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Minutes of Federal Open Market Committee
March 4, 1969
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:
on Tuesday, March 4, 1969, at 9:30 a.m.
Mr. Martin, Chairman
Mr. Hayes, Vice Chairman
Mr. Bopp
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Brimmer
Clay
Coldwell
Daane
Maisel
Mitchell
Robertson
Scanlon
Sherrill
Messrs. Francis, Heflin, Hickman, Swan, and
Treiber, Alternate Members of the Federal
Open Market Committee
Messrs. Morris, Kimbrel, and Galusha, Presidents
of the Federal Reserve Banks of Boston,
Atlanta, and Minneapolis, respectively
Mr. Holland, Secretary
Mr. Broida, Deputy Secretary
Messrs. Kenyon and Molony, Assistant
Secretaries
Mr. Hackley, General Counsel
Mr. Brill, Economist
Messrs. Axilrod, Baughman, Eastburn, Green,
Hersey, Solomon, and Tow, Associate
Economists
Mr. Holmes, Manager, System Open Market Account
Mr. Sherman, Consultant, Board of Governors
Messrs. Coyne and Nichols, Special Assistants
to the Board of Governors
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Mr. Williams, Adviser, Division of Research
and Statistics, Board of Governors
Mr. Keir, Assistant Adviser, Division of
Research and Statistics, Board of
Governors
Mr. Bernard, Special Assistant, Office of the
Secretary, Board of Governors
Miss Eaton, Open Market Secretariat Assistant,
Office of the Secretary, Board of Governors
Messrs. Parthemos, Taylor, and Jones, Senior
Vice Presidents of the Federal Reserve
Banks of Richmond, Atlanta, and St. Louis,
respectively
Messrs. Eisenmenger and MacLaury, Vice
Presidents of the Federal Reserve Banks
of Boston and New York, respectively
Messrs. Garvy and Kareken, Economic Advisers
of the Federal Reserve Banks of New York
and Minneapolis, respectively
Mr. Shotwell, Assistant Vice President and
Economist, Federal Reserve Bank of Cleveland
Mr. Cooper, Manager, Securities and Acceptance
Departments, Federal Reserve Bank of
New York
The Secretary reported that advices had been received of
the election by the Federal Reserve Banks of members and alternate
members of the Federal Open Market Committee for the term of one
year beginning March 1, 1969, that it appeared that such persons
were legally qualified to serve, and that they had executed their
oaths of office.
The elected members and alternates were as follows:
Alfred Hayes, President of the Federal Reserve Bank of New York,
with William F. Treiber, First Vice President of the Federal
Reserve Bank of New York, as alternate;
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Karl R. Bopp, President of the Federal Reserve Bank of Phila
delphia, with Aubrey N. Heflin, President of the Federal
Reserve Bank of Richmond, as alternate;
Charles J. Scanlon, President of the Federal Reserve Bank of
Chicago, with W. Braddock Hickman, President of the Federal
Reserve Bank of Cleveland, as alternate;
George H. Clay, President of the Federal Reserve Bank of
Kansas City, with Eliot J. Swan, President of the Federal
Reserve Bank of San Francisco, as alternate;
Philip E. Coldwell, President of the Federal Reserve Bank of
Dallas, with Darryl R. Francis, President of the Federal
Reserve Bank of St. Louis, as alternate.
By unanimous vote, the following officers of the Federal
Open Market Committee were elected to serve until the election of
their successors at the first meeting of the Committee after
February 28, 1970, with the understanding that in the event of the
discontinuance of their official connection with the Board of
Governors or with a Federal Reserve Bank, as the case might be,
they would cease to have any official connection with the Federal
Open Market Committee:
Wm. McC. Martin, Jr.
Alfred Hayes
Robert C. Holland
Arthur L. Broida
Kenneth A. Kenyon and Charles Molony
Howard H. Hackley
David B. Hexter
Daniel H. Brill
Stephen H. Axilrod, Ernest T.
Baughman, David P. Eastburn,
Ralph T. Green, A. B. Hersey,
Robert G. Link, J. Charles Partee,
John E. Reynolds, Robert Solomon,
and Clarence W. Tow
Chairman
Vice Chairman
Secretary
Deputy Secretary
Assistant Secretaries
General Counsel
Assistant General Counsel
Economist
Associate Economists
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By unanimous vote, the Federal Reserve Bank of New York was
selected to execute transactions for the System Open Market Account
until the adjournment of the first meeting of the Federal Open
Market Committee after February 28, 1970.
By unanimous vote, Alan R. Holmes and Charles A. Coombs
were selected to serve at the pleasure of the Federal Open Market
Committee as Manager of the System Open Market Account and as
Special Manager for foreign currency operations for such Account,
respectively, it being understood that their selection was subject
to their being satisfactory to the Board of Directors of the Federal
Reserve Bank of New York.
Secretary's Note: Advice subsequently
was received that Messrs. Holmes and
Coombs were satisfactory to the Board of
Directors of the Federal Reserve Bank of
New York for service in the respective
capacities indicated.
By unanimous vote, the minutes of actions taken at the
meeting of the Federal Open Market Committee held on February 4,
1969, were approved.
The memorandum of discussion for the meeting of the Federal
Open Market Committee held on February 4, 1969, was accepted.
Consideration was then given to the continuing authorizations
of the Committee, according to the customary practice of reviewing
such matters at the first meeting in March of every year, and the
actions set forth hereinafter were taken.
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By unanimous vote, the following procedures with respect
to allocations of securities
in the System Open Market Account
were approved without change:
1. Securities in the System Open Market Account
shall be reallocated on the last business day of each
month by means of adjustments proportionate to the
adjustments that would have been required to equalize
approximately the average ratios of gold holdings to
note liabilities of the twelve Federal Reserve Banks
based on the ratios of gold to notes for the most
recent five business days.
2. Until the next reallocation the Account shall
be apportioned on the basis of the ratios determined in
paragraph 1.
3. Profits and losses on the sale of securities
from the Account shall be allocated on the day of
delivery of the securities sold on the basis of each
Bank's current holdings at the opening of business on
that day.
By unanimous vote, the following list for distribution of
periodic reports prepared by the Federal Reserve Bank of New York
for the Federal Open Market Committee was approved:
1.
*2.
*3.
*4.
*5.
6.
Members and Alternate Members of the Committee,
other Reserve Bank Presidents, and officers of
the Committee.
The Secretary of the Treasury.
The Under Secretary of the Treasury for Monetary
Affairs and the Deputy Under Secretary for
Monetary Affairs.
The Assistant to the Secretary of the Treasury
working on debt management problems.
The Fiscal Assistant Secretary of the Treasury.
The Director of the Division of Federal Reserve
Bank Operations, Board of Governors
* Weekly reports only.
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7.
The officer in charge of research at each of the
Federal Reserve Banks not represented by its
President on the Committee.
8. The officers of the Federal Reserve Bank of New York
working under the Manager and Special Manager of
the System Open Market Account.
9. With the approval of a member of the Committee or
any other President of a Federal Reserve Bank,
with notice to the Secretary, any other employee
of the Board of Governors or of a Federal Reserve
Bank.
By unanimous vote, the Committee reaffirmed the authoriza
tion, first given on March 1, 1951, for the Chairman to appoint a
Federal Reserve Bank to operate the System Open Market Account
temporarily in case the Federal Reserve Bank of New York is unable
to function.
By unanimous vote, the following resolution to provide for
the continued operation of the Federal Open Market Committee during
an emergency was reaffirmed:
In the event of war or defense emergency, if the
Secretary or Assistant Secretary of the Federal Open
Market Committee (or in the event of the unavailability
of both of them, the Secretary or Acting Secretary of
the Board of Governors of the Federal Reserve System)
certifies that as a result of the emergency the avail
able number of regular members and regular alternates
of the Federal Open Market Committee is less than seven,
all powers and functions of the said Committee shall be
performed and exercised by, and authority to exercise
such powers and functions is hereby delegated to, an
Interim Committee, subject to the following terms and
conditions:
Such Interim Committee shall consist of seven
members, comprising each regular member and regular
alternate of the Federal Open Market Committee then
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available, together with an additional number, sufficient
to make a total of seven, which shall be made up in the
following order or priority from those available:
(1)
each alternate at large (as defined below); (2) each
President of a Federal Reserve Bank not then either a
regular member or an alternate; (3) each First Vice
President of a Federal Reserve Bank; provided that (a)
within each of the groups referred to in clauses (1),
(2), and (3) priority of selection shall be in numerical
order according to the numbers of the Federal Reserve
Districts, (b) the President and the First Vice President
of the same Federal Reserve Bank shall not serve at the
same time as members of the Interim Committee, and (c)
whenever a regular member or regular alternate of the
Federal Open Market Committee or a person having a higher
priority as indicated in clauses (1), (2), and (3) becomes
available he shall become a member of the Interim Committee
in the place of the person then on the Interim Committee
having the lowest priority. The Interim Committee is
hereby authorized to take action by majority vote of those
present whenever one or more members thereof are present,
provided that an affirmative vote for the action taken
is cast by at least one regular member, regular alternate,
or President of a Federal Reserve Bank. The delegation
of authority and other procedures set forth above shall
be effective only during such period or periods as there
are available less than a total of seven regular members
and regular alternates of the Federal Open Market Com
mittee.
As used herein the term "regular member" refers to
a member of the Federal Open Market Committee duly
appointed or elected in accordance with existing law;
the term "regular alternate" refers to an alternate of
the Committee duly elected in accordance with existing
law and serving in the absence of the regular member for
whom he was elected; and the term "alternate at large"
refers to any other duly elected alternate of the Com
mittee at a time when the member in whose absence he was
elected to serve is available.
By unanimous vote, the following resolution authorizing
certain actions by the Federal Reserve Banks during an emergency
was reaffirmed:
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The Federal Open Market Committee hereby authorizes
each Federal Reserve Bank to take any or all of the
actions set forth below during war or defense emergency
when such Federal Reserve Bank finds itself unable after
reasonable efforts to be in communication with the
Federal Open Market Committee (or with the Interim Com
mittee acting in lieu of the Federal Open Market Committee)
or when the Federal Open Market Committee (or such Interim
Committee) is unable to function.
(1) Whenever it deems it necessary in the light of
economic conditions and the general credit situation then
prevailing (after taking into account the possibility of
providing necessary credit through advances secured by
direct obligations of the United States under the last
paragraph of section 13 of the Federal Reserve Act), such
Federal Reserve Bank may purchase and sell obligations of
the United States for its own account, either outright or
under repurchase agreement, from and to banks, dealers,
or other holders of such obligations.
(2) In case any prospective seller of obligations
of the United States to a Federal Reserve Bank is unable
to tender the actual securities representing such obliga
tions because of conditions resulting from the emergency,
such Federal Reserve Bank may, in its discretion and
subject to such safeguards as it deems necessary, accept
from such seller, in lieu of the actual securities, a
"due bill" executed by the seller in form acceptable to
such Federal Reserve Bank stating in substantial effect
that the seller is the owner of the obligations which
are the subject of the purchase, that ownership of such
obligations is thereby transferred to the Federal Reserve
Bank, and that the obligations themselves will be delivered
to the Federal Reserve Bank as soon as possible.
(3) Such Federal Reserve Bank may in its discretion
purchase special certificates of indebtedness directly
from the United States in such amounts as may be needed
to cover overdrafts in the general account of the Treasurer
of the United States on the books of such Bank or for the
temporary accommodation of the Treasury, but such Bank
shall take all steps practicable at the time to insure as
far as possible that the amount of obligations acquired
directly from the United States and held by it, together
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with the amount of such obligations so acquired and held
by all other Federal Reserve Banks, does not exceed $5
billion at any one time.
Authority to take the actions set forth shall be
effective only until such time as the Federal Reserve
Bank is able again to establish communications with the
Federal Open Market Committee (or the Interim Committee),
and such Committee is then functioning.
By unanimous vote, the Committee reaffirmed the authoriza
tion, first given at the meeting on December 16, 1958, providing
for System personnel assigned to the Office of Emergency Preparedness,
Special Facilities Division, on a rotating basis to have access to
the resolutions (1) providing for continued operation of the
Committee during an emergency and (2) authorizing certain actions
by the Federal Reserve Banks during an emergency.
There was unanimous agreement that no action should be
taken to change the existing procedure, as called for by resolution
adopted June 21, 1939, requesting the Board of Governors to cause
its examining force to furnish the Secretary of the Federal Open
Market Committee a report of each examination of the System Open
Market Account.
It was agreed unanimously that no action should be taken
at this time to amend the procedure authorized at the meeting of
the Committee on March 2, 1955, and most recently reaffirmed on
March 5, 1968, whereby, in addition to members and officers of
the Committee and Reserve Bank Presidents not currently members
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of the Committee, minutes and other records could be made available
to any other employee of the Board of Governors or of a Federal
Reserve Bank with the approval of a member of the Committee or
another Reserve Bank President, with notice to the Secretary.
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 Open Market
Account in accordance with the following continuing authority
directive relating to transactions in U.S. Government securities,
agency obligations, and bankers' acceptances:
1. The Federal Open Market Committee authorizes
and directs the Federal Reserve Bank of New York, to the
extent necessary to carry out the most recent current
economic policy directive adopted at a meeting of the
Committee:
(a) To buy or sell U.S. Government
securities in the open market, from or to
Government securities dealers and foreign and
international accounts maintained at the
Federal Reserve Bank of New York, on a cash,
regular, or deferred delivery basis, for the
System Open Market Account at market prices
and, for such Account, to exchange maturing
U.S. Government securities with the Treasury
or allow them to mature without replacement;
provided that the aggregate amount of such
securities held in such Account at the close
of business on the day of a meeting of the
Committee at which action is taken with
respect to a current economic policy directive
shall not be increased or decreased by more
than $2.0 billion during the period commencing
with the opening of business on the day follow
ing such meeting and ending with the close of
business on the day of the next such meeting;
3/4/69
(b) To buy or sell prime bankers' accept
ances of the kinds designated in the Regulation
of the Federal Open Market Committee 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; provided that the aggregate
amount of bankers' acceptances held at any one
time shall not exceed (1) $125 million or (2)
10 per cent of the total of bankers' acceptances
outstanding as shown in the most recent accept
ance survey conducted by the Federal Reserve
Bank of New York, whichever is the lower;
(c) To buy U.S. Government securities,
obligations that are direct obligations of, or
fully guaranteed as to principal and interest
by, any agency of the United States, and prime
bankers' acceptances with maturities of 6 months
or less at the time of purchase, from nonbank
dealers for the account of the Federal Reserve
Bank of New York under agreements for repurchase
of such securities, obligations, or acceptances
in 15 calendar days or less, at rates not less
than (1) the discount rate of the Federal
Reserve Bank of New York at the time such
agreement is entered into, or (2) the average
issuing rate on the most recent issue of 3-month
Treasury bills, whichever is the lower; provided
that in the event Government securities or
agency issues covered by any such agreement are
not repurchased by the dealer pursuant to the
agreement or a renewal thereof, they shall be
sold in the market or transferred to the System
Open Market Account; and provided further that
in the event bankers' acceptances covered by
any such agreement are not repurchased by the
seller, they shall continue to be held by the
Federal Reserve Bank or shall be sold in the
open market.
2. The Federal Open Market Committee authorizes and
directs the Federal Reserve Bank of New York to purchase
directly from the Treasury for the account of the Federal
3/4/69
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Reserve Bank of New York (with discretion, in cases where
it seems desirable, to issue participations to one or more
Federal Reserve Banks) such amounts of special short-term
certificates of indebtedness as may be necessary from time
to time for the temporary accommodation of the Treasury;
provided that the rate charged on such certificates shall
be a rate 1/4 of 1 per cent below the discount rate of
the Federal Reserve Bank of New York at the time of such
purchases, and provided further that the total amount of
such certificates held at any one time by the Federal
Reserve Banks shall not exceed $1 billion.
By unanimous vote, the authorization for System foreign
currency operations was amended to read as follows:
AUTHORIZATION FOR SYSTEM FOREIGN CURRENCY OPERATIONS
1. The Federal Open Market Committee authorizes
and directs the Federal Reserve Bank of New York, for
System Open Market Account, to the extent necessary to
carry out the Committee's foreign currency directive and
express authorizations by the Committee pursuant thereto:
A. To purchase and sell the following foreign
currencies in the form of cable transfers through spot
or forward transactions on the open market at home and
abroad, including transactions with the U.S. Stabiliza
tion Fund established by Section 10 of the Gold Reserve
Act of 1934, with foreign monetary authorities, and with
the Bank for International Settlements:
Austrian schillings
Belgian francs
Canadian dollars
Danish kroner
Pounds sterling
French francs
German marks
Italian lire
Japanese yen
Mexican pesos
Netherlands guilders
Norwegian kroner
Swedish kronor
Swiss francs
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3/4/69
B.
To hold foreign currencies listed in para
graph A above, up to the following limits:
(1) Currencies purchased spot,
including currencies purchased from the
Stabilization Fund, and sold forward to the
Stabilization Fund, up to $1 billion equivalent;
(2) Currencies purchased spot or
forward, up to the amounts necessary to fulfill
other forward commitments;
(3) Additional currencies purchased
spot or forward, up to the amount necessary for
System operations to exert a market influence
but not exceeding $250 million equivalent; and
(4) Sterling purchased on a covered
or guaranteed basis in terms of the dollar,
under agreement with the Bank of England, up
to $300 million equivalent.
C. To have outstanding forward commitments
undertaken under paragraph A above to deliver foreign
currencies, up to the following limits:
(1) Commitments to deliver foreign
currencies to the Stabilization Fund, up to
the limit specified in paragraph 1B(1) above;
(2) Commitments to deliver Italian
lire, under special arrangements with the
Bank of Italy, up to $500 million equivalent;
and
(3) Other forward commitments to
deliver foreign currencies, up to $550 million
equivalent.
D. To draw foreign currencies and to permit
foreign banks to draw dollars under the reciprocal cur
rency arrangements listed in paragraph 2 below, provided
that drawings by either party to any such arrangement
shall be fully liquidated within 12 months after any
amount outstanding at that time was first drawn, unless
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3/4/69
the Committee, because of exceptional circumstances,
specifically authorizes a delay.
2. The Federal Open Market Committee directs the
Federal Reserve Bank of New York to maintain reciprocal
currency arrangements ("swap" arrangements) for System
Open Market Account for periods up to a maximum of 12
months with the following foreign banks, which are among
those designated by the Board of Governors of the Federal
Reserve System under Section 214.5 of Regulation N,
Relations with Foreign Banks and Bankers, and with the
approval of the Committee to renew such arrangements on
maturity:
Foreign bank
Amount of
arrangement
(millions of
dollars equivalent)
Austrian National Bank
National Bank of Belgium
Bank of Canada
National Bank of Denmark
Bank of England
Bank of France
German Federal Bank
Bank of Italy
Bank of Japan
Bank of Mexico
Netherlands Bank
Bank of Norway
Bank of Sweden
Swiss National Bank
Bank for International Settlements:
Dollars against Swiss francs
Dollars against authorized European
currencies other than Swiss francs
100
225
1,000
100
2,000
1,000
1,000
1,000
1,000
130
400
100
250
600
600
1,000
3. Unless otherwise expressly authorized by the
Committee, all transactions in foreign currencies under
taken under paragraph 1(A) above shall be at prevailing
market rates and no attempt shall be made to establish
rates that appear to be out of line with underlying
market forces.
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4. It shall be the practice to arrange with foreign
central banks for the coordination of foreign currency
transactions. In making operating arrangements with
foreign central banks on System holdings of foreign cur
rencies, the Federal Reserve Bank of New York shall not
commit itself to maintain any specific balance, unless
authorized by the Federal Open Market Committee. Any
agreements or understandings concerning the administration
of the accounts maintained by the Federal Reserve Bank of
New York with the foreign banks designated by the Board
of Governors under Section 214.5 of Regulation N shall
be referred for review and approval to the Committee.
5. Foreign currency holdings shall be invested
insofar as practicable, considering needs for minimum
working balances. Such investments shall be in accordance
with Section 14(e) of the Federal Reserve Act.
6. A Subcommittee consisting of the Chairman and
the Vice Chairman of the Committee and the Vice Chairman
of the Board of Governors (or in the absence of the
Chairman or of the Vice Chairman of the Board of Governors
the members of the Board designated by the Chairman as
alternates, and in the absence of the Vice Chairman of
the Committee his alternate) is authorized to act on
behalf of the Committee when it is necessary to enable
the Federal Reserve Bank of New York to engage in foreign
currency operations before the Committee can be consulted.
All actions taken by the Subcommittee under this paragraph
shall be reported promptly to the Committee.
7. The Chairman (and in his absence the Vice
Chairman of the Committee, and in the absence of both,
the Vice Chairman of the Board of Governors) is authorized:
A. With the approval of the Committee, to enter
into any needed agreement or understanding with the
Secretary of the Treasury about the division of responsi
bility for foreign currency operations between the System
and the Secretary;
B. To keep the Secretary of the Treasury fully
advised concerning System foreign currency operations,
and to consult with the Secretary on such policy matters
as may relate to the Secretary's responsibilities; and
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C. From time to time, to transmit appropriate
reports and information to the National Advisory Council
on International Monetary and Financial Policies.
8. Staff officers of the Committee are authorized
to transmit pertinent information on System foreign
currency operations to appropriate officials of the
Treasury Department.
9. All Federal Reserve Banks shall participate in
the foreign currency operations for System Account in
accordance with paragraph 3 G(1) of the Board of Governors'
Statement of Procedure with Respect to Foreign Relation
ships of Federal Reserve Banks dated January 1, 1944.
10. The Special Manager of the System Open Market
Account for foreign currency operations shall keep the
Committee informed on conditions in foreign exchange
markets and on transactions he has made and shall render
such reports as the Committee may specify.
By unanimous vote, the foreign currency directive given below
was reaffirmed:
FOREIGN CURRENCY DIRECTIVE
1. The basic purposes of System operations in
foreign currencies are:
A. To help safeguard the value of the dollar
in international exchange markets;
B. To aid in making the system of international
payments more efficient;
C. To further monetary cooperation with central
banks of other countries having convertible currencies,
with the International Monetary Fund, and with other
international payments institutions;
D. To help insure that market movements in
exchange rates, within the limits stated in the Inter
national Monetary Fund Agreement or established by
central bank practices, reflect the interaction of
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underlying economic forces and thus serve as efficient
guides to current financial decisions, private and
public; and
E. To facilitate growth in international
liquidity in accordance with the needs of an expanding
world economy.
2. Unless otherwise expressly authorized by the
Federal Open Market Committee, System operations in
foreign currencies shall be undertaken only when neces
sary:
A. To cushion or moderate fluctuations in the
flows of international payments, if such fluctuations
(1) are deemed to reflect transitional market unsettle
ment or other temporary forces and therefore are expected
to be reversed in the foreseeable future; and (2) are
deemed to be disequilibrating or otherwise to have
potentially destabilizing effects on U.S. or foreign
official reserves or on exchange markets, for example,
by occasioning market anxieties, undesirable speculative
activity, or excessive leads and lags in international
payments;
B. To temper and smooth out abrupt changes in
spot exchange rates, and to moderate forward premiums
and discounts judged to be disequilibrating. Whenever
supply or demand persists in influencing exchange rates
in one direction, System transactions should be modified
or curtailed unless upon review and reassessment of the
situation the Committee directs otherwise;
C. To aid in avoiding disorderly conditions
in exchange-markets. Special factors that might make
for exchange market instabilities include (1) responses
to short-run increases in international political tension,
(2) differences in phasing of international economic
activity that give rise to unusually large interest rate
differentials between major markets, and (3) market rumors
of a character likely to stimulate speculative trans
actions. Whenever exchange market instability threatens
to produce disorderly conditions, System transactions
may be undertaken if the Special Manager reaches a
judgment that they may help to reestablish supply and
3/4/69
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demand balance at a level more consistent with the
prevailing flow of underlying payments. In such cases,
the Special Manager shall consult as soon as practicable
with the Committee or, in an emergency, with the members
of the Subcommittee designated for that purpose in para
graph 6 of the Authorization for System foreign currency
operations; and
D. To adjust System balances within the
limits established in the Authorization for System
foreign currency operations in light of probable
future needs for currencies.
3. System drawings under the swap arrangements are
appropriate when necessary to obtain foreign currencies
for the purposes stated in paragraph 2 above.
4. Unless otherwise expressly authorized by the
Committee, transactions in forward exchange, either
outright or in conjunction with spot transactions, may
be undertaken only (i) to prevent forward premiums or
discounts from giving rise to disequilibrating movements
of short-term funds; (ii) to minimize speculative dis
turbances; (iii) to supplement existing market supplies
of forward cover, directly or indirectly, as a means of
encouraging the retention or accumulation of dollar
holdings by private foreign holders; (iv) to allow
greater flexibility in covering System or Treasury
commitments, including commitments under swap arrange
ments, and to facilitate operations of the Stabilization
Fund; (v) to facilitate the use of one currency for the
settlement of System or Treasury commitments denominated
in other currencies; and (vi) to provide cover for System
holdings of foreign currencies.
By unanimous vote, the System open market transactions in
foreign currencies during the period February 4, through March 3,
1969, were approved, ratified, and confirmed.
By unanimous vote, the open market transactions in Government
securities, agency obligations, and bankers' acceptances during the
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period February 4 through March 3, 1969, 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 current economic policy directive:
The information reviewed at this meeting suggests
that expansion in real economic activity has been
moderating, but that upward pressures on prices and
costs are persisting. Prospects are for some further
slowing in economic expansion in the period ahead. Most
market interest rates have edged up on balance in recent
weeks. In the first two months of the year bank credit
changed little on average, as investments contracted
while loan demands, especially from businesses, remained
strong. The outstanding volume of large-denomination
CD's continued to decline sharply and inflows of other
time and savings deposits slowed. Growth in the money
supply moderated as U.S. Government deposits rose con
siderably. It appears that a sizable deficit reemerged
in the U.S. balance of payments on the liquidity basis
in January and February and, with Euro-dollar inflows
moderating, a deficit also reappeared in the balance on
the official settlements basis in February. In this
situation, it is the policy of the Federal Open Market
Committee to foster financial conditions conducive to
the reduction of inflationary pressures, with a view to
encouraging a more sustainable rate of economic growth
and attaining 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 maintaining on balance about
the prevailing firm conditions in money and short-term
credit markets; provided, however, that operations shall
be modified if bank credit appears to be deviating
significantly from current projections.
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3/4/69
It
was agreed that the next meeting of the Committee would
be held on Tuesday, April 1, 1969, at 9:30 a.m.
The meeting adjourned.
Secretary
@FedFRASER