Monetary Trends Sept Fed

MonetaryTrends
September 2013
This publication contains charts and tables compiled by the Data Desk staff of the Federal Reserve Bank of St. Louis. The data are related to U.S. monetary and financial conditions, with an emphasis on various measures of the monetary policy stance.
Contents
Page
3 4 6 7 8 9 10 11 12 14 15 16 18 Monetary and Financial Indicators at a Glance Monetary Aggregates and Their Components Reserves Markets and Short-Term Credit Flows Senior Loan Officer Opinion Survey on Bank Lending Practices Measures of Expected Inflation Interest Rates Policy-Based Inflation Indicators Implied Forward Rates, Futures Contracts, and Inflation-Indexed Securities Velocity, Gross Domestic Product, and M2 Bank Credit Stock Market Index and Foreign Inflation and Interest Rates Reference Tables Definitions, Notes, and Sources
Conventions used in this publication:

1. Unless otherwise indicated, data are monthly. 2. Shaded areas indicate recessions, as determined by the National Bureau of Economic Research. 3. Percent change at an annual rate is the simple, not compounded, monthly percent change multiplied by 12. For example, using consecutive months, the percent change at an annual rate in x between month t 1 and the current month t is: [(x /x 1 )1] 1200. Note that this differs from National Economic Trends. In that publication, monthly percent changes are compounded and expressed as annual growth rates. 4. The percent change from year ago refers to the percent change from the same period in the previous year. For example, the percent change from year ago in x between month t 12 and the current month t is: [(x /x 12 )1] 100. We welcome your comments addressed to: Editor, Monetary Trends Research Division Federal Reserve Bank of St. Louis P.O. Box 442 St. Louis, MO 63166-0442 or to: stlsFRED@stls.frb.org On March 23, 2006, the Board of Governors of the Federal Reserve System ceased the publication of the M3 monetary aggregate. It also ceased publishing the following components: large-denomination time deposits, RPs, and eurodollars.
Monetary Trends is published monthly by the Research Division of the Federal Reserve Bank of St. Louis. Visit the Research Divisions website at research.stlouisfed.org/publications/mt to download the current version of this publication or register for e-mail notification updates. For more information on data in the publication, please visit research.stlouisfed.org/fred2 or call (314) 444-8590.
updated through 09/06/13
Monetary Trends
Treasury Yield Curve
Percent
4.0 3.5 3.0
M2 and MZM
Billions of dollars
12000 11500 11000 10500 10000
Week Ending Friday: 08/31/12 08/02/13 08/30/13
MZM
2.5 2.0
9500
M2
9000 8500 8000
1.5 1.0 0.5
2010
2011
2012
2013
5y
7y
10y
20y
Adjusted Monetary Base

Percent change at an annual rate
120 100
Real Treasury Yield Curve

Percent
1.5
1.0 80 60 40 20 -0.5 0 -1.0 -20 -40 -1.5 0.0
Tapering has begun

0.5
2010
2011
2012
2013
5y
7y
10y
20y
Reserve Market Rates

1.00
Inflation-Indexed Treasury Yield Spreads

Percent
2.4
Effective Federal Funds Rate Intended Federal Funds Rate*

0.75
Primary Credit Rate
2.2
0.50
2.0
0.25
1.8
0.00
1.6
2010
2011
2012
2013
5y
7y
10y
20y
*Note: Effective December 16, 2008, FOMC reports the Intended Federal Funds Rate as a range. Currently, Intended Federal Funds Rate is not plotted on this chart due to the note above.
Research Division Federal Reserve Bank of St. Louis
Monetary Trends
M1
Percent change from year ago
24 18 12 6 0 -6
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
MZM
25 20 15 10 5 0 -5
Although the y/y growth rates are holding up, the 13-week annualized figures are in decline
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
M2
12 9 6 3 0 -3
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
Monetary Services Index - M2

12 9 6 3 0 -3
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
Research Division
Federal Reserve Bank of St. Louis
Monetary Trends

120 100 80 60 40 20 0 -20
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
Domestic Nonfinancial Debt

40
Currency Held by the Nonbank Public

10
30
20
Total
Federal
10
Money Stock falls as currency held accelerates

2010 2011 2012 2013
2006
2007
2008
2009
2010
2011
2012
2013
Small Denomination Time Deposits

-16
Checkable Deposits
35 28 21
-18
-20 14 -22 7 0
-24
2010
2011
2012
2013
2010
2011
2012
2013
Money Market Mutual Fund Shares

10
Savings Deposits
16
14
Retail Funds
-10 12
Institutional Funds
-20 10
-30
2010
2011
2012
2013
2010
2011
2012
2013
Monetary Trends
Adjusted and Required Reserves
Billions of dollars
2500 2000 1500 1000 500 0
Adjusted
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
Required
11 12 13
Total Borrowings
Billions of dollars
800
Excess Reserve Balances

Billions of dollars
2400 2000
600 1600 400 1200 800 200 400 0 0
2006
2007
2008
2009
2010
2011
2012
2013
2006
2007
2008
2009
2010
2011
2012
2013
Nonfinancial Commercial Paper

60
NO growth in Non-Fin CP, Is this a sign of economic growth?
30
-30
-60
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
As of April 10, 2006, the Federal Reserve Board made major changes to its commercial paper calculations. For more information, please refer to http://www.federalreserve.gov/releases/cp/about.htm.
Consumer Credit
20
This while consumer credit growth stalls.
10
-10
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
Research Division
Monetary Trends
Net Percentage of Domestic Banks Tightening Standards for Commercial and Industrial Loans
Percentage
90
The stall in credit growth is despite easign lending standards and QE efforts.
Large & Medium Firms
60
30
Small Firms
0
-30
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
Net Percentage of Domestic Banks Tightening Standards for Commercial Real Estate Loans
Percentage
90
60
30
-30
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
Net Percentage of Domestic Banks Tightening Standards for Residential Mortgage Loans
Percentage
80 60 40 20 0 -20
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
Net Percentage of Domestic Banks Tightening Standards for Consumer Loans

Percentage
90
60
Credit Card Loans

30
Other Consumer Loans

-30
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
Monetary Trends
CPI Inflation and 1-Year-Ahead CPI Inflation Expectations

Percent
6 5
CPI Inflation Humphrey-Hawkins CPI Inflation Range
4 3 2 1 0 -1 -2 | | | | | | | | | | | | |
University of Michigan
Federal Reserve Bank of Philadelphia

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
The shaded region shows the Humphrey-Hawkins CPI inflation range. Beginning in January 2000,the Humphrey-Hawkins inflation range was reported using the PCE price index and therefore is not shown on this graph.
10-Year Ahead PCE Inflation Expectations and Realized Inflation

Percent
8
Realized
0
65 70 75 80 85 90 95 00
Expected
05
10
See the notes section for an explanation of the chart.
Treasury Security Yield Spreads

Yield to maturity
4
Real Interest Rates

Percent, Real rate = Nominal rate less year-over-year CPI inflation
4
10-Year less 3-Month T-Bill
1-Year Treasury Yield

2 2
| |
10-Year less 3-Year Note
3-Year less 3-Month T-Bill
-2
Federal Funds Rate

-4
-2
04
05
06
07
08
09
10
11
12
13
04
05
06
07
08
09
10
11
12
13
Research Division
Monetary Trends
Short-Term Interest Rates

Percent
12 10 8 6 4 2 0 -2
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
90-Day Commercial Paper
Prime Rate
3-Month Treasury Yield
Long-Term Interest Rates

Percent
10
Conventional Mortgage
7 | | | |
Corporate Aaa
4

1
96 97 98 99 00 01 02 03 04 05 06 07
Turning up with taper talk... although it is happening now
08
09
10
11
12
13
Long-Term Interest Rates

Percent
8
Short-Term Interest Rates

Percent
0.4
Corporate Baa
6 4 2
0.3
90-Day Commercial Paper
0.2
0.1

0
2010 2011 2012 2013
0.0
3-Month Treasury Yield

2010 2011 2012 2013
FOMC Intended Federal Funds Rate, Discount Rate, and Primary Credit Rate
Percent
8 6 4 2 0
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
Intended Federal Funds Rate Discount Rate Primary Credit Rate
Monetary Trends
Federal Funds Rate and Inflation Targets
Percent
10
4% 3% 2% 1% 0% Target Inflation Rates
Actual
0
-5
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Calculated federal funds rate is based on Taylor's rule.
Components of Taylor's Rule Actual and Potential Real GDP PCE Inflation
Billions of chain-weighted 2009 dollars
16000

5
Actual
15000
4 3
14000
Potential
13000
1 0
12000
-1
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
After the change in the GDP calculation, now the economy is running far ahed of potential. Just love Govt stats Monetary Base Growth and Inflation Targets
Percent
30
See notes section for further explanation.
Target Inflation Rates 0% 1% 2% 3% 4%

15
Actual
-15
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Calculated base growth is based on McCallum's rule. Actual base growth is percent change from the previous quarter. Stars represent actual values for 2008:Q4, 2009:Q1, 2009:Q4, 2011:Q1, 2011:Q2, 2013:Q1 and 2013:Q2 are 188.33%, 60.16%, 56.53%, 45.93%, 58.75%, 30.24% and 36.03%, respectively.
Components of McCallum's Rule Monetary Base Velocity Growth Real Output Growth
Percent
20 0 -20 0 -40 -60 -80
Percent Recursive Average

| |
10
10-Year Moving Average

| | | | |
Change from a Year Ago
-5
Quarter to Quarter Growth Rate
-10
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Research Division
10
Monetary Trends
Rates on 3-Month Eurodollar Futures
Percent, daily data
0.37
Implied One-Year Forward Rates

Percent
6 5 4 3 2
Week Ending: 08/31/12 08/02/13 08/30/13
Nov 2013
0.34 0.31 0.28
Oct 2013
| | |
Sep 2013
0
2y 3y 5y 7y 10y
0.25
07/07 07/14 07/21 07/28 08/04 08/11 08/18 08/25 09/01 09/08
Longer dated fwd rates (less manipulated by the Fed, are flattening out. Sign of LT Rates on economic Selected growth? Rates on Federal Funds Futures Federal Funds Futures Contracts on Selected Dates
Percent, daily data
0.14 0.13 0.12 0.11 0.10 0.09 0.08
07/07 07/14 07/21 07/28 08/04 08/11 08/18 08/25 09/01 09/08
Percent
0.15
Nov 2013
Oct 2013
| | | |
0.14 0.13
06/28/2013 07/26/2013 08/30/2013
0.12 0.11
Sep 2013
0.10 Sep Oct Nov Dec Jan Feb
Contract Month
Inflation-Indexed Treasury Securities

Weekly data
Percent 4.00 1.67 -0.67 -3.00 2011 15 2012 . 10 2013 2014 5 Maturity
Inflation-Indexed Treasury Yield Spreads

Weekly data
Percent 4.00 1.67 -0.67 -3.00 2011 15 2012 . 10 2013 2014 5 Horizon
20
20
Note: Yields are inflation-indexed constant maturity U.S. Treasury securities
Note: Yield spread is between nominal and inflation-indexed constant maturity U.S. Treasury securities.
Inflation-Indexed 10-Year Government Notes

Percent, weekly data
3
Inflation-Indexed 10-Year Government Yield Spreads

Percent, weekly data
3
U.S.
1
U.S.
1
-1
2009
2010
2011
2012
2013
2009
2010
2011
2012
2013
Note: Data is temporarily unavailable for the French and U.K. 10-Year Notes and Government Yield Spreads.
Although nominal 10-y tips rates have pooped, inflation expectations appear more stable
11
Monetary Trends
Velocity
Nominal GDP/MZM, Nominal GDP/M2 (Ratio Scale)
2.75 2.50 2.25 2.00
MZM
M2
1.75
1.50
1.25
13149
96
13515
97
13880
98
14245
99
14610
00
14976
01
15341
02
15706
03
16071
04
16437
05
16802
06
17167
07
17532
08
17898
09
18263
10
18628
11
18993
12
19359
13
19724
Interest Rates
Percent
8
3-Month T-Bill
4
M2 Own
2
MZM Own
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
MZM Velocity and Interest Rate Spread

Ratio Scale
3.50
M2 Velocity and Interest Rate Spread

Ratio Scale
2.25
Velocity = Nominal GDP / MZM
3.00 2.50
Velocity = Nominal GDP / M2
2.00
2.00
1.75
1.50
1.50
1974Q1 to 1993Q4 1994Q1 to present

1.00 1.25
1974Q1 to 1993Q4 1994Q1 to present
-1
0 3 5 6 8 9 10 11 1 2 4 7 Interest Rate Spread = 3-Month T-Bill less MZM Own Rate
-1
0 3 5 6 1 2 4 Interest Rate Spread = 3-Month T-Bill less M2 Own Rate
Research Division
12
Monetary Trends
Gross Domestic Product

10 8 6 4 2 0 -2 -4
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
Dashed lines indicate 10-year moving averages.
Real Gross Domestic Product

6
-3
-6
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
Gross Domestic Product Price Index

5 4 3 2 1 0
Below trend GDP and at/near stall speed
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
M2
12
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
13
Monetary Trends
Bank Credit
15 10 5 0 -5 -10
Bank lending and activity slowing across the board
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Investment Securities in Bank Credit at Commercial Banks

20 15 10 5 0 -5
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Total Loans and Leases in Bank Credit at Commercial Banks

15 10 5 0 -5 -10 -15
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Commercial and Industrial Loans at Commercial Banks

30
15
-15
-30
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Research Division
14
Monetary Trends
Standard & Poor's 500

1800 150
1440
120
Composite Index (left)

1080 90
720
60
Price/Earnings Ratio (right)

360 30
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
Recent Inflation and Long-Term Interest Rates

Consumer Price Inflation Rates
Percent change from year ago 2012Q3 2012Q4 2013Q1 United States Canada France Germany Italy Japan United Kingdom
* Copyright
Long-Term Government Bond Rates

2013Q2
1.42 0.77 0.80 1.50 1.17 . 2.69
May13
1.93 1.89 1.87 1.29 3.96 0.88 1.94
Percent Jun13 Jul13

2.30 2.25 2.21 1.53 4.38 0.82 2.31 2.58 . 2.25 1.56 4.42 . .
Aug13
2.74 . . . . . .
1.70 1.22 1.98 2.02 3.17 -0.34 2.41
1.90 0.94 1.54 2.01 2.47 -0.24 2.67
1.68 0.91 1.06 1.54 1.91 -0.63 2.77
, 2011, Organisation for Economic Cooperation and Development, OECD Main Economic Indicators (www.oecd.org).
Inflation and Long-Term Interest Rate Differentials

Percent
2
Percent
4
Canada
1 2
U.K. Canada U.K.

0
Germany
-1
Japan Germany
-2 -2
Inflation differential = Foreign inflation less U.S. inflation Long-term rate differential = Foreign rate less U.S. rate
-3 -4
Japan
2010 2011 2012 2013
2010
2011
2012
2013
15
Monetary Trends
Money Stock
M1
2008 . 2009 . 2010 . 2011 . 2012 . 1434.484 1637.746 1742.079 2009.572 2310.402
Bank M3*
. . . . .

1010.160 1796.556 2031.689 2538.959 2661.969
MZM
8707.039 9542.589 9536.343 10203.10 11054.33
M2
7764.531 8385.536 8593.096 9221.519 10006.40
Credit
9102.439 9170.055 9122.822 9225.324 9720.831
Reserves
232.392 944.368 1143.690 1576.503 1611.943
MSI M2**
7621.783 8242.433 8453.575 9079.325 9858.683
2011 . . . 2012 . . . 2013 .
1 2 3 4 1 2 3 4 1 2
1873.875 1931.825 2078.262 2154.327 2214.065 2260.856 2342.317 2424.370 2469.142 2526.838
9796.210 10033.57 10397.71 10584.91 10756.03 10897.22 11149.37 11414.69 11598.62 11730.30
8852.835 9010.039 9426.258 9596.946 9748.146 9873.356 10086.32 10317.77 10444.55 10559.11
. . . . . . . . . .
9132.510 9154.295 9239.261 9375.231 9541.837 9673.501 9783.921 9884.063 9988.619 10044.58
2242.975 2597.817 2680.091 2634.952 2688.263 2651.102 2651.597 2656.914 2865.577 3135.693
1310.136 1647.222 1713.491 1635.163 1662.515 1615.869 1601.177 1568.212 1760.223 2026.008
8713.433 8869.467 9282.300 9452.100 9602.667 9726.800 9937.400 10167.87 10293.53 10406.93
2011 . . . . .
Jul Aug Sep Oct Nov Dec
1998.765 2112.455 2123.566 2142.167 2159.892 2160.921 2201.941 2216.784 2223.470 2252.593 2262.601 2267.375 2312.603 2340.020 2374.329 2420.935 2406.534 2445.640 2466.178 2477.936 2463.311 2523.265 2534.675 2522.574 2549.063
10277.15 10424.97 10491.03 10530.63 10587.94 10636.16 10716.39 10749.16 10802.54 10846.58 10895.83 10949.24 11054.81 11149.00 11244.31 11332.33 11390.73 11521.00 11598.19 11582.92 11614.75 11691.18 11718.93 11780.78 11912.29
9267.421 9490.829 9520.523 9550.176 9602.369 9638.293 9712.317 9747.838 9784.282 9828.699 9870.331 9921.038 10012.78 10085.28 10160.89 10245.88 10298.35 10409.08 10448.76 10424.73 10460.14 10525.81 10552.67 10598.87 10709.99
. . . . . . . . . . . . . . . . . . . . . . . . .
9201.248 9247.992 9268.543 9326.888 9391.172 9407.632 9468.715 9564.655 9592.141 9634.579 9677.959 9707.965 9757.337 9784.011 9810.416 9826.296 9874.249 9951.644 9979.153 9991.133 9995.572 10056.33 10041.79 10035.63 10018.54
2703.445 2680.325 2656.502 2678.391 2622.980 2603.486 2647.505 2733.081 2684.203 2673.666 2634.893 2644.747 2669.164 2669.390 2616.238 2648.761 2665.101 2656.879 2748.980 2874.405 2973.347 3045.675 3139.116 3222.287 3310.247
1737.429 1720.803 1682.241 1706.483 1627.223 1571.783 1579.387 1732.832 1675.326 1654.445 1587.948 1605.214 1621.528 1626.188 1555.816 1584.811 1581.353 1538.472 1594.118 1794.812 1891.740 1955.176 2013.932 2108.917 2185.034
9124.400 9346.400 9376.100 9405.900 9457.500 9492.900 9566.700 9602.700 9638.600 9682.800 9723.800 9773.800 9864.600 9936.300 10011.30 10095.70 10149.20 10258.70 10297.80 10274.20 10308.60 10374.10 10400.60 10446.10 10555.70
2012 Jan . . . . . . . . . . . Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2013 Jan . . . . . . Feb Mar Apr May Jun Jul
Note: All values are given in billions of dollars. *See table of contents for changes to the series.
Research Division
16
Monetary Trends
Federal
Primary Prime
3-mo CDs
Treasury Yields 3-mo 3-yr 10-yr
Corporate
Municipal
Conventional Mortgage
Funds Credit Rate Rate
Aaa Bonds Aaa Bonds
2008 . 2009 . 2010 . 2011 . 2012 .
1.93 0.16 0.17 0.10 0.14
2.39 0.50 0.72 0.75 0.75
5.09 3.25 3.25 3.25 3.25
2.97 0.56 0.31 0.30 0.28
1.39 0.15 0.14 0.05 0.09
2.24 1.43 1.11 0.75 0.38
3.67 3.26 3.21 2.79 1.80
5.63 5.31 4.94 4.64 3.67
4.58 4.27 3.90 4.26 3.12
6.04 5.04 4.69 4.46 3.66
2011 . . . 2012 . . . 2013 .
1 2 3 4 1 2 3 4 1 2
0.16 0.09 0.08 0.07 0.10 0.15 0.14 0.16 0.14 0.12
0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75
3.25 3.25 3.25 3.25 3.25 3.25 3.25 3.25 3.25 3.25
0.28 0.22 0.29 0.42 0.33 0.30 0.27 0.23 0.22 0.20
0.13 0.05 0.02 0.01 0.07 0.09 0.10 0.09 0.09 0.05
1.16 0.95 0.47 0.42 0.42 0.40 0.35 0.36 0.39 0.44
3.46 3.21 2.43 2.05 2.04 1.82 1.64 1.71 1.95 2.00
5.13 5.04 4.46 3.93 3.89 3.80 3.45 3.54 3.88 3.97
4.71 4.50 4.02 3.82 3.31 3.32 3.05 2.81 3.01 3.31
4.85 4.66 4.31 4.01 3.92 3.79 3.55 3.36 3.50 3.68
2011 Aug . Sep . . . Oct Nov Dec
0.10 0.08 0.07 0.08 0.07 0.08 0.10 0.13 0.14 0.16 0.16 0.16 0.13 0.14 0.16 0.16 0.16 0.14 0.15 0.14 0.15 0.11 0.09 0.09 0.08
0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75
3.25 3.25 3.25 3.25 3.25 3.25 3.25 3.25 3.25 3.25 3.25 3.25 3.25 3.25 3.25 3.25 3.25 3.25 3.25 3.25 3.25 3.25 3.25 3.25 3.25
0.29 0.33 0.37 0.41 0.49 0.40 0.30 0.29 0.29 0.29 0.32 0.30 0.26 0.24 0.23 0.23 0.24 0.23 0.22 0.21 0.20 0.20 0.19 . .
0.02 0.01 0.02 0.01 0.01 0.03 0.09 0.08 0.08 0.09 0.09 0.10 0.10 0.11 0.10 0.09 0.07 0.07 0.10 0.09 0.06 0.04 0.05 0.04 0.04
0.38 0.35 0.47 0.39 0.39 0.36 0.38 0.51 0.43 0.39 0.39 0.33 0.37 0.34 0.37 0.36 0.35 0.39 0.40 0.39 0.34 0.40 0.58 0.64 0.70
2.30 1.98 2.15 2.01 1.98 1.97 1.97 2.17 2.05 1.80 1.62 1.53 1.68 1.72 1.75 1.65 1.72 1.91 1.98 1.96 1.76 1.93 2.30 2.58 2.74
4.37 4.09 3.98 3.87 3.93 3.85 3.85 3.99 3.96 3.80 3.64 3.40 3.48 3.49 3.47 3.50 3.65 3.80 3.90 3.93 3.73 3.89 4.27 4.34 4.54
3.90 3.84 3.93 3.79 3.75 3.48 3.09 3.37 3.43 3.20 3.32 3.18 3.01 2.96 2.86 2.76 2.81 2.83 3.08 3.13 3.11 3.13 3.70 3.73 .
4.27 4.11 4.07 3.99 3.96 3.92 3.89 3.95 3.91 3.80 3.68 3.55 3.60 3.50 3.38 3.35 3.35 3.41 3.53 3.57 3.45 3.54 4.07 4.37 4.46
2012 Jan . Feb . Mar . . . . . . . . . Apr May Jun Jul Aug Sep Oct Nov Dec
2013 Jan . Feb . Mar . . . . . Apr May Jun Jul Aug
Note: All values are given as a percent at an annual rate.
17
Monetary Trends
M1
Percent change at an annual rate
MZM
M2
M3*
2008 . 2009 . 2010 . 2011 . 2012 .
4.50 14.17 6.37 15.35 14.97
14.06 9.60 -0.07 6.99 8.34
6.82 8.00 2.48 7.31 8.51
. . . . .
2011 . . . 2012 . . . 2013 .
1 2 3 4 1 2 3 4 1 2
13.11 12.37 30.32 14.64 11.09 8.45 14.41 14.01 7.39 9.35
3.38 9.69 14.52 7.20 6.47 5.25 9.26 9.52 6.45 4.54
4.76 7.10 18.48 7.24 6.30 5.14 8.63 9.18 4.91 4.39
. . . . . . . . . .
2011 Jul . Aug . Sep . . . Oct Nov Dec
28.52 68.26 6.31 10.51 9.93 0.57 22.78 8.09 3.62 15.72 5.33 2.53 23.94 14.23 17.59 23.55 -7.14 19.50 10.08 5.72 -7.08 29.21 5.43 -5.73 12.60
19.76 17.26 7.60 4.53 6.53 5.46 9.05 3.67 5.96 4.89 5.45 5.88 11.57 10.22 10.26 9.39 6.18 13.72 8.04 -1.58 3.30 7.90 2.85 6.33 13.40
24.61 28.93 3.75 3.74 6.56 4.49 9.22 4.39 4.49 5.45 5.08 6.16 11.10 8.69 9.00 10.04 6.15 12.90 4.58 -2.76 4.08 7.53 3.06 5.25 12.58
. . . . . . . . . . . . . . . . . . . . . . . . .
2012 Jan . Feb . Mar . . . . . . . . . Apr May Jun Jul Aug Sep Oct Nov Dec
2013 Jan . Feb . Mar . . . . Apr May Jun Jul
*See table of contents for changes to the series.
Research Division
18
Monetary Trends
Definitions
M1: The sum of currency held outside the vaults of depository institutions, Federal Reserve Banks, and the U.S. Treasury; travelers checks; and demand and other checkable deposits issued by financial institutions (except demand deposits due to the Treasury and depository institutions), minus cash items in process of collection and Federal Reserve float. MZM (money, zero maturity): M2 minus small-denomination time deposits, plus institutional money market mutual funds (that is, those included in M3 but excluded from M2). The label MZM was coined by William Poole (1991); the aggregate itself was proposed earlier by Motley (1988). M2: M1 plus savings deposits (including money market deposit accounts) and small-denomination (under $100,000) time deposits issued by financial institutions; and shares in retail money market mutual funds (funds with initial investments under $50,000), net of retirement accounts. M3: M2 plus large-denomination ($100,000 or more) time deposits; repurchase agreements issued by depository institutions; Eurodollar deposits, specifically, dollar-denominated deposits due to nonbank U.S. addresses held at foreign offices of U.S. banks worldwide and all banking offices in Canada and the United Kingdom; and institutional money market mutual funds (funds with initial investments of $50,000 or more). Bank Credit: All loans, leases, and securities held by commercial banks. Domestic Nonfinancial Debt: Total credit market liabilities of the U.S. Treasury, federally sponsored agencies, state and local governments, households, and nonfinancial firms. End-of-period basis. Adjusted Monetary Base: The sum of currency in circulation outside Federal Reserve Banks and the U.S. Treasury, deposits of depository financial institutions at Federal Reserve Banks, and an adjustment for the effects of changes in statutory reserve requirements on the quantity of base money held by depositories. This series is a spliced chain index; see Anderson and Rasche (1996a,b, 2001, 2003). Adjusted Reserves: The sum of vault cash and Federal Reserve Bank deposits held by depository institutions and an adjustment for the effects of changes in statutory reserve requirements on the quantity of base money held by depositories. This spliced chain index is numerically larger than the Board of Governors measure, which excludes vault cash not used to satisfy statutory reserve requirements and Federal Reserve Bank deposits used to satisfy required clearing balance contracts; see Anderson and Rasche (1996a, 2001, 2003). Monetary Services Index: An index that measures the flow of monetary services received by households and firms from their holdings of liquid assets; see Anderson, Jones, and Nesmith (1997). Indexes are shown for the assets included in M2, with additional data at research.stlouisfed.org/msi/index.html. Note: M1, M2, M3, Bank Credit, and Domestic Nonfinancial Debt are constructed and published by the Board of Governors of the Federal Reserve System. For details, see Statistical Supplement to the Federal Reserve Bulletin, tables 1.21 and 1.26. MZM, Adjusted Monetary Base, Adjusted Reserves, and Monetary Services Index are constructed and published by the Research Division of the Federal Reserve Bank of St. Louis.
nominal constant maturity yield less the real constant maturity yield. Daily data and descriptions are available at research.stlouisfed.org/fred2/. See also Statistical Supplement to the Federal Reserve Bulletin, table 1.35. The 30-year constant maturity series was discontinued by the Treasury as of February 18, 2002. Page 5: Checkable Deposits is the sum of demand and other checkable deposits. Savings Deposits is the sum of money market deposit accounts and passbook and statement savings. Time Deposits have a minimum initial maturity of 7 days. Retail Money Market Mutual Funds are included in M2. Institutional money market funds are not included in M2. Page 6: Excess Reserve Balances equals the amount of reserve balances maintained at depository institutions (DIs) less reserve balance requirements at DIs. Total Borrowings from the Federal Reserve is the sum of credit extended under the primary, second, and seasonal programs, as well as credit extended under the Term Asset-Backed Securities Loan Facility, and other credit extensions. [NOTE: Excess reserves and total borrowings are not seasonally adjusted.] The excess reserves calculation was changed with the introduction of the new H.3 statistical release, Aggregate Reserves of Depository Institutions and the Monetary Base on July 11, 2013. See http://www.federalreserve.gov/releases/h3/current/. Page 7: Data are reported in the Senior Loan Officer Opinion Survey on Bank Lending Practices. Page 8: Inflation Expectations measures include the quarterly Federal Reserve Bank of Philadelphia Survey of Professional Forecasters, the monthly University of Michigan Survey Research Centers Surveys of Consumers, and the annual Federal Open Market Committee (FOMC) range as reported to the Congress in the February testimony that accompanies the Monetary Policy Report to the Congress. Beginning February 2000, the FOMC began using the personal consumption expenditures (PCE) price index to report its inflation range; the FOMC then switched to the PCE chain-type price index excluding food and energy prices (core) beginning July 2004. Accordingly, neither are shown on this graph. CPI Inflation is the percentage change from a year ago in the consumer price index for all urban consumers. Real Interest Rates are ex post measures, equal to nominal rates minus year-over-year CPI inflation. From 1991 to the present the source of the long-term PCE inflation expectations data is the Federal Reserve Bank of Philadelphias Survey of Professional Forecasters. Prior to 1991, the data were obtained from the Board of Governors of the Federal Reserve System. Realized (actual) inflation is the annualized rate of change for the 40-quarter period that corresponds to the forecast horizon (the expectations measure). For example, in 1965:Q1, annualized PCE inflation over the next 40 quarters was expected to average 1.7 percent. In actuality, the average annualized rate of change measured 4.8 percent from 1965:Q1 to 1975:Q1. Thus, the vertical distance between the two lines in the chart at any point is the forecast error. Page 9: FOMC Intended Federal Funds Rate is the level (or midpoint of the range, if applicable) of the federal funds rate that the staff of the FOMC expected to be consistent with the desired degree of pressure on bank reserve positions. In recent years, the FOMC has set an explicit target for the federal funds rate. Page 10: Federal Funds Rate and Inflation Targets shows the observed federal funds rate, quarterly, and the level of the funds rate implied by applying Taylors (1993) equation ft*= 2.5 + t 1 + ( t 1 * )/2 + 100 ( yt 1 yt 1P )/2 to five alternative target inflation rates, * = 0, 1, 2, 3, 4 percent, where ft* is the implied federal funds rate, t 1 is the previous periods inflation rate (PCE) measured on a year-over-year basis, yt 1 is the log of the previous periods level of real gross domestic product (GDP), and yt 1P is the log of an estimate of the previous periods level of potential output. Potential Real GDP is estimated by the Congressional Budget Office (CBO). Monetary Base Growth and Inflation Targets shows the quarterly growth of the adjusted monetary base implied by applying McCallums (2000, p. 52) equation bt = xt* vta + ( xt* xt 1 ), xt* = * + yt*
Notes
Page 3: Readers are cautioned that, since early 1994, the level and growth of M1 have been depressed by retail sweep programs that reclassify transactions deposits (demand deposits and other checkable deposits) as savings deposits overnight, thereby reducing banks required reserves; see Anderson and Rasche (2001) and research.stlouisfed.org/aggreg/swdata.html. Primary Credit Rate, Discount Rate, and Intended Federal Funds Rate shown in the chart Reserve Market Rates are plotted as of the date of the change, while the Effective Federal Funds Rate is plotted as of the end of the month. Interest rates in the table are monthly averages from the Board of Governors H.15 Statistical Release. The Treasury Yield Curve and Real Treasury Yield Curve show constant maturity yields calculated by the U.S. Treasury for securities 5, 7, 10, and 20 years to maturity. Inflation-Indexed Treasury Yield Spreads are a measure of inflation compensation at those horizons, and it is simply the
19
Monetary Trends
to five alternative target inflation rates, * = 0, 1, 2, 3, 4 percent, where bt is the implied growth rate of the adjusted monetary base, y* t is the 10-year moving average growth in real GDP, ta is the average base velocity growth (calculated recursively), xt 1 is the lag growth rate of nominal GDP, and = 0.5. Page 11: Implied One-Year Forward Rates are calculated by this Bank from Treasury constant maturity yields. Yields to maturity, R(m), for securities with m = 1,..., 10 years to maturity are obtained by linear interpolation between reported yields. These yields are smoothed by fitting the regression suggested by Nelson and Siegel (1987), R(m) = a0 + (a1 + a2 )(1 em /50 )/(m /50) a2 em /50, and forward rates are calculated from these smoothed yields using equation (a) in table 13.1 of Shiller (1990), f(m) = [D(m)R(m) D(m1)] / [D(m) D(m1)], where duration is approximated as D(m) = (1 e R (m) m)/R(m). These rates are linear approximations to the true instantaneous forward rates; see Shiller (1990). For a discussion of the use of forward rates as indicators of inflation expectations, see Sharpe (1997). Rates on 3-Month Eurodollar Futures and Rates on Selected Federal Funds Futures Contracts trace through time the yield on three specific contracts. Rates on Federal Funds Futures on Selected Dates displays a single days snapshot of yields for contracts expiring in the months shown on the horizontal axis. Inflation-Indexed Treasury Securities and Yield Spreads are those plotted on page 3. Inflation-Indexed 10-Year Government Notes shows the yield of an inflation-indexed note that is scheduled to mature in approximately (but not greater than) 10 years. The current French note has a maturity date of 7/25/2015, the current U.K. note has a maturity date of 4/16/2020, and the current U.S. note has a maturity date of 11/15/2020. Inflation-Indexed Treasury Yield Spreads and InflationIndexed 10-Year Government Yield Spreads equal the difference between the yields on the most recently issued inflation-indexed securities and the unadjusted security yields of similar maturity. Page 12: Velocity (for MZM and M2) equals the ratio of GDP, measured in current dollars, to the level of the monetary aggregate. MZM and M2 Own Rates are weighted averages of the rates received by households and firms on the assets included in the aggregates. Prior to 1982, the 3-month T-bill rates are secondary market yields. From 1982 forward, rates are 3-month constant maturity yields. Page 13: Real Gross Domestic Product is GDP as measured in chained 2009 dollars. The Gross Domestic Product Price Index is the implicit price deflator for GDP, which is defined by the Bureau of Economic Analysis, U.S. Department of Commerce, as the ratio of GDP measured in current dollars to GDP measured in chained 2009 dollars. Page 14: Investment Securities are all securities held by commercial banks in both investment and trading accounts. Page 15: Inflation Rate Differentials are the differences between the foreign consumer price inflation rates and year-over-year changes in the U.S. all-items Consumer Price Index. Page 17: Treasury Yields are Treasury constant maturities as reported in the Board of Governors of the Federal Reserve Systems H.15 release. Bureau of Economic Analysis : GDP. Bureau of Labor Statistics : CPI. Chicago Board of Trade : Federal funds futures contract. Chicago Mercantile Exchange : Eurodollar futures. Congressional Budget Office : Potential real GDP. Federal Reserve Bank of Philadelphia : Survey of Professional Forecasters inflation expectations. Federal Reserve Bank of St. Louis : Adjusted monetary base and adjusted reserves, monetary services index, MZM own rate, one-year forward rates. Organization for Economic Cooperation and Development : International interest and inflation rates. Standard & Poors : Stock price-earnings ratio, stock price composite index. University of Michigan Survey Research Center : Median expected price change. U.S. Department of the Treasury : U.S. security yields.
References
Anderson, Richard G. and Robert H. Rasche (1996a). A Revised Measure of the St. Louis Adjusted Monetary Base, Federal Reserve Bank of St. Louis Review, March/April, 78(2), pp. 3-13.* ____ and ____(1996b). Measuring the Adjusted Monetary Base in an Era of Financial Change, Federal Reserve Bank of St. Louis Review, November/ December, 78(6), pp. 3-37.* ____ and ____(2001). Retail Sweep Programs and Bank Reserves, 19941999, Federal Reserve Bank of St. Louis Review, January/February, 83(1), pp. 51-72.* ____ and ____ , with Jeffrey Loesel (2003). A Reconstruction of the Federal Reserve Bank of St. Louis Adjusted Monetary Base and Reserves, Federal Reserve Bank of St. Louis Review, September/October, 85(5), pp. 39-70.* ____ , Barry E. Jones and Travis D. Nesmith (1997). Special Report: The Monetary Services Indexes Project of the Federal Reserve Bank of St. Louis, Federal Reserve Bank of St. Louis Review, January/February, 79(1), pp. 31-82.* McCallum, Bennett T. (2000). Alternative Monetary Policy Rules: A Comparison with Historical Settings for the United States, the United Kingdom, and Japan, Federal Reserve Bank of Richmond Economic Quarterly, vol. 86/1, Winter. Motley, Brian (1988). Should M2 Be Redefined? Federal Reserve Bank of San Francisco Economic Review, Winter, pp. 33-51. Nelson, Charles R. and Andrew F. Siegel (1987). Parsimonious Modeling of Yield Curves, Journal of Business, October, pp. 473-89. Poole, William (1991). Statement before the Subcommittee on Domestic Monetary Policy of the Committee on Banking, Finance and Urban Affairs, U.S. House of Representatives, November 6, 1991. Government Printing Office, Serial No. 102-82. Sharpe, William F. (1997). Macro-Investment Analysis, on-line textbook available at www.stanford.edu/~wfsharpe/mia/mia.htm. Shiller, Robert (1990). The Term Structure of Interest Rates, Handbook of Monetary Economics, vol. 1, B. Friedman and F. Hahn, eds., pp. 627-722. Taylor, John B. (1993). Discretion versus Policy Rules in Practice, CarnegieRochester Conference Series on Public Policy, vol. 39, pp. 195-214. Note: *Available on the Internet at research.stlouisfed.org/publications/review/.
Sources
Agence France Trsor : French note yields. Bank of Canada : Canadian note yields. Bank of England : U.K. note yields. Board of Governors of the Federal Reserve System : Monetary aggregates and components: H.6 release. Bank credit and components: H.8 release. Consumer credit: G.19 release. Required reserves, excess reserves, clearing balance contracts, and discount window borrowing: H.4.1 and H.3 releases. Interest rates: H.15 release. Nonfinancial commercial paper: Board of Governors website. Nonfinancial debt: Z.1 release. M2 own rate. Senior Loan Officer Opinion Survey on Bank Lending Practices.
20

Monetary Trends Sept Fed

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Monetary Trends Sept Fed

Uploaded by

Copyright:

Available Formats

MonetaryTrends

Conventions used in this publication:

updated through 09/06/13

Week Ending Friday: 08/31/12 08/02/13 08/30/13

1.5 1.0 0.5

Adjusted Monetary Base

Real Treasury Yield Curve

1.0 80 60 40 20 -0.5 0 -1.0 -20 -40 -1.5 0.0

Tapering has begun

Week Ending Friday: 08/31/12 08/02/13 08/30/13

Reserve Market Rates

Inflation-Indexed Treasury Yield Spreads

Effective Federal Funds Rate Intended Federal Funds Rate*

Week Ending Friday: 08/31/12 08/02/13 08/30/13

Primary Credit Rate

updated through 08/20/13

Monetary Services Index - M2

Federal Reserve Bank of St. Louis

updated through 08/20/13

Adjusted Monetary Base

Domestic Nonfinancial Debt

Currency Held by the Nonbank Public

Money Stock falls as currency held accelerates

Small Denomination Time Deposits

Money Market Mutual Fund Shares

Research Division Federal Reserve Bank of St. Louis

updated through 08/20/13

Excess Reserve Balances

600 1600 400 1200 800 200 400 0 0

Nonfinancial Commercial Paper

NO growth in Non-Fin CP, Is this a sign of economic growth?

This while consumer credit growth stalls.

Federal Reserve Bank of St. Louis

updated through 08/06/13

Net Percentage of Domestic Banks Tightening Standards for Consumer Loans

Credit Card Loans

Other Consumer Loans

Research Division Federal Reserve Bank of St. Louis

updated through 09/06/13

CPI Inflation and 1-Year-Ahead CPI Inflation Expectations

CPI Inflation Humphrey-Hawkins CPI Inflation Range

Federal Reserve Bank of Philadelphia

10-Year Ahead PCE Inflation Expectations and Realized Inflation

See the notes section for an explanation of the chart.

Treasury Security Yield Spreads

Real Interest Rates

10-Year less 3-Month T-Bill

1-Year Treasury Yield

10-Year less 3-Year Note

3-Year less 3-Month T-Bill

Federal Funds Rate

Federal Reserve Bank of St. Louis

updated through 09/06/13

Short-Term Interest Rates

90-Day Commercial Paper

3-Month Treasury Yield

Long-Term Interest Rates

10-Year Treasury Yield

Turning up with taper talk... although it is happening now

Long-Term Interest Rates

Short-Term Interest Rates

90-Day Commercial Paper

10-Year Treasury Yield