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2/15/77
Meeting of Federal Open Market Committee
February 15, 1977
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.,
on Tuesday, February 15,
1977, at 9:00 a.m.
PRESENT:
Burns, Chairman
Volcker, Vice Chairman
Balles
Black
Coldwell
Gardner
Jackson
Kimbrel
Lilly
Partee
Mr. Wallich
Mr. Winn
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Messrs. Baughman, Guffey, Mayo, and Morris,
Alternate Members of the Federal Open
Market Committee
Messrs. Eastburn and Roos, Presidents of the
Federal Reserve Banks of Philadelphia and
St. Louis, respectively
Mr. Broida, Secretary
Mr. Altmann,1/ Deputy Secretary
Mr. Bernard,1/ Assistant Secretary
Mr. O'Connell, General Counsel
Mr. Axilrod, Economist (Domestic Finance)
Messrs. Brandt,1/ Davis,1/ Keran,1/
Kichline,1, Parthemos,1/ Reynolds,1/
and Zeisel,1/ Associate Economists
1/
Attended part of Tuesday session only.
2/15/77
- 2 Mr. Holmes, Manager System Open Market
Account
Mr. Pardee,1/ Deputy Manager for Foreign
Operations
Mr. Sternlight,1/ Deputy Manager for
Domestic Operations
Messrs. Coyne and Keir,1/ Assistants to
the Board of Governors
Mr. Ettin,1/ Associate Director, Division
of Research and Statistics, Board of
Governors
Mr. Truman,1/ Associate Director, Division
of International Finance, Board of
Governors
Mrs. Farar,1/ Economist, Open Market
Secretariat, Board of Governors
Mrs. Deck,1/ Staff Assistant, Open Market
Secretariat, Board of Governors
Mr. Van Nice, First Vice President, Federal
Reserve Bank of Minneapolis
Messrs. Balbach,1/ Boehne,1/ Davis,1/ and
Scheld,1/ Senior Vice Presidents,
Federal Reserve Banks of St. Louis,
Philadelphia, Cleveland,and Chicago,
respectively
Messrs. Davis,1/ and Green,1/ Vice Presidents,
Federal Reserve Banks of Kansas City
and Dallas, respectively
Mr. McNees,1/ Assistant Vice President,
Federal Reserve Bank of Boston
Mr. Kareken,1/ Economic Adviser, Federal
Reserve Bank of Minneapolis
Mr. Hill,1/ Senior Economist, Federal Reserve
Bank of New York
By unanimous vote, the Committee approved the
statement of policy regarding the Government
Act:
1/
Attended part of Tuesday session only.
following
in the Sunshine
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Policy Regarding the
Government in the Sunshine Act
On September 13, 1976, there was enacted into
law the Government in the Sunshine Act, Pub. L. No.94
409, 90 Stat. 1241 ("Sunshine Act"), established
for the purpose of providing the public with the
"fullest practicable information regarding the
decisionmaking processes of the Federal Government...
while protecting the rights of individuals and the
ability of the Government to carry out its responsi
bilities."1/ The Sunshine Act applies only to those
Federal agencies that are defined in Section 552(e)
of Title 5 of the United States Code and "headed by
a collegial body composed of two or more individual
members, a majority of whom are appointed to such
position by the President with the advice and con
sent of the Senate, and any subdivision thereof
authorized to act on behalf of the agency. "2/
The Federal Open Market Committee ("FOMC") is
a separate and independent statutory body within
the Federal Reserve System. In no respect is it an
agent or 'subdivision' of the Board. It was originally
established by the Banking Act of 1933 and restructured
in its present form by the Banking Act of 1935 and
subsequent legislation in 1942 (generally see 12 U.S.C.
§263(a)). The FOMC's membership is composed of the seven
members of the Board of Governors of the Federal Reserve
System ("Board of Governors") and five representatives of
1/
2/
Government in the Sunshine Act, Pub. L. No. 94
409, §2, 90 Stat. 1241 (1976).
Government in the Sunshine Act, Pub. L. No. 94
409, §3(a), 90 Stat. 1241 (1976).
2/15/77
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the Federal Reserve Banks who are selected annually
in accordance with the procedures set forth in
Section 12A of the Federal Reserve Act, 12 U.S.C.
§263(a).
Members of the Board of Governors serve
in an ex officio capacity on the FOMC by reason of
their appointment as Members of the Board of
Governors, not as a result of an appointment "to
such position" (the FOMC) by the President.
Representatives of the Reserve Banks serve on the
FOMC not as a result of an appointment "to such
position" by the President, but rather by virtue
of their positions with the Reserve Banks and their
selection pursuant to Section 12A of the Federal
Reserve Act.
It is clear therefore that the FOMC
does not fall within the scope of an 'agency' or
'subdivision' as defined in the Sunshine Act and
consequently is not subject to the provisions of
that Act.
As explained below, the Act would not require
the FOMC to hold its meetings in open session even
if the FOMC were covered by the Act.
However,
despite the conclusion reached that the Sunshine
Act does not apply to the FOMC, the FOMC has
determined that its procedures and timing of public
disclosure already are conducted in accordance with
the spirit of the Sunshine Act, as that Act would
apply to deliberations of the nature engaged in by
the FOMC.
In the foregoing regard, the FOMC has noted
that while the Act calls generally for open meetings
of multi-member Federal agencies, 10 specific
exemptions from the open meeting requirement are
provided to assure the ability of the Government to
carry out its responsibilities.
Among the exemp
tions provided is that which authorizes any agency
operating under the Act to conduct closed meetings
where the subject of a meeting involves information
"the premature disclosure of which would--in the
case of an agency which regulates currencies,
securities, commodities, or financial institutions,
2/15/77
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be likely to lead to significant financial specula
tion in currencies, securities, or commodities."3/
As to meetings closed under such exemption, the
Act requires the maintenance of either a transcript,
electronic recording or minutes and sets forth
specified, detailed requirements as to the contents
and timing of disclosure of certain portions or all
of such minutes. The Act permits the withholding
from the public of the minutes where disclosure
would be likely to produce adverse consequences of
the nature described in the relevant exemptions.
The FOMC has reviewed the agenda of its monthly
meetings for the past three years and has determined
that all such meetings could have been closed pur
suant to the exemption dealing with financial
speculation or other exemptions set forth in the
Sunshine Act. The FOMC has further determined that
virtually all of its substantive deliberations could
have been preserved pursuant to the Act's minutes
requirements and that such minutes could similarly
have been protected against premature disclosure
under the provisions of the Act.
The FOMC's deliberations are currently reported
by means of a document entitled "Record of Policy
Actions" which is released to the public approxi
mately one month after the meeting to which it
relates. The Record of Policy Actions complies with
the Act's minutes requirements in that it contains
a full and accurate report of all matters of policy
discussed and views presented, clearly sets forth
all policy actions taken by the FOMC and the reasons
therefor, and includes the votes by individual
members on each policy action. The timing of
release of the Record of Policy Actions is fully
consistent with the Act's provisions assuring
against premature release of any item of discussion
in an agency's minutes that contains information
of a sensitive financial nature.
In fact, by
3/
Government in the Sunshine Act, Pub. L. No. 94
409, §3(a), 90 Stat. 1242 (1976).
- 6 -
2/15/77
releasing the comprehensive Record of Policy Actions
to the public approximately a month after each
meeting, the FOMC exceeds the publication require
ments that would be mandated by the letter of the
Sunshine Act.
Recognizing the Congressional purpose under
lying enactment of the Sunshine Act, the FOMC has
determined to continue its current practice and
timing of public disclosures in the conviction
that its operations thus conducted are consistent
with the intent and spirit of the Sunshine Act.
By unanimous vote, the minutes of actions taken at
the meeting of the Federal Open Market Committee held on
January 17-18, 1977, were approved.
By unanimous vote, the Committee amended Section
271.6(a) of its Rules Regarding Availability of Information to
read as follows, effective March 12,
1977:
271.6 Information not Disclosed
Except as may be authorized by the Committee,
information of the Committee that is not available
to the public through other sources will not be
published or made available for inspection, examina
tion, or copying by any person if such information
(a)
is specifically exempted from dis
closure by statute (other than
section 552b of Title 5 United
States Code), provided that such
statute (A) requires that the
matters be withheld from the public
in such a manner as to leave no dis
cretion on the issue, or (B) estab
lishes particular criteria for with
holding or refers to particular
-
2/15/77
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types of matters to be withheld; or
is specifically authorized under
criteria established by an executive
order to be kept secret in the
interest of national defense or
foreign policy and is in fact
properly classified pursuant to
such executive order.
*
*
*
*
*
By unanimous vote, System open market transactions
in foreign currencies during the period January 18,
1977,
through February 14, 1977, were approved, ratified, and
confirmed.
By unanimous vote, System open market transactions
in Government securities, agency obligations, and bankers'
acceptances during the period January 18, 1977, through
February 14, 1977, were approved, ratified, and confirmed.
By unanimous vote, 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 accordance with the following domestic policy directive:
The information reviewed at this meeting
suggests underlying strength in economic activity,
although industrial production and retail sales
were held down in January by the effects of
unusually severe weather. Housing starts rose
sharply in December, and labor market surveys
completed by mid-January indicated a further rise
in employment and a decline in the unemployment
rate from 7.8 to 7.3 per cent. The wholesale
price index for all commodities continued to
2/15/77
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rise, reflecting increases in the average both for
farm products and foods and for industrial
commodities.
The index of average wage rates
rose sharply in January as a result of marked
increases in the volatile construction and service
sectors.
The average value of the dollar against
leading foreign currencies has risen somewhat over
the past month.
In December the U. S. foreign
trade deficit increased further; in the fourth
quarter as a whole the deficit was a little larger
than in the third quarter.
M-1, which had expanded appreciably in
December, grew at a moderate pace in January.
Growth in M-2 and M-3 also moderated.
At banks
and thrift institutions, inflows of time and
savings deposits other than large-denomination CD's
slowed somewhat.
Interest rates have changed
relatively little on balance since mid-January.
In light of the foregoing developments, it
is the policy of the Federal Open Market Committee
to foster bank reserve and other financial con
ditions that will encourage continued economic
expansion, while resisting inflationary pressures
and contributing to a sustainable pattern of
international transactions.
At its meeting on January 18, 1977, the
Committee agreed that growth of M-1, M-2, and
M-3 within ranges of 4-1/2 to 6-1/2 per cent, 7
to 10 per cent, and 8-1/2 to 11-1/2 per cent,
respectively, from the fourth quarter of 1976 to
the fourth quarter of 1977 appears to be consistent
with these objectives. These ranges are subject
to reconsideration at any time as conditions
warrant.
The Committee seeks to encourage near-term
rates of growth in M-1 and M-2 on a path believed
to be reasonably consistent with the longer-run
ranges for monetary aggregates cited in the pre
ceding paragraph.
Specifically, at present, it
2/15/77
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expects the annual growth rates over the February
March period to be within the ranges of 3 to 7 per
cent for M-1 and 6-1/2 to 10-1/2 per cent for M-2.
In the judgment of the Committee such growth rates
are likely to be associated with a weekly average
Federal funds rate of about 4-5/8 to 4-3/4 per
cent.
If, giving approximately equal weight to
M-1 and M-2, it appears that growth rates over the
2-month period will deviate significantly from the
midpoints of the indicated ranges, the operational
objective for the Federal funds rate shall be modified
in an orderly fashion within a range of 4-1/4 to 5
per cent.
If it appears during the period before the next
meeting that the operating constraints specified
above are proving to be significantly inconsistent,
the Manager is promptly to notify the Chairman who
will then decide whether the situation calls for
supplementary instructions from the Committee.
By unanimous vote,the Committee revised No. 4 of
the Guidelines for the Conduct of System Operations in Federal
Agency Issues to read as follows, effective immediately;
4.
Purchases will be limited to fully taxable
issues, not eligible for purchase by the
Federal Financing Bank, for which there is
an active secondary market. Purchases will
also be limited to issues outstanding in
amounts of $300 million or over in cases
where the obligations have a maturity of five
years or less at the time of issuance, and
to issues outstanding in amounts of $200
million or over in cases where the securities
have a maturity of more than five years at
the time of issuance.
It was agreed that the next meeting of the Committee
would be held on March 15, 1977, at 9:30 a.m.
The meeting adjourned.
Secretary
@FedFRASER