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Meeting of Federal Open Market Committee

July 16,



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, July 16, 1974, at 9:30 a.m.


Burns, Chairman
Hayes, Vice Chairman

Messrs. Coldwell, Mayo, and Morris, Alternate
Members of the Federal Open Market Committee
Messrs. Eastburn, Francis, and Balles, Presidents
of the Federal Reserve Banks of Philadephia,
St. Louis, and San Francisco, respectively
Mr. Broida, Secretary
Mr. Altmann, Deputy Secretary
Mr. Bernard, Assistant Secretary
Mr. O'Connell, General Counsel
Mr. Partee, Senior Economist
Mr. Axilrod, Economist (Domestic Finance)
Messrs. Brandt, Davis, Doll, Gramley,
Hocter, Pierce, and Reynolds,
Associate Economists


Mr. Holmes, Manager, System Open Market

Mr. Coombs, Special Manage:, System Open
Market Account
Mr. Coyne, Assistant to the Board of
Mr. Wonnacott, Associate Director, Division
of International Finance, Board of
Mr. Williams, Adviser, Division of Research
and Statistics, Board of Governors
Mr. Wendel, Assistant Adviser, Division of
Research and Statistics, Board of
Miss Pruitt, Economist, Open Market Secretariat,
Board of Governors
Mrs. Ferrell, Open Market Secretariat Assistant,
Board of Governors
Mr. Van Nice, First Vice President, Federal
Reserve Bank of Minneapolis
Messrs. Eisenmenger, Boehne, Scheld, and
Sims, Senior Vice Presidents, Federal
Reserve Banks of Boston, Philadelphia,
Chicago, and San Francisco, respectively
Messrs. Snellings, Jordan, and Green, Vice
Presidents, Federal Reserve Banks of
Richmond, St. Louis, and Dallas,
Mr. Kareken, Economic Adviser, Federal Reserve
Bank of Minneapolis

Ms. Tschinkel, Manager, Securities Department,
Federal Reserve Bank of New York
By unanimous vote, the minutes of actions taken at the meeting
of the Federal Open Market Committee held on June 18, 1974, were


The memorandum of discussion for the meeting of the Federal
Open Market Committee held on June 18, 1974, was accepted.
By unanimous vote, the System open market transactions in
foreign currencies during the period June 18 through July 15, 1974,
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 August 2-15, 1974, was authorized.
A proposed letter from Chairman Burns to the Secretary of
the Treasury, concerning possible use by the Bank of Italy of its
swap line with the Federal Reserve, was approved.
By unanimous vote, the open market transactions in
Government securities, agency obligations, and bankers' acceptances
during the period June 18 through July 15, 1974, were approved,
ratified, and confirmed.
With Mr. Bucher dissenting, the Federal Reserve Bank of New
York was authorized and directed, until otherwise directed by the
Committee, to execute transactions for the System Account in
accordance with the following domestic policy directive:


The information reviewed at this meeting suggests that
real output of goods and services changed little in the
second quarter and that no significant expansive forces
appear to be emerging. The over-all rate of price rise,
while very large, was not quite so rapid in the second
as in the first quarter, but the advance in wage rates
accelerated. In June industrial production was unchanged,
following 2 months of moderate advance, while nonfarm
payroll employment edged down. The unemployment rate
remained at 5.2 per cent. Wholesale prices of farm and
food products declined substantially further, but increases
among industrial commodities continued widespread and
extraordinarily large.
Since mid-May the dollar has appreciated somewhat
against leading foreign currencies. In June there was
a large increase in foreign official assets in the United
States, mainly reflecting investments by oil-exporting
countries. The foreign trade deficit increased sharply
in May, as exports declined and imports rose further.
Growth in the narrowly defined money stock was
somewhat more rapid in June than in May; growth during
the second quarter was close to the 7 per cent first
quarter pace. Net inflows of consumer-type time deposits
at banks and at nonbank thrift institutions increased in
June, but deposit experience at the nonbank institutions
deteriorated late in the month. Growth in business loans
and in total bank credit slowed in June, and banks added
much less to their outstanding volume of large-denomination
CD's than in April and May. Private market interest rates
have risen substantially in recent weeks, and in association
with uneasy conditions in financial markets, yield spreads
between prime and lower quality issues have widened. Yields
on long-term Government securities have increased relatively
little, and those on Treasury bills have declined somewhat.
In light of the foregoing developments, it is the
policy of the Federal Open Market Committee to foster
financial conditions conducive to resisting inflationary
pressures, supporting a resumption of real economic growth,
and achieving equilibrium in the country's balance of


To implement this policy, while taking account of
the forthcoming Treasury refunding and of developments
in domestic and international financial markets, the
Committee seeks to achieve bank reserve and money
market conditions that would moderate growth in monetary
aggregates over the months ahead.
By unanimous vote, the guidelines for the conduct of System
operations in Federal agency issues were amended, effective imme

to delete guidelines

numbered 4 and 7,

and to renumber

the remaining guidelines as 4, 5 and 6.
By unanimous vote, paragraph 1(b) of the Authorization
for Domestic Open Market Operations was amended, effective
immediately, to read as follows:
(b) To buy or sell in the open market, from or to
acceptance dealers and foreign accounts maintained at
the Federal Reserve Bank of New York, on a cash, regular,
or deferred delivery basis, for the account of the Federal
Reserve Bank of New York at market discount rates, prime
bankers' acceptances with maturities of up to nine months
at the time of acceptance that (1) arise out of the current
shipment of goods between countries or within the United
States, or (2) arise out of the storage within the United
States of goods under contract of sale or expected to move
into the channels of trade within a reasonable time and
that are secured throughout their life by a warehouse
receipt or similar document conveying title to the under
lying goods; provided that the aggregate amount of bankers'
acceptances held at any one time shall not exceed $500 million.



It was agreed that the next meeting of the Committee would
be held on Tuesday, August 20, 1974, at 9:30 a.m.
The meeting adjourned.


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102