 3.9 2.9 4.2 7.1 5.3 4.1 5.9 7.1 5.3 4.1 5.7 -2.7 -0.7 -6.7 -5.7 -2.7 -0.7 -6.7 -6.2 4.1 4.7 4.1 4.2 5.7 6.0 5.7 5.7 -3.4 -4.9 -3.4 -5.6 3.9 4.9 4.3 4.4 3.9 4.9 4.3 4.3 5.8 6.2 5.6 5.7 5.8 6.2 5.6 5.6 -1.8 -1.7 -3.3 -3.9 -1.8 -1.7 -3.3 -4.0 Levels in Billions Jun-96 Jul-96 Aug-96 Sep-96 Oct-96 Nov-96 Dec-96 Growth Rate From Dec-95 Aug-96 94 95 95 95 Q4 Q4 Q4 Q4 To Aug-96 Dec-96 95 96 96 96 Q4 Q2 Q3 Q4 1996 Target Ranges: 1 to 5 2 to 6 -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 Committee'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 might (WOULD) 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. September 23, 1996 SELECTED INTEREST RATES (percent) Short-Term Lon-Term federal Treasury bills CDs secondary funds secondary market market 3-month I 6-month I 1-year _1 __ _1 2 | comm. money market bank paper mutual prime 3-month 1-month U.S. government constant fund loan 3-year maturity yields 10-year 30-year corporate conventional home mortgages A-utility municipal secondary primary recently Bond offered Buyer 3 4 5 6 7 8 9 10 11 12 13 market market fixed-rate fixed-rate I ARM 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 Sep 95 Oct 95 Nov 95 Dec 95 5.80 5.76 5.80 5.60 5.28 5.28 5.36 5.14 5.30 5.32 5.27 5.13 5.31 5.28 5.14 5.03 5.73 5.79 5.74 5.62 5.82 5.81 5.80 5.84 5.24 5.20 5.26 5.20 8.75 8.75 8.75 8.65 5.89 5.77 5.57 5.39 6.20 6.04 5.93 5.71 6.55 6.37 6.26 6.06 7.55 7.36 7.30 7.10 6.18 6.05 5.89 5.74 8.01 7.88 7.79 7.53 7.64 7.48 7.38 7.20 5.81 5.74 5.64 5.57 5.56 5.22 5.31 5.22 5.24 5.27 5.40 5.22 5.00 4.83 4.96 4.95 5.02 5.09 5.15 5.05 4.92 4.77 4.96 5.06 5.12 5.25 5.30 5.13 4.82 4.69 5.06 5.23 5.33 5.48 5.52 5.35 5.39 5.15 5.29 5.36 5.36 5.46 5.53 5.40 5.56 5.29 5.39 5.40 5.38 5.45 5.44 5.39 5.05 4.85 4.76 4.75 4.74 4.76 4.81 4.82 8.50 8.25 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 6.21 5.65 5.81 6.27 6.51 6.74 6.91 6.87 6.64 6.05 6.24 6.60 6.79 6.93 7.06 7.03 6.84 7.09 7.31 7.75 7.90 8.02 8.13 8.07 7.87 5.72 5.73 6.07 6.20 6.22 6.25 6.15 6.00 7.45 7.51 8.07 8.32 8.46 8.59 8.56 8.33 7.03 7.08 7.62 7.93 8.07 8.32 8.25 8.00 5.44 5.31 5.51 5.73 5.77 5.92 5.98 5.84 Jan Feb Mar Apr May Jun Jul Aug Weekly Jun Jun Jun Jun Daily 96 96 96 96 96 96 96 96 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 Jul Jul Jul Jul Jul 3 10 17 24 31 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 Aug Aug Aug Aug 7 14 21 28 96 96 96 96 5.38 5.10 5.18 5.21 5.06 5.02 5.04 5.04 5.12 5.11 5.11 5.13 5.32 5.29 5.33 5.41 5.43 5.40 5.38 5.38 5.41 5.38 5.38 5.37 4.87 4.79 4.82 4.79 8.25 8.25 8.25 8.25 6.14 6.12 6.15 6.31 6.56 6.54 6.59 6.74 6.77 6.74 6.80 6.95 7.73 7.81 7.98 8.16 5.92 5.98 6.00 6.09 8.21 8.28 8.35 8.62 7.88 7.88 7.93 8.09 5.89 5.81 5.79 5.75 Sep Sep Sep 4 96 11 96 18 96 5.39 5.16 5.22 5.15 5.17 5.11 5.29 5.33 5.23 5.57 5.59 5.49 5.49 5.54 5.48 5.42 5.46 5.44 4.83 4.82 4.83 8.25 8.25 8.25 6.52 6.52 6.92 6.94 7.09 7.12 8.14 7.99 6.19 6.12 8.67 8.42 8.34 8.28 5.85 5.90 6.37 6.80 7.00 -- 8.53 8.14 5.83 5.29 5.29 - p 5.07 5.11 - 5.17 5.26 -- 5.44 5.53 -- 5.45 5.32 5.52 5.43 5.45 8.25 8.25 6.29 6.46 6.74 6.87 6.95 7.05 Sep 13 96 Sep 19 96 Sep 20 96 - 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 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 for 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)- class11 FOM Money and Credit Aggregate Measures SEPTFAER 23, 199 Seasonally adjusted Mon ey stock measures and liquid assets Bank credit nontransaclions components Period Ml M2 1 2 In M2 In M3 only 3 4 M3 L 5 6 total loans and Domestic nonfinancial debt investments' U. S. government 7 8 2 other2 totalz 9 10 Annual arowth rates( ): Annually (04 to Q4) 1993 1994 1995 10.5 2.4 -1.8 1.4 0.6 3.9 -2.4 -0.3 6.6 -0.5 6.2 14.5 1.0 1.6 5.8 1.4 2.6 7.2 5.0 6.8 8.7 8.4 5.7 4.4 4.0 5.1 5.9 5.2 5.2 5.5 Quarterly (average) 1995-Q3 1995-Q4 1996-01 1996-Q2 -1.5 -5.1 -2.7 -0.7 6.6 4.1 5.8 3.9 10.5 8.4 9.6 5.9 12.1 6.4 12.3 10.5 7.7 4.6 7.1 5.3 8.9 6.0 5.0 5.5 6.6 4.8 5.3 2.6 4.4 2.3 3.0 4.7 5.5 5.6 5.7 5.8 5.2 4.7 5.0 5.6 Monthly 1995-AUG. SEP. OCT. NOV. DEC. -1.7 -3.9 -8.7 -3.0 -4.4 6.8 4.5 2.5 3.9 5.7 10.8 8.3 7.7 7.0 10.2 10.5 9.7 10.6 -0.3 -3.8 7.5 5.5 4.1 3.1 3.8 7.9 10.0 5.8 1.4 5.3 5.2 7.7 3.6 4.0 3.7 1.8 0.9 3.3 3.1 1.0 4.2 5.8 5.9 5.6 5.2 3.6 4.5 5.2 4.9 4.1 -6.1 -2.0 10.1 -3.3 -6.8 -0.5 -8.8 -9.9 4.8 5.4 11.6 1.8 -2.0 5.3 1.9 3.7 9.6 8.6 12.4 4.0 0.0 7.7 6.4 9.3 17.5 28.4 8.9 1.5 21.1 1.5 5.3 10.9 7.4 10.0 11.1 1.8 2.7 4.5 2.6 5.1 3.9 4.4 12.5 5.4 -0.9 5.7 3.0 9.7 4.6 -2.0 6.1 1.4 1.5 1.0 -1.0 0.3 6.1 8.9 4.2 2.0 2.1 6.0 5.8 6.2 5.6 6.0 5.5 6.0 5.0 4.4 6.2 6.5 5.5 4.6 5.0 5.3 1123.6 1117.2 1116.7 1108.5 1099.4 3730.0 3723.7 3740.0 3745.8 3757.2 2606.4 2606.5 2623.3 2637.3 2657.7 956.5 973.3 974.5 978.8 987.7 4686.5 4697.0 4714.5 4724.6 4744.8 5804.7 5800.2 5827.9 5842.7 3660.1 3664.3 3669.0 3672.0 3668.8 3698.0 3704.3 3710.7 3729.4 10433.5 10481.5 10533.8 10577.7 1107.9 1099.4 1096.8 1099.6 3757.1 3755.7 3757.2 3759.8 2649.2 2656.3 2660.3 2660.2 975.9 987.1 987.4 991.9 4733.0 4742.8 4744.5 4751.7 1097.4 1095.4 3758.4 3775.3 2660.9 2679.9 994.9 992.1 4753.3 4767.4 1996-JAN. FEB. MAR. APR. MAY JUNE JULY AUG. p Levels (9billions)s Monthly 1996-APR. MAY JUNE JULY AUG. p Weekly 1996-AUG. SEP. 5 12 19 26 2 p 9 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 14131.5 14185.7 14244.5 14307.1 Strictly Confidential (FR)Class 11 FOMC Components of Money Stock and Related Measures SEPIABER 23, 1996 Smonlyadjuted Money market Peiod Currency Demand demand deposits Other checkable deposits Savings deposits' depo Small denomination time deposit mutual funds Retai Institution- Large . denomination esecuries RP's time deposits Savins bo Short-term Treasury securities 10 11 12 13 Eurodolars Commerc papel Bankers acceptances' acceptances only 1 Level 2 3 4 (Sbillions)- 5 --- 6 7 8 9 14 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 1123.8 792.3 812.0 934.2 356.5 383.1 455.5 196.3 182.9 225.2 334.8 358.6 414.1 155.3 175.9 184.3 66.1 81.7 91.6 170.7 179.8 184.5 339.5 381.0 468.3 382.4 401.5 438.2 15.7 13.8 12.7 Monthly 1995-AUG. SEP. 368.5 369.5 389.3 389.4 377.2 372.4 1101.6 1108.4 923.3 926.4 438.7 445.9 218.5 221.7 396.4 400.3 192.9 192.5 93.1 93.7 183.5 183.9 437.0 456.6 433.3 438.6 12.4 12.8 OCT. NOV. DEC. 370.8 371.6 373.2 388.1 388.2 389.8 364.1 360.4 353.0 1116.1 1120.6 1134.6 929.8 935.1 937.7 450.6 455.5 460.3 223.7 224.8 227.2 409.7 415.3 417.2 190.0 185.3 177.6 92.9 90.7 91.1 184.2 184.5 184.8 465.4 464.2 475.4 440.5 437.1 437.1 13.4 12.6 12.0 1996-JAN. FEB. MAR. 373.6 373.3 375.2 393.5 397.4 407.1 343.2 337.8 335.4 1151.8 1164.5 1183.0 937.5 937.1 932.5 463.6 469.5 482.1 230.6 243.9 248.3 416.1 421.5 428.4 184.4 186.3 184.1 95.4 96.6 94.4 185.0 185.0 185.2 465.8 444.8 459.2 437.2 442.3 445.1 11.8 10.3 9.8 APR. MAY JUNE 376.0 377.1 379.4 406.3 409.7 413.7 332.4 321.8 315.0 1193.2 1197.5 1206.9 930.4 928.2 927.5 482.8 480.8 488.8 245.6 243.5 249.4 430.8 436.2 442.2 182.9 195.1 183.6 97.2 98.5 99.3 185.6 186.0 186.4 461.3 433.1 444.8 461.0 473.4 470.9 10.3 10.8 11.4 JULY 382.6 410.6 306.8 1213.6 929.6 494.1 252.9 448.2 179.9 97.7 186.8 446.7 473.1 11.4 AUG. p 385.0 407.5 298.6 1223.7 933.8 500.2 257.2 454.1 177.5 98.8 1. 2. 3. 4. 5. 6. Includes money market deposit accounts. Includes retail repurchase agreements. All IRA and Keogh accounts at commercial banks and thriftinstitutions 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 NET CHANGES IN SYSTEM HOLDINGS OF SECURITES Millions of dollars, not seasonally adjusted September 20, 1996 I STRICTLY CONFIDENTIAL (FR) CLASS II-FOMC 1 Treasurycoupons Period 1996 ---Q1 ---02 1995 September October November December 1996 January February March April May June July August 17,717 17,484 10,932 ----900 17,717 17,484 10,032 4,470 --- 4,470 842 --- 842 5,621 900 4,721 3,399 --- 3,399 409 --- 409 1,350 4,271 900 --- 450 4,271 1,223 1,238 390 10,350 9,168 4,966 4,168 3,818 1,239 3,457 3,606 3,122 2,549 100 2,317 35 1,899 479 1,065 100 2,317 88 3,311 88 18,431 15,493 8,241 35,374 31,975 16,970 5,974 -7,412 -1,023 -621 4,156 200 4,506 -850 8,314 541 8,965 -4,083 10,395 -15,979 8,644 -1,228 2,691 -1,336 5,952 -8,879 2,959 200 -485 400 4,591 563 -118 4,551 4,533 608 -427 2,404 6,666 -1,228 -1,228 -12,623 -1,689 5,433 -505 4,174 -711 7,118 -9,267 1,899 2,691 1,279 3,716 -108 2,697 -16 3,271 -52 3,716 3,311 Weekly June 5 12 19 26 July 3 10 17 24 31 August 7 14 21 28 September 4 11 18 3,311 3,271 1,240 217.7 -- .--_ --- ---. -. -° 1279 1,279 ---_ -37 -. _ ---. ---. ---_ _- Memo: LEVEL (bil. $)6 September 18 -15 2,476 1,240 2,476 1,240 ---_ -25 95.0 33.7 40.4 2,584 -6,784 10,552 -8,919 5,399 476 5,130 -12,007 12,371 -9,379 160 -1,370 4,584 -3,632 4,811 -5,122 401.4 386.8 -12.3 ' 1. 2. 3. in Change from end-of-period to end-of-period. Outright transactions in market and with foreign accounts. Outright transactions in market and with foreign accounts, and short-term notes acquired exchange for maturing bills. Excludes maturity shifts and rollovers of maturing issues. 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: September 18 within 1 year 1.4 1-5 0.4 5-10 0.5 over 10 0.0 total 2.3 

Federal Reserve (1996, September 23). Bluebook. Bluebooks, Federal Reserve. https://whenthefedspeaks.com/doc/bluebook_19960924

@misc{wtfs_bluebook_19960924,
  author = {Federal Reserve},
  title = {Bluebook},
  year = {1996},
  month = {Sep},
  howpublished = {Bluebooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/bluebook_19960924},
  note = {Retrieved via When the Fed Speaks corpus}
}