Economic Report of the President

It then moved to relatively high levels from 1980 through the firsthalf of 1982, tending to reduce aggregate demand. By the end of1982, however, the real pretax Treasury bill rate had fallen to aboutthe same level as its highs in the 1950s and 1960s.Chart 6-5Nominal and Real 3-Month Treasury Bill YieldPERCENT15 -10 ~1955 1960 1965 1970 1975 1980'CONVERTED TO EFFECTIVE ANNUAL YIELD FROM DISCOUNT BASIS.^EQUALS NOMINAL YIELD LESS ACTUAL RATE OF INFLATION, DEFINED BY PERSONALCONSUMPTION DEFLATOR, OVER THE PERIOD TO MATURITY. DEFLATOR FOR FIRSTQUARTER 1983 FORECAST BY COUNCIL OF ECONOMIC ADVISERS.SOURCES: DEPARTMENT OF COMMERCE, BOARD OF GOVERNORS OF THE FEDERAL RESERVESYSTEM, AND COUNCIL OF ECONOMIC ADVISERS.The sharp run-up and subsequent decline in real pretax ratesduring the 1980-82 period probably reflect in part the adjustment ofcredit markets to the decontrol of interest rates. During the late1970s variable interest rate time and savings accounts were introducedby depository institutions, and the process of financial innovationspeeded up the movement of funds out of regulated, fixed-rateaccounts. In addition, the consumer has recently become a more vig-138