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Meeting of Federal Open Market Committee May 21, 1974 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, PRESENT: D. C. on Tuesday, May 21, 1974, at 9:30 a.m. Mr. Burns, Chairman Mr. Hayes, Vice Chairman Mr. Black Mr. Brimmer Mr. Bucher Mr. Clay Mr. Holland Mr. Mr. Mr. Mr. Mr. Kimbrel Mitchell Sheehan Wallich Winn Messrs. Coldwell, MacLaury, Mayo, and Morris, Alternate Members of the Federal Open Market Committee Messrs. Balles and Francis, Presidents of the Federal Reserve Banks of San Francisco and St. Louis, respectively Mr. Broida, Secretary Mr. Altmann, Deputy Secretary Mr. Bernard, Assistant Secretary Mr. Nicoll, Assistant General Counsel Mr. Partee, Senior Economist Mr. Axilrod, Economist (Domestic Finance) Messrs. Brandt, Bryant, Davis, Doll, Gramley, Hocter, Parthemos, Pierce, and Reynolds, Associate Economists Mr. Holmes, Manager, System Open Market Account Mr. Coombs, Special Manager, System Open Market Account 5/21/74 Mr. Melnicoff, Managing Director for Operations and Supervision, Board of Governors Mr. Chase, Adviser to the Board of Governors Mr. Coyne, Assistant to the Board of Governors Mr. Wonnacott, Associate Director, Division of International Finance, Board of Governors Messrs. Keir and Williams, Advisers, Division of Research and Statistics, Board of Governors Mr. Gemmill, Adviser, Division of International Finance, Board of Governors Mr. Struble, Senior Economist, Division of Research and Statistics, Board of Governors Miss Pruitt, Economist, Open Market Secretariat, Board of Governors Mrs. Ferrell, Open Market Secretariat Assistant, Board of Governors Mr. Willes, First Vice President, Federal Reserve Bank of Philadelphia Messrs. Eisenmenger, Boehne, Scheld, and Sims, Senior Vice Presidents, Federal Reserve Banks of Boston, Philadelphia, Chicago, and San Francisco, respectively Messrs. Jordan and Green, Vice Presidents, Federal Reserve Banks of St Louis and Dallas, respectively Mr. Kareken, Economic Adviser, Federal Reserve Bank of Minneapolis Mr. Cooper, Assistant Vice President, Federal Reserve Bank of New York 5/21/74 By unanimous vote, the minutes of actions taken at the meeting of the Federal Open Market Committee held on April 15-16, 1974, were approved. The memorandum of discussion for the meeting of the Federal Open Market Committee held on April 15-16, 1974, was accepted. By unanimous vote, the System open market transactions in foreign currencies during the period April 6 through May 20, 1974, were approved, ratified, and confirmed. By unanimous vote, the open market transactions in Government securities, agency obligations, and bankers' ances during the period April 16 through May 20, 1974, accept 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 for the System Account in accordance with the following domestic policy directive: 5/21/74 The information reviewed at this meeting suggests that real output of goods and services--which had declined appreciably in the first quarter--is likely to change little in the current quarter and that price increases are con tinuing exceptionally large. In April industrial production and manufacturing employment expanded somewhat, after having declined for 4 months. The unemployment rate edged down to 5 per cent, as the civilian labor force declined. Wholesale prices of farm and food products declined substantially further, but increases among industrial commodities again were wide spread and extraordinarily large. The advance in wage rates has accelerated somewhat in recent months, and unit labor costs have been rising at a fast pace. In April and early May the dollar depreciated further against leading foreign currencies, and the balance of pay ments remained in deficit on the official settlements basis. Rising import costs for petroleum and other products con tributed to a sizable deficit in U.S. foreign trade in March. Growth in the narrowly defined money stock slackened somewhat in April from the rapid pace in the preceding 2 months, and the more broadly defined money stock continued to expand moderately. Deposit experience at nonbank thrift institutions deteriorated sharply. Business short-term credit demands remained exceptionally strong. These demands were con centrated in banks, and to help finance loan growth, banks issued a record amount of large-denomination CD's and continued to borrow in the commercial paper and Euro-dollar markets. Private short-term market interest rates have risen sharply further in recent weeks and conditions in financial markets have been uneasy. Treasury bill rates also rose in late April and early May, but have declined markedly in recent days. Long-term rates have continued upward. Effective April 25, Federal Reserve discount rates were raised one-half point to 8 per cent. 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 payments. 5/21/74 To implement this policy, while taking account of developments in domestic and international financial markets, the Committee seeks to maintain about the prevailing restrict ive money market conditions, provided that the monetary aggre gates appear to be growing at rates within the specified ranges of tolerance. It was agreed that the next meeting of the Federal Open Market Committee would be held on Tuesday, June 18, 1974, at 9:30 a.m. The meeting adjourned. Secretary
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