Memorandum: Interest Rates and Ceiling Rates

This memo covers two separate topics. In the first, I discuss the topics determining Interest rates and the effect that I expect these factors to have on Interest rates in 1967. Then I consider the role of present ceilings on rates paid to depositors by commercial banks and other thrift institutions. The two topics are related in part because the rates are themselves related in well functioning markets for money and securities and in part because ceilings or other restrictions that prevent the rates paid by banks and other institutions from adjusting disrupt well established patterns of resource allocation and force individuals to search for new mans of holding assets.