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Meeting of Federal Open Market Committee December 12, 1967 MINUTES OF ACTIONS A meeting of the Federal Open Market Committee was held in the offices of the Board of Governors of the Federal Reserve System in Washington, D. C., PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. on Tuesday, December 12, 1967, at 9:30 a.m. Martin, Chairman Hayes, Vice Chairman Brimmer Francis Maisel Mitchell Robertson Scanlon Sherrill 1/ Swan Wayne Messrs. Ellis, Hickman, Patterson, and Galusha, Alternate Members of the Federal Open Market Committee Messrs. Bopp, Clay, and Irons, Presidents of the Federal Reserve Banks of Philadelphia, Kansas City, and Dallas, respectively Mr. Holland, Secretary Mr. Sherman, Assistant Secretary Mr. Kenyon, Assistant Secretary Mr. Broida, Assistant Secretary Mr. Molony, Assistant Secretary Mr. Hackley, General Counsel Mr. Brill, Economist Messrs. Baughman, Hersey, Koch, Partee, Parthemos, and Solomon, Associate Economists Mr. Holmes, Manager, System Open Market Account 1/ Entered the meeting at the point indicated. 12/12/67 Mr. Cardon, Legislative Counsel, Board of Governors Mr. Fauver, Assistant to the Board of Governors Mr. Williams, Adviser, Division of Research and Statistics, Board of Governors Mr. Reynolds, Adviser, Division of International Finance, Board of Governors Mr. Axilrod, Associate Adviser, Division of Research and Statistics, Board of Governors Miss Eaton, General Assistant, Office of the Secretary, Board of Governors Miss McWhirter, Analyst, Office of the Secretary, Board of Governors Messrs. Eisenmenger, Link, Eastburn, Mann, Taylor, Andersen, Tow, and Green, Vice Presidents of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Atlanta, St. Louis, Kansas City, and Dallas, respectively Mr. Lynn, Director of Research, Federal Reserve Bank of San Francisco Messrs. MacLaury and Meek, Assistant Vice Presidents of the Federal Reserve Bank of New York Mr. Kareken, Consultant, Federal Reserve Bank of Minneapolis By unanimous vote, the minutes of actions taken at the meeting of the Federal Open Market Committee held on November 14, 1967, were approved. The memorandum of discussion for the meeting of the Federal Open Market Committee held on November 14, 1967, was accepted. By unanimous vote, the action taken by members of the Federal Open Market Committee on November 30, 1967, increasing effective as of that date the swap arrangement with the Bank of Canada by $250 million equivalent, from $500 million to $750 million equivalent, 12/12/67 -3 and the corresponding change in paragraph 2 of the authorization for System foreign currency operations, was ratified. Mr. Sherrill entered the meeting. By unanimous vote, the System open market transactions in foreign currencies during the period November 27 through December 11, 1967, were approved, ratified, and confirmed. Renewal for further periods of twelve months of the $750 million swap arrangements with the Bank of Canada, maturing December 28, 1967, and with the Bank of Italy, maturing December 29, 1967, was approved. Renewal for a period of twelve months of the $225 million swap arrangement with the Netherlands Bank, maturing December 29, 1967, was approved. Renewal for a period of three months of the $100 million swap arrangement with the Bank of France, maturing December 29, 1967, was approved. By unanimous vote, the open market transactions in Govern ment securities, agency obligations, and bankers' acceptances during the period November 27 through December 11, 1967, were approved, ratified, and confirmed. With Mr. Maisel dissenting, the Federal Reserve Bank of New York was authorized and directed, until otherwise directed by the Committee, to execute transactions in the System Account in accord ance with the following current economic policy directive: 12/12/67 The information reviewed at this meeting indicates that industrial output and employment have rebounded following strike settlements in the automobile and other industries, and that prospects have heightened for more rapid expansion of over-all economic activity in the months ahead. Both industrial and consumer prices have continued to rise at a substantial rate. The imbalance in U.S. international transactions has worsened, partly because of weakening in the export surplus since midyear. Foreign purchases of gold have been large following the devaluation of the pound sterling. Bank credit expansion has lessened, with diminished bank buying of Government securities and continued moderate loan growth. Most interest rates have risen further in reaction to the British devaluation and Bank rate increase, the rise in Federal Reserve discount rates, and waning expectations of enactment of the President's fiscal program. In this situation, it is the policy of the Federal Open Market Committee to foster financial conditions conducive to resistance of inflationary pressures and progress toward reasonable equilibrium in the country's balance of payments. To implement this policy, System open market opera tions until the next meeting of the Committee shall be conducted with a view to moving slightly beyond the firmer conditions that have developed in money markets partly as a result of the increase in Federal Reserve discount rates; provided, however, that operations shall be modified as needed to moderate any apparently significant deviations of bank credit from current expectations or any unusual liquidity pressures. It was agreed the next meeting of the Committee would be held on Tuesday, January 9, 1968, at 9:30 a.m. The meeting adjourned. Secretary
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