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Authorized for public release by the FOMC Secretariat on 2/3/2021 BOARD OF GOVERNORS INRECORDS SECTION OF THE FEDERAL RESERVE SYSTEM Office Correspondence To Board Members (individually addressed) From Date Subject: Arthur L. Broida Attached is a copy of a telegram being sent to the President-Members of the FOMC. today If you concur in the Chairman's recommendation, please indicate by initialing below and returning this memorandum to my office. 1975 5, February Authorized for public release by the FOMC Secretariat on 2/3/2021 IN RECORDS SECTION TE LE G RA M MAR 20 FEDERAL RESERVE COMMUNICATIONS SYSTEM BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON February 5, 1975 CONFIDENTIAL (FR) CLASS II-FOMC DEBS - NEW YORK BLACK - RICHMOND WINN - CLEVELAND KIMBREL - ATLANTA CLAY - KANSAS CITY According to estimates prepared last week, in January M declined at about a 7 per cent annual rate and M 2 grew at a rate of less than 3.5 per cent. Growth rates for January-February period appeared to be well below the lower limits of Committee's ranges of tolerance. Latest incoming data indicate further weaken- ing in these monetary aggregates, wholly reflecting the behavior of demand deposits; growth in relatively strong. consumer-type time deposits remains Desk is currently aiming at Federal funds rate of 6-1/2 per cent, the lower limit of its range of tolerance. In light of these developments and of the reduction in discount rates effective today, Chairman Burns recommends that lower limit of funds rate constraint be reduced to 6-1/4 per cent at this time. Please advise promptly whether you concur in recommendation. BROIDA Chairman's 1975 Authorized for public release by the FOMC Secretariat on 2/3/2021 BOARD OF GOVERNORS N RECORDS SECTION FEDERAL RESERVE SYSTEM Office Correspondence To Chairman Burns From Arthur L. Broida Date Subject: February on wire to Responses funds rate All members of the FOMC concur in your recommendation to reduce the lower limit of the funds rate constraint to 6-1/4 per cent except Governor Sheehan. Governor Sheehan's reason for not concurring was as follows: "6- 1 /4 per cent is inadequate as a lower limit. I prefer 6 now and 5-3/4 shortly if the aggregates continue their growth below the range limits specified at the last Committee meeting." In addition, three Board members, all of whom concurred in the recommendation, added comments as follows: Governor Mitchell: Governor Bucher: "But I prefer 6 per cent." "Would strongly prefer reducing to 6 per cent." Governor Holland: "But I would much prefer that the limit be lowered to 6 per cent, and I urge that the bottom be dropped to 6 per cent as soon as Friday, February 7. Keeping the bottom of the range above 6 per cent, in my view, is inconsistent with the behavior of the aggregates, the displayed attitude of banks, the 1/2 point reduction in the discount rate, and the tenor of discussion at the Board meeting on Tuesday, February 4." 5, 1975 Authorized for public release by the FOMC Secretariat on 2/3/2021 BOARD OF GOVERNORS OF THE CONFIDENTIAL (FR) CLASS II - FOMC FEDERAL RESERVE SYSTEM Office Correspondence To Board Members (individually addressed) From Arthur L. Date February 6, 1975 Subject: Broida In reply to yesterday's telegram, all Committee members except Governor Sheehan have concurred in Chairman Burns' recommendation for a reduction in the lower limit of the Federal funds rate constraint to 6-1/4 per cent. Mr.Debs responded as alternate for Mr. Hayes. Governor Sheehan did not concur because he considers 6-1/4 per cent inadequate; his preference would be for a lower limit of 6 per cent now and 5-3/4 per cent shortly if the aggregates remain below the ranges specified at the last meeting. Governors Bucher, Holland, and Mitchell, while concurring, also would have preferred reducing the lower limit to 6 per cent. Authorized for public release by the FOMC Secretariat on 2/3/2021 BOARD OF GOVERNORS OF THE CONFIDENTIAL (FR) CLASS II - FOMC FEDERAL RESERVE SYSTEM Office Correspondence Date D INRECORDS SECTION February 6, 1975 Subject: To From Arthur L. Broida For your information attached is a telegram sent yesterday to FOMC members. All Committee members except Governor Sheehan have concurred in Chairman Burns' recommendation for a reduction in the lower limit of the Federal funds rate constraint to 6-1/4 per cent. Mr. Debs responded as alternate for Mr. Hayes. Governor Sheehan did not concur because he considers 6-1/4 per cent inadequate; his preference would be for a lower limit of 6 per cent now and 5-3/4 per cent shortly if the aggregates remain below the ranges specified at the last meeting. Governors Bucher, Holland, and Mitchell, while concurring, also would have preferred reducing the lower limit to 6 per cent. Attachment cc: Bernard Messrs. Altmann O'Connell R. Solomon Keir Bryant Mrs.Farar Authorized for public release by the FOMC Secretariat on 2/3/2021 TELE G R A M MAR 20 1975 FEDERAL RESERVE COMMUNICATIONS SYSTEM BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON February 6, 1975 CONFIDENTIAL (FR) CLASS II-FOMC MORRIS - BOSTON HAYES - NEW YORK EASTBURN - PHILADELPHIA MAYO - CHICAGO FRANCIS - ST. LOUIS MACLAURY - MINNEAPOLIS BAUGHMAN - DALLAS BALLES - SAN FRANCISCO For your information, the following wire was sent yesterday to FOMC members: "According to estimates prepared last week, in January M 1 declined at about a 7 per cent annual rate and M 2 grew at a rate of less than 3.5 per cent. Growth rates for January-February period appeared to be well below the lower limits of Committee's ranges of tolerance. Latest incoming data indicate further weaken- ing in these monetary aggregates, wholly reflecting the behavior of demand deposits; growth in relatively strong. of 6-1/2 per cent, "In consumer-type time deposits remains Desk is currently aiming at Federal funds rate the lower limit of its range of tolerance. light of these developments and of the reduction in discount rates effective today, Chairman Burns recommends that lower limit of funds rate constraint be reduced to 6-1/4 per cent at this time. "Please advise promptly whether you concur in recommendation." Chairman's Authorized for public release by the FOMC Secretariat on 2/3/2021 TELEGRAM MAR 2 0 1975 FEDERAL RESERVE COMMUNICATIONS SYSTEM BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON -2- In reply to yesterday's telegram, all Committee members except Governor Sheehan have concurred in Chairman Burns' mendation for a reduction in the lower limit of the Federal funds rate constraint to 6-1/4 per cent. for Mr. recom- Mr. Debs responded as alternate Hayes. Governor Sheehan did not concur because he considers 6-1/4 per cent inadequate; his preference would be for a lower limit of 6 per cent now and 5-3/4 per cent shortly if the aggre- gates remain below the ranges specified at the last meeting. Governors Bucher, Holland, and Mitchell, while concurring, also would have preferred reducing the lower limit to 6 per cent. BROIDA
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