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Meeting of the Federal Open Market Committee
November 14-15, 1983
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 Monday afternoon, November 14, 1983, and continuing
on Tuesday, November 15, 1983, at 9:30 a.m.
PRESENT:
Mr. Volcker, Chairman
Mr. Solomon, Vice Chairman
Mr. Gramley
Mr. Guffey
Mr. Keehn
Mr. Martin
Mr. Morris
Mr. Partee
Mr. Rice
Mr. Roberts
Mrs. Teeters
Mr. Wallich
Messrs. Boehne, Corrigan, and Mrs. Horn, Alternate
Members of the Federal Open Market Committee
Messrs. Balles and Black, Presidents of the Federal Reserve
Banks of San Francisco and Richmond, respectively
Mr. Axilrod, Staff Director and Secretary
Mr. Bernard, Assistant Secretary
Mrs. Steele, Deputy Assistant Secretary
Mr. Bradfield, General Counsel
Mr. Kichline, Economist
Mr. Truman, Economist (International)
Messrs. Balbach, T. Davis, Eisenmenger, Prell,
Scheld, and Zeisel, Associate Economists
Mr. Cross, Manager for Foreign Operations,
System Open Market Account
Mr. Sternlight, Manager for Domestic Operations,
System Open Market Account
11/14-15/83
Mr. Frost, Staff Director, Office of Staff Director
for Management, Board of Governors
Mr. Coyne, Assistant to the Board of Governors
Mr. Roberts, Assistant to the Chairman, Board of Governors
Mr. Kohn, Deputy Staff Director, Office of Staff
Director for Monetary and Financial Policy,
Board of Governors
Mr. Lindsey, Associate Director, Division of Research
and Statistics, Board of Governors
Mr. Henderson, Deputy Associate Director, Division of
International Finance, Board of Governors
Mrs. Low, Open Market Secretariat Assistant,
Board of Governors
Messrs. Forrestal and Wallace, First Vice Presidents,
Federal Reserve Banks of Atlanta and Dallas
Mr. Fousek, Executive Vice President, Federal Reserve
Bank of New York
Messrs. Burns, J. Davis, Koch, Mullineaux, Parthemos, and
Stern, Senior Vice Presidents, Federal Reserve Banks
of Dallas, Cleveland, Atlanta, Philadelphia, Richmond,
and Minneapolis, respectively
Mr. Bisignano, Vice President, Federal Reserve Bank of
San Francisco
Ms. Meulendyke, 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 October 4, 1983, were approved.
By unanimous vote, System open market transactions in Government
securities, agency obligations, and bankers acceptances during the period
October 4 through November 14, 1983, were ratified.
By unanimous vote, the Committee approved the renewal for further
periods of up to one year of the reciprocal currency ("swap") arrangements
having the indicated amounts and maturity dates as shown below.
-3-
11/14-15/83
Amount of
arrangement
Foreign bank
(millions of
Term
Maturity
$ equivalent)
(months)
date
Austrian National
Bank
National Bank of Belgium
Bank of Canada
National Bank of Denmark
$ 250.0
1,000.0
2,000.0
250.0
12/ 2/83
12 mos.
"12/16/83
"12/29/83
"12/29/83
2/83
Bank of England
Bank of France
German Federal Bank
3,000.0
2,000.0
6,000.0
"12/
"12/29/83
"12/29/83
Bank of Italy
Bank of Japan
Bank of Mexico
Netherlands Bank
Bank of Norway
Bank of Sweden
Swiss National Bank
Bank for International
SettlementsSwiss francs
Other authorized
European currencies
3,000.0
5,000.0
700.0
500.0
250.0
300.0
4,000.0
"12/29/83
12/ 2/83
"
2/83
"12/
"12/29/83
2/83
"12/
2/83
"12/
12/ 2/83
"
600.0
"
12/ 2/83
1,250.0
"
12/ 2/83
By unanimous vote, paragraph 1(a) of the Authorization for
Domestic Open Market Operations was amended to raise from $4 billion
to $5 billion the dollar limit on intermeeting changes in System
account holdings of U.S. government and federal agency securities
for the period from November 16, 1983 through the close of business
on December 20, 1983.
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 domestic policy directive:
The information reviewed at this meeting suggests
that real GNP is growing at a relatively rapid pace in
the current quarter, although the rate of expansion
appears to have moderated since the spring and summer.
In October, industrial production increased appreciably,
following large gains in previous months. Nonfarm
payroll employment rose substantially further and the
civilian unemployment rate declined 1/2 percentage
11/14-15/83
point to 8.8 percent. After changing little on balance
during the summer months, retail sales strengthened in
September and October. Housing starts and permits
declined in September while home sales rose somewhat.
Recent data on new orders and shipments indicate
further strength in the demand for business equipment.
Producer and consumer prices have continued to
increase at about the same pace as in other recent
months. The index of average hourly earnings rose
somewhat more in September and October than in
previous months but over the first ten months of
the year the index has risen more slowly than in 1982.
The foreign exchange value of the dollar has
risen since early October against a trade-weighted
average of major foreign currencies. The U.S. foreign
trade deficit increased considerably in the third
quarter, with imports, especially of petroleum,
rising faster than exports.
After slowing substantially over the summer
months, growth in M2 accelerated in October, while
M3 continued to expand at a moderate rate. Through
October M2 was at a level in the lower portion of
the Committee's range for 1983 and M3 in the upper
portion of its range. M1 continued to grow at a
sluggish pace in October and was in the lower portion
of the Committee's monitoring range for the second
half of the year. Longer-term market rates have
risen somewhat on balance since early October, and
short-term rates generally have fluctuated in a narrow
range.
The Federal Open Market Committee seeks to foster
monetary and financial conditions that will help to
reduce inflation further, promote growth in output on
a sustainable basis, and contribute to a sustainable
pattern of international transactions. At its meeting
in July the Committee reconsidered the growth ranges
for monetary and credit aggregates established earlier
for 1983 in furtherance of these objectives and set
tentative ranges for 1984. The Committee recognized
that the relationships between such ranges and ultimate
economic goals have become less predictable; that the
impact of new deposit accounts on growth of the
monetary aggregates cannot be determined with a high
degree of confidence; and that the availability of
interest on large portions of transaction accounts
may be reflected in some changes in the historical
trends in velocity.
11/14-15/83
Against this background, the Committee at its
July meeting reaffirmed the following growth ranges
for the broader aggregates: for the period from
February-March of 1983 to the fourth quarter of 1983,
7 to 10 percent at an annual rate for M2; and for
the period from the fourth quarter of 1982 to the
fourth quarter of 1983, 6-1/2 to 9-1/2 percent for
M3. The Committee also agreed on tentative growth
ranges for the period from the fourth quarter of
1983 to the fourth quarter of 1984 of 6-1/2 to 9-1/2
percent for M2 and 6 to 9 percent for M3. The
Committee considered that growth of M1 in a range
of 5 to 9 percent from the second quarter of 1983
to the fourth quarter of 1983, and in a range of
4 to 8 percent from the fourth quarter of 1983 to the
fourth quarter of 1984, would be consistent with the
ranges for the broader aggregates. The associated
range for total domestic nonfinancial debt was
reaffirmed at 8-1/2 to 11-1/2 percent for 1983 and
tentatively set at 8 to 11 percent for 1984.
In implementing monetary policy, the Committee
agreed that substantial weight would continue to be
placed on the behavior of the broader monetary aggre
gates. The behavior of M1 and total domestic non
financial debt will be monitored, with the degree of
weight placed on M1 over time dependent on evidence
that velocity characteristics are resuming more pre
dictable patterns. The Committee understood that
policy implementation would involve continuing
appraisal of the relationships between the various
measures of money and credit and nominal GNP,
including evaluation of conditions in domestic
credit and foreign exchange markets.
The Committee seeks in the short run to maintain
the existing degree of reserve restraint. The action
is expected to be associated with growth of M2 and
M3 at annual rates of around 8-1/2 percent from
September to December, consistent with the targets
established for these aggregates for the year.
Depending on evidence about the continuing strength
of economic recovery and other factors bearing on
the business and inflation outlook, somewhat greater
restraint would be acceptable should the aggregates
expand more rapidly; lesser restraint might be
acceptable in the context of a significant shortfall
11/14-15/83
in growth of the aggregates from current expectations.
Given the relatively slow growth in October, the
Committee anticipates that M1 growth at an annual
rate of around 5 to 6 percent from September to
December will be consistent with its fourth-quarter
objectives for the broader aggregates, and that
expansion in total domestic nonfinancial debt would
remain within the range established for the year.
The Chairman may call for Committee consultation if
it appears to the Manager for Domestic Operations
that pursuit of the monetary objectives and related
reserve paths during the period before the next
meeting is likely to be associated with a federal
funds rate persistently outside a range of 6 to 10
percent.
It was agreed that the next meeting of the Committee would be
held on Tuesday, December 20, 1983.
The meeting adjourned.
Secretary
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