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Meeting of Federal Open Market Committee
January 20, 1976
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, January 20, 1976, at

9:00 a.m.
PRESENT:

Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr,
Mr.
Mr.
Mr.

Burns, Chairman
Volcker, Vice Chairman
Baughman
Coldwell
Eastburn
Holland
Jackson
MacLaury
Mayo
Mitchell
Partee
Wallich

Messrs. Balles, Black, and Winn, Alternate
Members of the Federal Open Market
Committee
Messrs. Clay, Kimbrel, and Morris, Presidents
of the Federal Reserve Banks of Kansas City,
Atlanta, and Boston, respectively
Mr. Broida, Secretary
Mr. Altmann, Deputy Secretary
Mr. Bernard, Assistant Secretary
Mr. O'Connell, General Counsel

Mr. Axilrod, Economist (Domestic Finance)
Mr. Gramley, Economist (Domestic Business)
Mr. Solomon, Economist (International Finance)
Messrs. Boehne, Davis, Green, Kareken,
Reynolds, and Scheld, Associate Economists

Mr. Holmes, Manager, System Open Market Account
Mr. Pardee, Deputy Manager for Foreign
Operations
Mr. Sternlight, Deputy Manager for Domestic
Operations
Mr. Coyne, Assistant to the Board of
Governors
Messrs. Kichline and Zeisel, Associate
Directors, Division of Research and
Statistics, Board of Governors

Mr. Keir, Adviser, Division of Research
and Statistics, Board of Governors
Mr. Gemmill, Adviser, Division of International
Finance, Board of Governors
Mrs. Farar, Economist, Open Market Secretariat,
Board of Governors
Mrs. Ferrell, Open Market Secretariat
Assistant, Board of Governors
Mr. Leonard, First Vice President, Federal
Reserve Bank of St. Louis
Messrs. Eisenmenger, Parthemos, Balbach, and
Doll, Senior Vice Presidents, Federal Reserve
Banks of Boston, Richmond, St. Louis, and
Kansas City, respectively
Messrs. Hocter, Brandt, and Keran, Vice
Presidents, Federal Reserve Banks of
Cleveland, Atlanta, and San Francisco,
respectively
Mr. Meek, Monetary Adviser, Federal Reserve
Bank of New York
By unanimous vote, the minutes of actions taken at the meeting
of the Federal Open Market Committee on December 16, 1975, were approved.
The memoranda of discussion for the meetings of the Federal
Open MarketCommittee on November 18 and December 16, 1975, were

By unanimous vote, the System open market transactions in
foreign currencies during the period December 16, 1975, through
January 19, 1976, were approved, ratified, and confirmed.
By unanimous vote,

renewal for further periods of 3 months

of System drawings on the National Bank of Belgium, the Swiss
National Bank, and the Bank for International Settlements, maturing
in the period January 30 through February 28, 1976, was authorized.
It was understood that the System's outstanding drawing of
$600 million on the Bank for International Settlements, maturing
on February 13, 1976, would be transferred on that date to the Swiss
National Bank under arrangements made between those two institutions.
By unanimous vote, the Committee approved an agreement with
the Swiss National Bank for the sharing of losses incurred in the
repayment of the System's swap liability to that Bank on the basis
recommended by the Manager in his memorandum to the Committee
dated January 15, 1976, subject to final approval by the Chairman
on

receipt of advice that the agreement was acceptable to the

Board of Directors of the Swiss National Bank.
Secretary's note: Chairman Burns approved the agreement
on February 2, 1976, following receipt of advice that the
agreement was acceptable to the Board of Directors of the
Swiss National Bank.

By unanimous vote, the open market transactions in Government
securities, agency obligations, and bankers' acceptances during the
period December 16, 1975, through January 19, 1976, 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 accord
ance with the following domestic policy directive:
The information reviewed at this meeting suggests
that output of goods and services--which had increased
very sharply in the third quarter of 1975--expanded more
moderately in the fourth quarter. In December retail
sales rose sharply, but the increase in the fourth
quarter as a whole was less than that in the third
quarter. After having slowed over the preceding 2
months, the rise in industrial production and in non
farm payroll employment accelerated in December.
However, the unemployment rate remained at 8.3 per cent,
as the civilian labor force grew about as much as total
employment. The increase in average wholesale prices of
industrial commodities was again relatively large, but
average prices of farm products and foods declined sharply
further. The index of average wage rates was unchanged
in December, following 2 months of large increases.
The exchange value of the dollar against leading
foreign currencies held steady in December but eased
somewhat in early January. Another sizable foreign
trade surplus was registered in November.
M1 declined in December, and growth in M2 and M3
slowed considerably. At commercial banks, inflows of
time and savings deposits other than large-denomination
CD's slowed, despite a continuing build-up of business

1/20/76

savings accounts, while inflows of deposits to nonbank
thrift institutions were relatively well maintained.
In terms of quarterly averages, growth in M1 from the
third to the fourth quarter was modest, while growth
in M2 and M 3 was more substantial. In recent weeks
interest rates on both short- and long-term securities
have declined appreciably. In mid-January Federal
Reserve discount rates were reduced from 6 to
5-1/2 per cent.
In light of the foregoing developments, it is the
policy of the Federal Open Market Committee to foster
financial conditions that will encourage continued
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 maintain prevailing
bank reserve and money market conditions over the
period immediately ahead, provided that monetary
aggregates appear to be growing at about the rates
currently expected.
It was agreed that the next meeting of the Committee would
be held on Wednesday, February 18, 1976, at 9:00 a.m.
The meeting adjourned.

Secretary