Milford chronicle., 1953-07-17
Federal Reserve Bank Of PhiladeL-
phia Statement For The Press


For business as well as for the
weather, fair and warmer" is an
appropriate report as the nation
enters the second half of 1858.
High-leVel activity in the indus
trial field, in construction, and in
distribution continues to character
ize the picture. With it all, price
levels remain steady. Wholesale
prices are a few percentage points
below those Of a year ago, and
consumer prices are only slightly
higher.
Whether consumer resistance and
strong competition will restrain the
possible effects Of recent pressures
is too early to say. For example,
steel price increases averaging
$3.50 a ton may raise the nations
annual steel bill by more than $500
million With increases in crude
oil prices, prices of most petroleum
products seem to be headed for
higher levels. Wages, too, have gone
up for construction, steel, and
automOtive workers.
Active business is reflected in a
money supply in the form of
deposits and outstanding currency
measurably above the early summer
of 1852, and in bank loans for both
business and consumer purposes at
higher levels. Corporate and munich
pal borrowing through the security
markets continues heavy and to
cap it all the Federal Government
has been in the market to supple
ment revenues. In the fiscal year
ended June 80, budget expenditures
ran ahead of receipts by $9.4 billion,
a peacetime record-and the cash
deficit is estimated at $5.2 billion.
Steps taken during the last three
months of the fiscal year to help
finance the deficit included an in
crease in Treasury bills outstanding
of $1.7 billion, a SIP billion issue
of 30-year three and a quarter per
cent bonds and sos billion Of tax
anticipation bills due in September.
Estimates for fiscal 1854 indicate
that the Treasury will again be
forced to enter the market to help
finance its operations. Under the
Presidents tax program, the bud
getary deficit will total $6 billion
and the cash deficit about So billion.
Requirements for the first half of
the fiscal year July l to January 1
are augmented by seasonally low
tax receipts. The Treasury may have
to raise between So billion and $12
billion during this period.
About half of the amount required
will be obtained through the sale
of about S5.5 billion of tax-anticipa-
tion certificates dated July Is. The
certificates bear two and half per
cent-the highest rate paid on such
an issue since 1933-and mature
next March.
The heavy requirements of the
Treasury come at time when the
seasonal needs Of business and
agriculture also tend to expand. AS
a consequence, the Board Of Cover
nOrs Of the Federal Reserve System
acted to prevent the credit market
from Tightening excessively in the
coming months. Effective July /, the
Board reduced reserve requirements
on net demand deposits at country
banks from IA per cent to 13 per
cent. Reductions were also effective
on July 8 at reserve. city banks from
90 per cent to 19 per cent and at
central reserve city banks from "a
per cent to % per cent. In announc-
ing the changes, the Board stated:
This step was taken. in pursuance
of Federal Reserve policy, designed
to make available the reserve funds
necessary to meet the essential
needs Of the. economy and to help
maintain stability Of the dollar. The
reduction, releasing an estimated
81 ,156, ,000, 900 Of reserves, was made
in anticipation Of the exceptionally
heavy demands on bank reserves
which will develop in the near
future when seasonal requirements
of the economy will expand and
Treasury financing in large volume
is inescapable. The action is in
tended to provide assurance that
these needs will be met without
undue strain on the economy and
is in conformity with System policy
of contributing to the objective of
sustaining economic equilibrium at
high levels Of production and en-
plOyment.