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Meeting of Federal Open Market Committee November 19, 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, D. C. on Tuesday, November 19, 1974, at 9:30 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Burns, Chairman Hayes, Vice Chairman Black Bucher Clay Coldwell Holland Kimbrel Mitchell Sheehan Wallich Winn Messrs. MacLaury, Mayo, and Morris, Alternate Members of the Federal Open Market Committee Messrs. Balles, Eastburn, and Francis, Presidents of the Federal Reserve Banks of San Francisco, Philadelphia, and St. Louis, respectively Mr. Broida, Secretary Mr. Altmann, Deputy Secretary Mr. Bernard, Assistant Secretary Mr. O'Connell, General Counsel Mr. Guy, Deputy General Counsel Mr. Partee, Senior Economist Mr. Axilrod, Economist (Domestic Finance) Messrs. Brandt, Doll, Hocter, Parthemos, and Reynolds, Associate Economists 11/19/74 Mr. Holmes, Manager, System Open Market Account Mr. Coombs, Special Manager, System Open Market Account Mr. Coyne, Assistant to the Board of Governors Mr. Wonnacott, Associate Director, Division of International Finance, Board of Governors Mr. Keir, Adviser, 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. Plant, First Vice President, Federal Reserve Bank of Dallas Messrs. Eisenmenger, Boehne, and Scheld, Senior Vice Presidents, Federal Reserve Banks of Boston, Philadelphia, and Chicago, respectively Mr. Garvy, Vice President and Senior Adviser, Federal Reserve Bank of New York 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. Keran, Director of Research, Federal Reserve Bank of San Francisco Mr. Cooper, Assistant Vice President, Federal Reserve Bank of New York By unanimous vote, the action by Committee members on November 11, 1974, increasing from $500 million to $1 billion the limit (speci fied in paragraph 1(b) of the Authorization for Domestic Open Market Operations) on holdings of bankers' acceptances by the Federal 11/19/74 Reserve Bank of New York, FOMC meeting, pending further review at the next was ratified. It was agreed that the $1 billion limit on holdings of bankers' acceptances should be retained. By unanimous vote, the minutes of actions taken at the meeting of the Federal Open Market Committee held on October 15, 1974, were approved. The memorandum of discussion for the meeting of the Federal Open Market Committee held on October 15, 1974, was accepted. By unanimous vote, the System open market transactions in foreign currencies during the period October 15 through Novem ber 18, 1974, were approved, ratified, and confirmed. By unanimous vote, the Committee approved the renewal for further periods of up to one year of the following swap arrange ments, having the indicated amounts and maturity dates: Foreign bank Austrian National Bank National Bank of Belgium Bank of Canada Amount of arrangement (millions of dollars equivalent) 250 1,000 2,000 Term (months) 12 9 12 Maturity date December 3, 1974 December 20, 1974 December 27, 1974 11/19/74 Foreign bank Amount of arrangement (millions of dollars equivalent) National Bank of Denmark 250 Bank of England 3,000 Bank of France 2,000 German Federal Bank 2,000 Bank of Italy 3,000 Bank of Japan 2,000 Bank of Mexico 180 Netherlands Bank 500 Bank of Norway 250 Bank of Sweden 300 Swiss National Bank 1,400 Bank for International Settlements: Dollars against Swiss francs 600 Dollars against other authorized European currencies 1,250 Term (months) Maturity date December December December December December December December December December December December 1974 1974 1974 1974 1974 1974 1974 1974 1974 1974 1974 12 December 3, 1974 12 December 3, 1974 By unanimous vote, the open market transactions in Government securities, agency obligations, and bankers' acceptances during the period October 15 through November 18, 1974, 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 accord ance with the following domestic policy directive: The information reviewed at this meeting suggests that real output of goods and services is falling significantly further in the current quarter while price and wage increases are continuing large. In October industrial production declined--after having changed little since May--and the unemployment rate increased further, from 5.8 to 6.0 per cent. 11/19/74 In recent weeks sizable cutbacks in automobile production have been announced, and claims for unemployment insurance There are major uncertainties have continued to increase. concerning the duration of the coal strike; a lengthy shut down would have substantial effects on other industries. The October rise in wholesale prices of industrial commodities, although substantial, remained well below the extraordinarily rapid rate in the first 8 months of the year; prices of farm products and foods increased sharply. In recent weeks the dollar has declined further against leading foreign currencies. In the third quarter the U.S. foreign trade deficit was substantially larger than in the second quarter, but U.S. banks sharply reduced their foreign lending. Growth of the narrowly defined money stock picked up from the slow pace of the third quarter to an annual rate of about 5 per cent in October. Net inflows of consumer-type time and savings deposits at banks and at nonbank thrift institutions also improved in October, and the money supply measures more broadly defined expanded appreciably. Bank credit outstanding changed little, and banks reduced their borrowing through Euro-dollars and large-denomination CD's. Since mid-October markets for short- and long-term securities have improved, despite heavy Treasury financing and a large volume of corporate security issues. Interest rates on market securities in general have declined further, and mort gage yields also have fallen somewhat. On November 13 the Board of Governors announced a restructuring of member bank reserve requirements, which will have the effect of releasing reserves to the banking system in the week beginning December 12. 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. To implement this policy, while taking account of develop ments in domestic and international financial markets, the Committee seeks to achieve bank reserve and money market conditions consistent with moderate growth in monetary aggregates over the months ahead. -6 11/19/74 It was agreed that the next meeting of the Committee would be held on December 16 and 17, 1974. The meeting adjourned. Secretary
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