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 AUGUST 14, MONETARY POLICY ALTERNATIVES PREPARED FOR THE FEDERAL OPEN MARKET COMMITTEE BY THE STAFF OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM 1998 Strictly Confidential (F.R.) August 14, 1998 Class I -- FOMC MONETARY POLICY ALTERNATIVES Recent Developments (1) The stable policy adopted at the July Committee meeting came as no surprise to market participants. In the event, the federal funds rate averaged just a little above its intended level of 5-1/2 percent over the intermeeting period.1 Investors appeared mostly to shrug off incoming data on the U.S. economy indicating more underlying strength in domestic demand and economic activity than foreseen, focusing instead on overseas developments. In July, as the prospects for meaningful policy initiatives in Japan initially appeared to improve with a change in government and the yen/dollar rate stabilized, yields on Treasury notes and bonds rose somewhat (chart). In August, however, optimism about Japanese policy faded; a weakening yen against the dollar and its implications for a number of emerging market economies, especially those in Asia with currencies tied to the dollar, along with deepening troubles in Russia, induced a widespread shift toward safe-haven currencies and securities. Treasury yields moved lower both on this flight to quality and on the assessment of market participants that a higher dollar and weaker aggregate demand abroad would damp U.S. output and inflation in the medium term. Concerns about the profit outlook, especially in light of continuing turmoil in Asia, weighed on private securities markets in the United States. Equity prices, as gauged by the Wilshire 5000, were down about 7-1/2 percent over the intermeeting period, and risk spreads on junk bonds rose appreciably further. These developments apparently strengthened the conviction that monetary 1The switch to lagged reserve requirements in the maintenance period beginning July 30 went smoothly for both depository institutions and the Federal Reserve System. Chart 1 Treasury Yield Curve Eurodollar Futures Percent Percent -- 6.00 Three-month - ---- 06/30/98 ........ 07/29/98 08/13/98 * . -* . * -. S5.50 I I 5 7 1 3 9/98 10 20 Maturity in Years 12/98 I I 6/99 3/99 Contract Months 9/99 12/99 Yen/Dollar and 10-Year Treasury Yield Selected Stock Indexes Percent Yen / $ lndex(7/97) = 100 --- 5.9 Daily I. -* July 1 FOMC Yen/$ (left scale) * . : A ': :. . . lr~i~' *.11 140 . . - *. 135 10 Year Treasury: Yield (right scale) I I • 1997 -I I I Jun May 1998 '5.3 Aug Jul 1998 Treasury Inflation-Protected Securities Rates Daily Percent Dollar Exchange Rates Index (7/97 =100) July 1 FOMC Five-year , Ten-year 2. v-p Thirty-year I I 1997 t I I I I I I I I I II I I , I I i I I l 1998 1997 * Against 29 U.S. trading partners 1998 # Against 16 major currencies -2policy would be on hold for longer than previously anticipated and encouraged a minority view that the next move could well be toward ease. On balance over the intermeeting period, Treasury yields fell as much as 1/4 percentage point, with declines greatest in the intermediate-term maturity range. (2) Against the backdrop of waning confidence that Japanese authorities will deal effectively with financial institution problems and provide adequate fiscal stimulus, the dollar percent against the yen, and the Japanese stock appreciated over the intermeeting period 5-3/4 market fell 5 percent overall, with bank stock prices down 18 percent. The weakness in the yen renewed speculation that China may choose to devalue the renminbi, which added to downward pressures on the Hong Kong dollar. Higher interest rates in Hong Kong, data showing unemployment at a fifteen-year high, and poor earnings reports sent the Hang Seng stock price index down more than 15 percent. In most other Asian economies, stock markets were off significantly. Asset prices in Russia continued to fall in often disorderly markets. The ruble traded near, and at times below, the lower edge of its official band, and banks encountered funding problems as concerns mounted about the Russian budget and prospects for debt repayment, in part stemming from further softness in oil prices. Russian equity prices plunged more than 25 percent, and spreads on Russian Brady bonds over U.S. Treasuries soared more than 61/2 percentage points. Credit-risk spreads for Brady bonds of other emerging market countries increased from 40 to 400 basis points over the period. Declining oil prices and slack demand for other commodities put pressure on other currencies as well, including the Mexican peso and Canadian dollar. Most interest rates rose in Canada, as market participants increasingly expected the currency's weakness to trigger monetary policy tightening, but the deepening crisis -3in Asia and Russia induced decreases in market interest rates in other Western industrial countries. Data releases showing a slowdown in U.K. economic growth contributed to an unwinding of expectations for an imminent rate hike by the Bank of England and a rise in the dollar against the pound. The dollar was little changed on balance against continental European currencies. The Desk did not intervene during the period for the accounts of the System or the Treasury. (3) After averaging nearly 6 percent over March to June, M2 growth moderated to a 5 percent rate in July. This slowing was expected and moved M2 growth down closer to the projected third-quarter increase in nominal income. Recent stock market weakness seems to have been associated with some shift in household investment preferences, as evidenced by the cessation of flows into equity mutual funds and increased flows into M2 money funds in late July and early August. M3 was about flat in July, even though bank credit grew at a 5 percent pace; however, large time deposits ran off sharply, owing largely to substitution of overseas sources of funding for deposits, particularly at the U.S. branches and agencies of European banks. Institutional money funds also declined in July as investors evidently shifted into market instruments around quarter end to take advantage of a temporary spike in short-term interest rates that was only partially reflected in more slowly adjusting money fund yields. From the fourth quarter of last year through July, M2 and M3 grew at rates of 7 percent and 81/2 percent, respectively. (4) Borrowing by households and businesses has edged down of late, but remains brisk, boosted by the heavy pace of equity retirements and robust private spending. With long- -4term interest rates low, borrowing has been concentrated in bond and fixed-rate mortgage markets. Although investors in securities markets seem to have become a bit more cautious, the August survey of senior loan officers suggested that standards at commercial banks were little changed over the past three months and terms on business loans were eased slightly further on net. 2 The federal government has continued to pay down debt on a seasonally adjusted basis. Growth of total domestic nonfinancial debt has slowed to the 5 percent area in recent months, leaving its growth from the fourth quarter of last year through June at a 6 percent rate. The slight narrowing of spreads reported in the survey is somewhat at odds with anecdotal information from market sources that spreads have stabilized or ticked up for broadly syndicated business loans. 2 -5MONEY, CREDIT, AND RESERVE AGGREGATES (Seasonally adjusted annual rates of growth) July 1997:Q4 to July2 M1 Adjusted for sweeps -3.1 4.7 0.5 5.3 M2 4.9 7.0 M3 0.4 8.6 Domestic nonfinancial debt Federal Nonfederal n.a. n.a. n.a. 6.0 -0.9 8.3 May June Money and Credit Aggregates Bank Credit Adjusted1 Reserve Measures Nonborrowed Reserves -11.7 -15.4 -4.9 Total Reserves Adjusted for sweeps -9.6 -0.3 -15.2 3.8 -4.8 5.9 5.0 6.6 5.5 6.5 Monetary Base Adjusted for sweeps Memo: (millions of dollars) Adjustment plus seasonal borrowing Excess Reserves 1150 251 258 1620 1368 1. Adjusted to remove effects of mark-to-market accounting rules (FIN 39 and FASB 115). 2. For nonfinancial debt, 1997:Q4 to June. 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 (5) Compared with the forecast prepared for the July Greenbook, the staff projection now calls for slightly less core inflation, reflecting in part a higher foreign exchange value of the dollar as well as somewhat less pressure in labor markets. Assuming an unchanged stance of monetary policy, the Greenbook forecasts that real GDP will expand over the second half of this year a little more slowly than the rate of growth of its potential. Next year, output growth moderates to 1-3/4 percent, below the 2 percent lower end of the FOMC members' central tendency range reported in July. The underlying pace of domestic final demand growth is expected to ebb appreciably, owing partly to the drop in equity prices as well as to the multiplier/accelerator effects of earlier downshifts in inventory investment and net exports. The unemployment rate should edge up to a little more than 5 percent by the end of next year. Although joblessness would remain below its estimated natural rate, the effects of tight labor markets on inflation should be about offset by lower inflation expectations and the continuing pass-through of dollar appreciation; abstracting from technical changes, core CPI inflation is expected to hold steady in 1999. The staff projects that the overall CPI will rise about 2 percent during 1999, a tad below its forecast for the June/July meeting and around the lower end of the Committee members' central tendency range. (6) If the Committee found the staff forecast, with inflation and unemployment both staying relatively low, to be both a reasonable expectation and a desirable outcome, it presumably would maintain the current 51/2 percent federal funds rate, as under alternative B. The Committee could still favor alternative B even if it saw higher inflation eventually, but was rather uncertain about its expectation of the eventual pickup in inflation, given the surprisingly -7favorable price performance of recent years. The odds on a significant price acceleration within a year or so may be seen as low; in such circumstances, delay would not materially jeopardize the Committee's goal of containing inflation and would buy some time to accumulate information on the evolving dynamics of inflation and hence the need for tightening. Moreover, the Committee may want to weigh any concerns about higher inflation against the increasingly precarious conditions in global financial markets. The greater fragility of these markets evident over the intermeeting period may suggest that the potential for adverse effects of a tightening of U.S. monetary policy on other economies has risen further. (7) With inflation low, aggregate demand apparently decelerating, and the outlook for Asia quite uncertain, market participants anticipate no policy action at this meeting, and market interest rates are likely to be little affected by selection of alternative B. Under the Greenbook forecast, information about prospective corporate earnings is likely to disappoint investors, keeping equity prices from rebounding and possibly precipitating a further decline. Absent such a decline, which could weaken the exchange value of the dollar as investments in the United States looked less desirable, the dollar should edge higher in coming months, most notably against the yen: The Japanese economy is likely to remain weak and skeptical market participants probably will require substantial, concrete actions to deal with the financial system and the economy before confidence can begin to recover. Should troubles in foreign markets intensify and spread further, the dollar would tend to strengthen more noticeably, equity prices would encounter additional downward pressures amid heightened worries about profits, and interest rates in the United States would continue to decline across the yield curve, reflecting both a more pronounced flight to quality and developing expectations of monetary policy easing. -8(8) Although the staff forecast envisions a relatively benign domestic macroeconomic outcome under current money market conditions, the Committee might be concerned either that in the staff forecast progress toward price stability was stalling or that in its own view inflation was more likely to escalate noticeably. In either case, it may prefer to apply additional monetary restraint at this meeting, as in the 25 basis point increase in the federal funds rate of alternative C. A prediction of worsening inflation pressures might be based in part on unambiguously tight labor market conditions and the uptrend already evident in wages and compensation. The odds on much softening of labor markets might be seen as low in light of the surprising momentum of domestic demand, which has been sustaining growth of employment and income. And while the Committee recently decided not to tighten, in part because of unsettled conditions abroad, a continued absence of action would not be desirable if the Committee were reasonably confident that the domestic economic situation was pointing to higher inflation rates before very long. In such a situation, delay would only increase the degree of tightening that would ultimately be necessary. Delayed but greater tightening could be even more disruptive to financial markets, since economies abroad may not be sufficiently improved and markets sufficiently settled to absorb the heavier blow. (9) Markets would be somewhat unsettled by the 25 basis point firming action of alternative C at this meeting, which would come as a surprise. Short-term market interest rates probably would back up by at least the rise in the federal funds rate. Investors would project lower earnings and use higher discount factors, and equity prices almost certainly would fall significantly further. Boosted nonetheless by higher interest rates, the foreign exchange value of the dollar likely would firm as well, with particularly large increases against the yen, and Asian -9countries with currencies tied to the dollar would confront considerable pressures to adjust their pegs. Longer-term dollar interest rates would probably jump initially in response to the rise in short-term rates, but might reverse course before long if market participants began to question the likely duration of the tightening move in view of the added strength in the dollar and lower equity prices; still, real long-term rates are likely to remain at higher levels for a while. Creditrisk spreads on domestic private debt, as well as on the obligations of a number of foreign governments and firms, likely would widen noticeably. (10) In view of recent developments in global financial markets, the Committee might be inclined to consider a 25 basis point easing of monetary policy, as in alternative A. Aggregate demand in the United States apparently has already decelerated appreciably, and Committee members may believe that the staff forecast does not give enough weight to ongoing deflationary forces coming from developments abroad. Moreover, the staff forecast may be viewed as underplaying the restrictive effects of recent changes in U.S. financial markets, despite declines in some nominal yields: The dollar has strengthened on net against a broad basket of currencies; U.S. equity prices have fallen significantly; and declines in inflation expectations may have largely accounted for the decline in nominal interest rates, leaving real rates little changed. Even in the context of the staff view of the economic outlook, with domestic inflation currently at low levels, the Committee may be willing to risk a slightly less satisfactory outcome in terms of U.S. inflation performance to help foster a recovery in foreign economies, which would be in the long-run interest of the United States. Lower interest rates would help ensure that domestic demand in the United States remains reasonably vigorous. And lower rates, along with somewhat less strength in the dollar, would benefit a number of foreign economies, even those -10with currencies not tied to the dollar; for those in the latter group, credit-risk spreads would tend to decline as concerns about foreign debt repayment abated a bit, and the tendency for their currencies to appreciate would give them room to adopt a somewhat less restrictive monetary policy. (11) Under the unchanged money market conditions assumed in the staff forecast, money and debt growth is expected to decelerate in coming quarters. Expansion of money and debt, however, continues to outpace that of nominal GDP this year as well as next. Increases in household sector debt should be restrained by slowing growth in nominal income and the less rapid advance in expenditures on consumer durables and housing. In the business sector, lower rates of growth of fixed investment and a slower pace of inventory accumulation will reduce needs for credit, but this tendency is partly offset in the staff forecast by a leveling out of internal funds as profits weaken and by the need to finance equity retirements associated with strong merger and acquisition activity. As income growth slows and profits decline, lenders should become a bit more cautious, but the projection does not include a substantial pulling back in credit availability. Federal debt will continue to contract modestly, reflecting continued unified budget surpluses. On balance, domestic nonfinancial sector debt is projected to expand at about a 5 percent annual rate over the remainder of the year, leaving this aggregate on a track to expand percent rate over 1998 as a whole, somewhat above the midpoint of its 3 to 7 at about a 5-3/4 percent annual range. (12) percent annual rates, respectively, M2 and M3 are forecast to expand at 5 and 7-3/4 from July to December under alternative B. The moderation in money reflects the expectation of slightly slower growth in nominal GDP over the second half of the year. In addition, the staff - 11 expects a less-rapid decline in M2 velocity in the second half, in part because the expansion of mortgage refinancing activity, which had boosted M2 growth over the first half of the year, comes to a halt. Bank credit is projected to rise less rapidly in the second half of the year than in the first, reflecting a slowing pace of securities acquisitions as well as some moderation in loan growth, damping banks' needs for funding through M3-type instruments. Despite the slowing in M2 and M3 growth during the second half, both aggregates are expected to overshoot their annual ranges for the year as a whole.3 3 According to elasticities based on staff econometric models, a rise in the federal funds rate on the order of 1-1/2 percentage points at this meeting would be necessary to restrain M2 to its annual range by the end of this year. Of course, this calculation does not capture any unusual reactions that might arise in current circumstances from a tightening of this magnitude. Alternative Growth Rates for Key Money and Credit Aggregates Debt Alt. A Alt. B Alt. C Alt. A Alt. B Alt. C 4.9 5.3 5.7 5.9 5.8 5.1 4.9 5.1 5.1 5.1 5.1 4.5 4.9 4.9 4.5 4.3 4.3 3.9 0.4 8.8 8.2 8.3 8.3 6.2 0.4 8.7 7.9 7.9 7.9 6.0 0.4 8.6 7.6 7.5 7.6 5.7 5.7 4.4 4.3 5.2 6.3 5.0 Quarterly Averages 1998 Q1 1998 Q2 1998 Q3 1998 Q4 8.0 7.3 4.9 5.7 8.0 7.3 4.8 5.0 8.0 7.3 4.7 4.4 11.0 9.6 4.9 8.1 11.0 9.6 4.8 7.8 11.0 9.6 4.8 7.5 6.3 5.9 5.1 5.2 Growth Rat e To From Dec-98 Jul-98 5.6 5.0 4.4 8.1 7.8 7.5 5.1 1997 1997 1997 Jul-98 Dec-98 Sep-98 7.0 6.6 6.8 7.0 6.3 6.7 7.0 6.1 6.6 8.6 8.6 8.7 8.6 8.5 8.7 8.6 8.4 8.6 6.0 5.7 5.7 1995 1996 1997 1996 Q4 1997 Q4 1998 Q4 4.6 5.7 6.7 4.6 5.7 6.5 4.6 5.7 6.3 6.8 8.8 8.7 6.8 8.8 8.6 6.8 8.8 8.5 5.3 5.0 5.7 All Alternatives Monthly Growth Rates Jul-98 Aug-98 Sep-98 Oct-98 Nov-98 Dec-98 1998 Annual Ranges: 1.0 to 5.0 2.0 to 6.0 Chart 2 Actual and Projected M2 Billions of Dollars 4400 S4350 Actual Level * * A Short-Run Alternatives SB - 4300 SC 5% 4250 4200 4150 4100 1% 4050 4000 S ..- '- I I Oct I I I I Dec 1997 3950 Feb Apr I Jun 1998 Aug Oct Dec I Feb 3900 Chart 3 Actual and Projected M3 Billions of Dollars 5900 Actual Level * 6000 Short-Run Alternatives *A SB c - 5800 6% - 5700 5600 5500 2% 5400 5300 I * Oct I Dec 1997 Feb I Apr I I Jun 1998 I Aug I I I Oct I I Dec 5200 I Feb Chart 4 Actual and Projected Debt Billions of Dollars 16600 16400 7% Actual Level - Projected Level 16200 *B 16000 15800 3% 15600 - 15400 15200 . 15000 - 14800 14600 Oct Dec 1997 Feb Apr Jun 1998 Aug Oct Dec Feb -13Directive Language (13) 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 conditions in reserve markets consistent with maintaining/INCREASING/DECREASING the 5-1/2] percent. In the context of the federal funds rate at/TO an average of around ___[DEL: Committee's long-run objectives for price stability and sustainable economic growth, and giving careful consideration to economic, financial, and monetary developments, a somewhat/SLIGHTLY higher federal funds rate would/MIGHT or a SOMEWHAT/slightly lower federal funds rate 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 17, 1998 SELECTED INTEREST RATES (percent) Short-Term federal funds 1 Treasury bills secondarymarke secondary maet 3-month 6-month 1-year 2 3 4 CDs nda maret 3-month m comm. paper 1-month 5 6 constant U.S. gormt aturity yields maturity yields 3-year 5-year 10-year 30-year 7 8 9 Long-Term y n indexed yields onventional home mortgages primary market fixed-rate ARM recently micia municipal ond Buyer 12 13 14 15 16 -year 10-year 10 11 corporate -utiity offered -- High -- Low 5.80 5.05 5.27 4.85 5.40 4.99 5.66 5.07 5.82 5.34 5.90 5.37 6.64 5.69 6.79 5.72 6.92 5.74 7.12 5.90 3.67 3.52 3.67 3.27 8.27 7.05 6.14 5.40 8.18 6.99 5.91 5.45 98 -- High -- Low 5.87 5.32 5.24 4.89 5.24 4.94 5.23 4.92 5.74 5.50 5.71 5.44 5.70 5.28 5.72 5.32 5.75 5.40 6.05 5.60 3.93 3.70 3.80 3.65 7.19 6.86 5.52 5.25 7.22 6.89 5.71 5.50 5.14 4.95 4.97 5.14 5.16 5.19 5.09 5.09 5.17 5.24 5.27 5.23 5.17 5.17 5.24 5.60 5.60 5.65 5.74 5.80 5.55 5.49 5.49 5.53 5.78 6.06 5.98 5.84 5.76 5.74 6.16 6.11 5.93 5.80 5.77 6.30 6.21 6.03 5.88 5.81 6.58 6.50 6.33 6.11 5.99 3.57 3.61 3.60 3.55 3.63 3.57 3.58 3.57 3.54 3.60 7.67 7.58 7.44 7.24 7.10 5.68 5.64 5.63 5.59 5.44 7.48 7.43 7.29 7.21 7.10 5.55 5.55 5.51 5.49 5.52 97 Monthly Aug Sep Oct 97 97 97 Nov 97 Dec 97 5.54 5.54 5.50 5.52 5.50 Jan Feb Mar Apr May Jun Jul Weekly Jun Jun Jun Jul Jul Jul Jul Jul Aug Aug Daily Jul Jul Jul Aug Aug Aug Aug Aug Aug Aug Aug Aug Aug 98 98 98 98 98 98 98 5.56 5.51 5.49 5.45 5.49 5.56 5.54 5.04 5.09 5.03 4.95 5.00 4.98 4.96 5.03 5.07 5.04 5.06 5.14 5.12 5.03 4.98 5.04 5.11 5.10 5.16 5.13 5.08 5.54 5.54 5.58 5.58 5.59 5.60 5.59 5.46 5.47 5.51 5.49 5.49 5.51 5.51 5.38 5.43 5.57 5.58 5.61 5.52 5.47 5.42 5.49 5.61 5.61 5.63 5.52 5.46 5.54 5.57 5.65 5.64 5.65 5.50 5.46 5.81 5.89 5.95 5.92 5.93 5.70 5.68 3.73 3.72 3.79 3.86 3.92 3.88 3.87 3.68 3.66 3.71 3.75 3.75 3.72 3.76 6.97 7.02 7.11 7.10 7.16 6.98 6.93 5.32 5.33 5.41 5.44 5.45 5.36 5.35 6.99 7.04 7.13 7.14 7.14 7.00 6.95 5.54 5.60 5.69 5.67 5.69 5.69 5.63 6.94 6.96 6.92 6.87 6.89 6.98 6.92 7.04 6.98 7.05 5.32 5.36 5.36 5.34 5.33 5.37 5.35 5.36 5.37 5.34 7.04 6.94 6.96 6.98 6.91 6.94 6.96 6.97 6.94 6.91 5.71 5.68 5.68 5.66 5.60 5.64 5.65 5.62 5.61 5.60 12 19 26 3 10 17 24 31 7 14 98 98 98 98 98 98 98 98 98 98 5.47 5.55 5.45 5.87 5.46 5.50 5.51 5.57 5.57 5.52 5.00 5.04 4.93 4.94 4.94 5.01 4.96 4.95 4.93 4.89 5.14 5.12 5.11 5.03 5.02 5.04 5.04 5.01 5.00 4.94 5.14 5.12 5.13 5.10 5.07 5.08 5.08 5.09 5.04 4.97 5.59 5.59 5.60 5.60 5.59 5.59 5.59 5.60 5.59 5.58 5.49 5.52 5.54 5.53 5.50 5.50 5.51 5.52 5.51 5.50 5.52 5.49 5.52 5.49 5.44 5.48 5.47 5.48 5.39 5.31 5.53 5.51 5.50 5.46 5.41 5.47 5.47 5.51 5.43 5.36 5.51 5.47 5.46 5.44 5.41 5.49 5.46 5.50 5.43 5.40 5.72 5.67 5.65 5.63 5.61 5.71 5.68 5.73 5.66 5.60 3.89 3.86 3.88 3.89 3.89 3.88 3.86 3.86 3.87 3.88 3.71 3.71 3.73 3.76 3.75 3.77 3.75 3.76 3.78 3.80 29 30 31 3 4 5 6 7 10 11 12 13 14 98 98 98 98 98 98 98 98 98 98 98 98 98 5.49 5.61 5.63 5.69 5.54 5.53 5.54 5.44 5.56 5.47 5.58 5.60 5.52 p 4.94 4.94 4.97 4.98 4.97 4.95 4.90 4.86 4.86 4.90 4.89 4.91 4.90 5.01 5.01 5.01 4.99 5.04 5.01 5.00 4.96 4.95 4.93 4.94 4.97 4.93 5.09 5.10 5.10 5.09 5.06 5.03 5.03 4.98 4.97 4.94 4.95 4.99 4.98 5.60 5.60 5.59 5.59 5.59 5.59 5.59 5.59 5.58 5.58 5.58 5.58 5.58 5.52 5.52 5.53 5.52 5.52 5.50 5.50 5.50 5.50 5.50 5.49 5.50 -- 5.49 5.49 5.48 5.44 5.42 5.38 5.38 5.33 5.35 5.30 5.29 5.32 5.30 5.52 5.52 5.52 5.46 5.44 5.43 5.43 5.39 5.39 5.33 5.34 5.38 5.34 5.52 5.50 5.50 5.46 5.43 5.43 5.44 5.40 5.41 5.37 5.40 5.44 5.40 5.77 5.73 5.72 5.67 5.65 5.66 5.67 5.63 5.63 5.60 5.62 5.60 5.55 3.87 3.87 3.87 3.87 3.87 3.87 3.87 3.88 3.89 3.87 3.88 3.88 3.88 3.77 3.77 3.77 3.77 3.77 3.78 3.78 3.80 3.80 3.79 3.80 3.80 3.81 Company; prior NOTE: Weekly data for columns 1 through 12 are week-ending averages. As of September 1997, data in column 6 are interpolated from data on certain commercial paper trades settled by the Depository Trust Column 15 is to that, they reflect an average of offering rates placed by several leading dealers. Columns 13 and 14 are 1-day quotes for Friday or Thursday, respectively. Column 14 is the Bond Buyer revenue index. for 1commitments on new rate contract initial the average 16 is Column lenders. institutional major at ratios loan-to-value 80 percent with (FRMs) mortgages for fixed-rate commitments on new rate contract the average year, adjustable-rate mortgages (ARMs) at major institutional lenders offering both FRMs and ARMs with the same number of discount points. p - preliminary data Strictly Confidential (FA)Class II FOMC Money and Debt Aggregates August 17,1998 Seasonally adjusted Money stock measures and liquid assets Domestic nonfinancial debt _ nontransactions components P e r io d Period Annual growth rates(Mt Annually (Q4 to Q4) 1995 1996 1997 Quarterly(average) 1997-Q3 Q4 1998-Q1 Q2 Monthly 1997-July Aug. Sep. M2 M2 In M2 1 2 3 3p U.S. government' 5 4 - 15.4 15.3 19.6 0.3 5.6 7.1 7.3 7.6 9.4 9.9 9.8 16.8 19.3 20.2 16.5 4.5 9.9 6.6 6.2 7.5 7.0 6.1 11.2 12.3 9.1 7.3 6.8 25.9 13.6 16.3 16.1 25.3 25.3 11.3 11.9 9.4 -3.1 7.6 9.6 8.3 9.5 2.8 -3.2 5.2 -3.1 4.9 4.9 8.1 7.7 19.1 6.8 32.7 12.4 15.9 6.1 -12.8 10.4 8.9 14.4 10.2 6.1 5.4 0.4 1081.1 1080.8 1078.0 4132.3 4165.1 4174.9 1075.1 4193.0 1072.3 4210.1 3051.2 3084.3 3096.9 3117.9 3137.8 1394.8 1409.2 1427.9 1435.2 1419.9 5527.1 5574.3 5602.8 5628.1 5630.0 1084.7 1061.6 1070.1 4214.6 4202.3 4208.8 1073.0 4212.9 3129.9 3140.7 3138.8 3139.9 1406.4 1417.5 1416.2 1426.5 5621.0 5619.8 5625.0 5639.4 1085.4 4224.5 3139.1 1439.2 5663.8 0.9 3.0 0.3 3.1 5.1 -0.3 Weekly 1998-July M 6.6 8.7 8.4 -2.6 Levels (Sbillions)i Monthly 1998-Mar. Apr. May June July p 3onyM3 In M3 only 3.9 4.6 5.7 -1.8 8.2 7.6 1998-Jan. Feb. Mar. Apr. May June July p I -1.6 -4.5 -1.2 -8.5 Dec. 1. M1 0.2 6.2 Oct. Nov. Aug. M 1 8.0 13.0 6 o other' total' 7 8 6.1 6.8 8.8 4.4 3.8 0.7 5.8 5.9 6.5 5.4 5.3 5.0 8.2 0.0 -1.4 6.1 7.6 8.4 8.3 4.5 5.8 6.3 5.9 1.5 1.3 0.8 6.2 6.7 6.7 10.0 11.0 9.6 9.5 10.8 9.0 8.5 11.8 11.5 0.4 0.0 0.0 8.0 -0.4 1.5 8.4 7.5 5.0 5.3 5.2 6.0 6.2 6.0 -0.5 -1.2 1.4 -1.8 -4.0 -1.0 8.1 9.3 8.5 8.5 7.9 7.1 5.9 6.7 6.7 6.0 4.9 5.1 3797. 3791. 3778. 3775. 11619.5 11701.8 11778.4 11847.7 15416.8 15493.4 15557.2 15623.5 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 preliminary pe preliminary estimate NET CHANGES IN SYSTEM HOLDINGS OF SECURITES Millions of dollars, not seasonally adjusted August 14, 1998 Treasury bills Period 1995 1996 1997 1997 ---01 ---02 ---03 ---Q4 1998 --Q1 ---02 Net 2 purchases Redemptions (-) Treasurycoupons Net change 15 over 10 5-10 Redemptions () Net RPs 1,776 2,015 1,996 7,941 5,179 32,979 1,003 409 1,540 16,970 14,670 40,586 -1,023 5,351 -64 3,366 5,822 2,697 7,794 698 1,233 1,237 1,894 4,545 619 877 644 3,409 1,918 2,766 607 376 598 416 5,314 9,451 2,744 15,471 230 498 571 241 5,084 13,554 2,173 19,775 -11,149 6,771 -4,493 8,807 -2,000 3,550 1,501 1,369 2,262 2,993 283 495 743 - 478 286 4,311 4,571 60 99 2,251 8,022 -15,409 10,707 179 105 215 26 -179 3,236 787 6,198 12,790 7,669 -181 -4,412 5,519 7,700 -2,478 -10 4,739 8,047 -21,985 4,262 2,314 9,405 -14,806 16,108 -9,397 4,545 3,341 1,002 6,224 8,245 2,697 4,545 3,323 4,471 -478 -2,000 3,550 3,550 _total 2,529 1,655 5,897 4,602 2,000 Net Change Net change outright holdings 4 1,432 1,116 3,849 4,602 2,000 with 1 year Federal agencies redmtions 5,366 3,898 19,680 10,032 9,901 9,147 3,550 Net purchases 3 390 524 5,549 10,932 9,901 9,147 1997 August September October November December 1998 January February March April May June STRICTLY CONFIDENTIAL (FR) CLASS II-FOMC 1 10 50 74 4,789 4,571 2,262 2,993 25 -25 -1,311 14 -14 25 -25 -1,311 July Weekly April 29 May 6 13 20 27 June 3 10 17 24 July 1 8 -1,311 15 22 29 August 5 12 -1,311 1,049 1,049 -50 50 Memo: LEVEL (bil. $) 6 August 12 215.7 96.7 43.0 242.2 52.2 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. 458.4 15,594 -32,580 -38 9,170 -4,173 4,462 -7,867 10,838 4,090 -1,629 -5,872 8,421 -10,085 8,153 -7,552 9,774 -15.7 __________ 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: I ,,#in I August 12 1 year 0.2 1-5 0.1 5-10 0.2 over 10 0.0 I total 0.5 

Federal Reserve (1998, August 17). Bluebook. Bluebooks, Federal Reserve. https://whenthefedspeaks.com/doc/bluebook_19980818

@misc{wtfs_bluebook_19980818,
  author = {Federal Reserve},
  title = {Bluebook},
  year = {1998},
  month = {Aug},
  howpublished = {Bluebooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/bluebook_19980818},
  note = {Retrieved via When the Fed Speaks corpus}
}