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FEDERAL RESERVE press release
For immediate release

May 24, 1976

The Federal Open Market Committee announced today that
it has voted to speed up publication of the records of policy
actions taken at each of its monthly meetings.
At its meeting on May 18, 1976, the Committee decided
that the policy record for a meeting should be released a few
days after the next regularly scheduled meeting, rather than
45 days after the meeting to which the record relates. Since
the majority of meetings are held at 4-week intervals, the
delay now will most often be about a month. For the minority
of meetings that are followed by a 5-week interval, it will be
about a week longer.
In view of this action, the FOMC and the Board of
Governors today released the attached record of policy actions
taken at the FOMC meeting of April 20, 1976. Under previous
rules, this record would not have been made available until
June 7.
A delay of approximately 45 days had been in effect
since early 1975. From mid-1967 to early 1975, a delay of
approximately 90 days had been in effect. Prior to mid-1967,
when the rules were changed to comply with the Freedom of
Information Act, the records of policy actions were published
only in the Board's Annual Report to Congress.
As in the past, the policy record for a meeting will
include information on any changes in the Committee's instructions
to the Desk during the period before the next regularly scheduled
meeting. Such changes in instructions ordinarily arise out of
Committee consultations by telephone or telegraph that are held
whenever necessitated by special developments.
It was understood that the record of policy actions would
be expanded to include more information concerning members' views
on longer-run and current policy. At the same time, the Committee
voted to discontinue its Memorandum of Discussion. These Memoranda,
which are detailed accounts of proceedings at meetings of the Com
mittee, have been available to the public 5 years after the end of
the year to which they apply.
The records of policy actions also are published in the
Federal Reserve Bulletin and the Board's Annual Report. The summary
descriptions of economic and financial conditions they contain are
based solely on information that was available to the Committee at
the time of the meeting.
Attachment

RECORD OF POLICY ACTIONS
OF THE FEDERAL OPEN MARKET COMITTEE
Meeting held on April 20, 1976
Domestic policy directive
Preliminary estimates of the Commerce Department in
dicated that growth in real output of goods and services had
picked up to an annual rate of 7.5 per cent in the first
quarter--from a rate of 5 per cent in the fourth quarter of
1975--and that the rate of increase in the GNP fixed-weighted
price index had slowed substantially.

Staff projections for

the remaining quarters of this year suggested that growth in
output would be moderate and that the rise in prices would
be above the relatively low first-quarter pace.
In March retail sales had risen sharply--according
to the advance report of the Commerce Department--reflect
ing a strong increase in sales at food stores and widespread
gains among other types of stores.

The increase in the first

quarter as a whole was substantially larger than that in the
fourth quarter of 1975.
Industrial production continued to recover in March,
owing mainly to increases in output of automobiles, some

4/20/76

other consumer goods, business equipment, and durable goods
materials.

For the second month in a row, output of all

durable goods rose more than the over-all index of industrial
production.
Gains in nonfarm employment were again widespread
in March, and they were sizable in durable goods manufactur
ing industries, in trade, and in services and finance.

The

increase in total employment exceeded that in the civilian
labor force, and the unemployment rate edged down from 7.6
to 7.5 per cent.
Private housing starts declined moderately in
March--following a sharp rebound in February to the highest
level in 2 years--while permits issued for private housing
units remained at about the level of the preceding 2 months.
Outstanding mortgage loan commitments at savings and loan
associations had remained strong in February--the latest
month for which data were available--and downpayment
requirements on mortgage loans had been easing during
recent weeks.

4/20/76

New orders for nondefense capital goods rose sub
stantially further in February, recovering to about the
pace of last October and November.

The level of new

orders was still relatively low, however, and the backlog
of unfilled orders continued to decline.

Nonresidential

construction activity remained depressed.
The index of average hourly earnings for private
nonfarm production workers rose at a less rapid pace over
the first quarter of 1976 than it had on the average in
1975.

In the first quarter the schedule of labor contract

negotiations was light and relatively few cost-of-living
wage adjustments went into effect.

In April, however, a

new agreement was reached in one major industry whichif approved by the union membership--would result in sub
stantial increases in wages and other benefits over a 3
year period, including a large increase in wage rates
effective April 1.
The wholesale price index of all commodities rose
slightly in

arch--following 2 months of decline--as a

4/20/76
continuing increase in average prices of industrial com
modities was not quite offset by a further decline in
prices of farm products and foods.

Over the first quarter

average wholesale prices of farm products, foods, and fuels
declined appreciably, but average wholesale prices of other
commodities rose almost as fast as during the second half
of 1975.

In February the rise in the consumer price index

had slowed appreciably further, reflecting additional
declines in retail prices of food and energy items.
The acceleration of growth in real GNP in the first
quarter reflected in large part a shift to accumulation of
business inventories.

In addition, personal consumption

expenditures rose appreciably.

On the other hand, State

and local government expenditures changed little, and net
exports of goods and services fell sharply.
Staff projections for the remaining three quarters
of 1976 suggested that personal consumption expenditures
would expand at a rate near the average of the past few
quarters; that residential construction and business
fixed investment would continue to recover; that State

-5-

4/20/76

and local government purchases of goods and services would
rise at a relatively slow pace; and that business inventory
accumulation would be substantial.
In recent weeks the average value of the dollar
against leading foreign currencies had been relatively
steady; the dollar had appreciated substantially against
the British pound and the Italian lira--which had remained
under considerable downward pressure--while it had depreci
ated somewhat against most other major foreign currencies.
In February, as in January, the U.S. foreign trade balance
registered a sizable deficit, in contrast with the large
surpluses in almost all months of 1975.

Reported net

outflows of private capital remained moderate.
Total loans and investments at U.S. commercial
banks continued to expand in March, in large part because
banks again added a substantial amount to their holdings
of Treasury securities.
remained weak:

Business short-term credit demands

Outstanding bank loans to businesses de

clined for the second consecutive month, and the outstanding
volume of commercial paper issued by nonfinancial corporations
also fell.

4/20/76

M
1

growth in March--at an annual rate of 6-1/2 per

cent--was little changed from that in February.

Growth in

M2 and M 3 also was moderate in March, compared with rela
tively high rates in the preceding 2 months.

At commercial

banks, inflows of time and savings deposits other than
negotiable CD's fell substantially from the exceptional
pace of January and February.

Inflows to nonbank thrift

institutions remained strong.
On the basis of quarterly average data, M1 grew
at an annual rate of 3 per cent in the first quarter,
compared with a rate of 2-1/2 per cent in the fourth
quarter of 1975.

However, M2 and M 3 grew at rates of

6-1/2 and 11 per cent, respectively, in the first quarter,
compared with rates of 6 and 9 per cent in the preceding
quarter.
System open market operations since the March 15-16
meeting had been guided by the Committee's decision to seek
bank reserve and money market conditions consistent with
moderate growth in monetary aggregates over the period
ahead.

Data that became available week by week during

4/20/76

the inter-meeting period suggested that in the March-April
period M1 and M2 would grow at rates near the midpoints of
the ranges that had been specified by the Committee.

Accord

ingly, System operations were directed toward maintaining
conditions of reserve availability consistent with a Federal
funds rate of about 4-3/4 per cent--the rate prevailing at
the time of the March meeting and the midpoint of the
operating range that the Committee had specified for the
inter-meeting period.
Market interest rates in general declined during
the inter-meeting period, as attitudes apparently were
influenced not only by the stability of the Federal funds
rate but also by indications of a slowing in the rate of
inflation and by reports of continued sluggish business
demands for short-term credit.

In the short-term area,

the outstanding volume of money market instruments was re
duced.

At the time of this meeting the market rate on 3

month Treasury bills was about 4.75 per cent, down from
about 4.95 per cent on the day before the March meeting.

4/20/76

In the intermediate- and longer-term area, the decline
in interest rates occurred even though in March the volume
of funds raised by corporations, the Treasury, and State and
local governments was exceptionally large.

Offerings of

new corporate bonds and stocks was the second highest monthly
amount on record.

Interest rates on new commitments for home

mortgages declined slightly in the inter-meeting period.
The Treasury was expected to announce the terms of
its mid-May refunding on April 28.

Of the maturing issues,

$4.1 billion were held by the public.
At this meeting the Committee reviewed its 12
month ranges for growth in the monetary aggregates.

At

the January meeting the Committee had specified the fol
lowing ranges for growth over the period from the fourth
quarter of 1975 to the fourth quarter of 1976:

M1 , 4-1/2

to 7-1/2 per cent; M2, 7-1/2 to 10-1/2 per cent; and M3,
9 to 12 per cent.

The associated range for growth in the

bank credit proxy was 6 to 9 per cent.

The ranges being

considered at this meeting were for the period from the first
quarter of 1976 to the first quarter of 1977.

4/20/76
During the discussion of policy, many members of
the Committee observed that the economic recovery had been
making good progress.

It was noted that expansion in output

of goods and services in the first quarter had been more
rapid than had been anticipated and that the expansion in
activity during the period ahead might well exceed the pace
suggested by the staff projections.

At the same time, inflation

remained a problem, and upward price pressures could intensify
in the near future.
In commenting on the longer-run growth ranges, many
members favored reducing the upper end of the range for M
1
It was noted that

by 1/2 percentage point, to 7 per cent.

the recovery in economic activity had been under way for 1
year and that the end of the new period for the growth ranges
would fall 2 years after the recession trough.
recovery recently had gained strength.

Moreover, the

Accordingly, it was

observed that this might be an opportune time for the Com
mittee to take a small step toward its longer-range objective
of returning growth in the monetary aggregates toward rates
consistent with general price stability.

-10-

4/20/76

It was stressed during the discussion that the rate of
growth in M1 needed to accommodate a good economic recovery
had been overestimated earlier:

Although M1 growth in the

past two quarters had fallen short of the lower limit of the
range that had been specified by the Committee, it obviously
had been sufficient to accommodate a strong recovery.

In any

case, the proposed upper limit of 7 per cent exceeded actual
growth during both 1974 and 1975.
Some sentiment was expressed for reducing both the
lower and the upper end of the range for M 1 by 1/2 percentage
point--or even by 1 percentage point--with a view to giving
more emphasis to the Committee's longer-run objective of general
price stability.

It was also suggested that it would be desir

able to preserve the width of the range adopted by the Committee
at its January meeting--by reducing the lower as well as the
upper end of the range--in view of the uncertainties associated
with growth in M 1 in this period of change in the public's demands
for currency and demand deposits.

No member advocated raising

either the lower or the upper limit of the longer-run range.

-11-

4/20/76

For M2, many Committee members favored reducing the
upper end of the range by 1/2 percentage point for most of
the same reasons that they favored reducing the upper limit
However, most members advocated retaining the 9 to

for M1.

12 per cent range for M3 that had been adopted at the January
Over the past year, growth in M3 had been faster in

meeting.

relation to growth in both M1 and M2 than had been projected,
as inflows of funds into nonbank thrift institutions--which
typically have been a major source of financing for home pur
chases--had been especially strong.

By retaining the 12 per

cent upper limit for M3, the Committee would allow for the
possibility that this relatively strong performance would
persist.
At the conclusion of the discussion, the Committee
agreed that the ranges for M1 and M2 should be narrowed by
reducing the upper end of each by 1/2 percentage point; thus,
the ranges projected were 4-1/2 to 7 per cent for M
to 10 per cent for M2 .
was 9 to 12 per cent.

and 7-1/2

The range specified for M3, as before,
The associated range for growth in the

bank credit proxy remained 6 to 9 per cent.

-12-

4/20/76

As at earlier meetings, it was agreed that the longer
term ranges, as well as the particular list of aggregates for
which such ranges were specified, would be subject to review
and modification at subsequent meetings.

It was also under

stood that, as a result of short-run factors, growth rates
from month to month might well fall outside the ranges con
templated for annual periods.
In the discussion of current policy at this meeting,
the Committee took note of a staff analysis suggesting that M
was expanding at a rapid rate in April, in large part because
of a substantial decline in Treasury balances.

In addition,

it appeared that a somewhat more typical relationship between
growth in M1 and growth in nominal GNP might be in the process
of being re-established.

It was expected that in the period

ahead growth of time and savings deposits other than negotiable
CD's would remain relatively strong.

Accordingly, the staff

analysis suggested that, if prevailing money market conditions
were maintained over the 4 weeks until the next meeting, growth
in both M1 and M in the April-May period was likely to be high
2
relative to the Committee's longer-run target ranges.

-13-

4/20/76

In view of their assessment that the pace of economic
expansion would be relatively strong, most members favored
directing operations in the period immediately ahead toward
restraining growth of the monetary aggregates within ranges
not very much higher than the longer-run ranges agreed upon
at this meeting and indicated that they would tolerate some
modest firming in money market conditions.

It was observed that

some firming in money market conditions in this period would
reduce the likelihood of excessive monetary growth in subsequent
months.
During the discussion, the view was expressed that an
appreciable tightening in money market conditions in the period
immediately ahead would be premature, for a number of reasons.
Although the recovery had made satisfactory progress, the rate
of unemployment was still well above a desirable level.

Resi

dential construction was just picking up again, and indications
of a recovery in business expenditures for plant and equipment
were only now beginning to appear.
banks remained weak.

Business loan demands at

From the third quarter of 1975 to the

first quarter of this year, moreover, growth of M --and to a

-14-

4/20/76

lesser extent, growth of M2--had been low relative to the
Committee's longer-run ranges.

Finally, financial markets

were particularly sensitive at this time, and any appreciable
tightening in money market conditions could have a substantial
effect on short-term interest rates and could adversely affect
flows of time and savings deposits at both banks and nonbank
thrift institutions.
At the conclusion of the discussion the Committee
decided to seek bank reserve and money market conditions con
sistent with moderate growth in monetary aggregates over the
period ahead.

Specifically, the members concluded that growth

in M1 and M2 over the April-May period at annual rates within
ranges of 4-1/2 to 8-1/2 per cent and 8 to 12 per cent, respec
tively, would be acceptable.

The Committee decided that, in

assessing the behavior of the aggregates, approximately equal
weight should be given to M1 and M 2 .
The members agreed that until the next meeting the weekly
average Federal funds rate might be expected to vary in an orderly
way within a range of 4-1/2 to 5-1/4 per cent.

They also agreed

that, in the conduct of operations, account should be taken of
developments in domestic and international financial markets.

4/20/76

-15-

In accordance with the understanding reached at a
special meeting held on March 29, 1976,1/ the Committee did
not specify an expected range for growth in reserves available
to support private nonbank deposits (RPD's).

At the March 29

meeting, the Committee had agreed it should consider the rates
of growth in several reserve measures--including nonborrowed
reserves, total reserves, and the "monetary base" (total reserves
plus currency)--that were likely to be associated with growth
in the monetary aggregates at the rates it specified for 2-month
periods.

It was contemplated that further experimentation and

analysis would help the Committee to evaluate the relative useful
ness of several possible reserve measures for operational purposes.
The following domestic policy directive was issued to the
Federal Reserve Bank of New York:
The information reviewed at this meeting sug
gests that growth in real output of goods and
services picked up in the first
quarter.
In March
retail sales rose sharply further and recovery in
industrial production continued. Gains in nonfarm
employment were again widespread and the unemployment
1/ The March 29 meeting had been called for the purpose of
reviewing procedures for formulating and implementing the Com
mittee's instructions to the Manager of the System Open Market
Account at the Federal Reserve Bank of New York.

4/20/76

-16-

rate declined from 7.6 to 7.5 per cent. Over
the first quarter wholesale prices of farm products,
foods, and fuels declined appreciably, but average
wholesale prices of other commodities rose almost
as rapidly as during the second half of 1975. Over
recent months, the advance in the index of average
wage rates has moderated somewhat.
The average value of the dollar against lead
ing foreign currencies has been relatively steady
in recent weeks, while the British pound and the
Italian lira have remained under considerable down
ward pressure. In February the U.S. foreign trade
balance registered a second successive monthly
deficit; reported net outflows of private capital
remained moderate.
Monetary aggregates expanded moderately in
March. At commercial banks, inflows of time and
savings deposits other than negotiable CD's fell
substantially from the exceptional pace of February;
inflows to nonbank thrift institutions remained
strong. Since mid-March, both short- and long-term
market interest rates have declined.
In light of the foregoing developments, it is
the policy of the Federal Open Market Committee to
foster financial conditions that will encourage con
tinued economic recovery, while resisting inflationary
pressures and contributing to a sustainable pattern of
international transactions.
To implement this policy, while taking account of
developments in domestic and international financial
markets, the Committee seeks to achieve bank reserve
and money market conditions consistent with moderate
growth in monetary aggregates over the period ahead.
Votes for this action: Messrs.
Burns, Volcker, Balles, Black, Coldwell,
Gardner, Jackson, Kimbrel, Partee, Wallich,
and Winn. Votes against this action: None.
Absent and not voting: Mr. Holland.