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Meeting of Federal Open Market Committee November 19-20, 1973 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 and Tuesday, November 19-20, 1973, beginning at 4:00 p.m. on Monday. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Burns, Chairman Hayes, Vice Chairman Balles Brimmer Bucher Daane Francis Ho land Mayo Mitchell Morris Sheehan Messrs. Clay, Eastburn, Kimbrel, and Win, Alternate Members of the Federal Open Market Committee Messrs. Black and MacLaury, Presidents of the Federal Reserve Banks of Richmond and Minneapolis, respectively Mr. Broida, Secretary Mr. Altmann, Assistant Secretary Mr. O'Connell, General Counsel Mr. Partee, Senior Economist Mr. Axilrod, Economist (Domestic Finance) Messrs. Andersen, Bryant, Gramley, Reynolds, Scheld, and Sims, Associate Economists 11/19-20/73 Mr. Holmes, Manager, System Open Market Account Mr. Coombs, Deputy Special Manager, System Open Market Account Mr. Melnicoff, Managing Director for Operation, and Supervision, Board of Governors Mr. Feldberg, Secretary, Board of Governors Mr. Coyne, 1/ Assistant to the Board of Governors Mr. Pierce, Associate Director, Division of Research and Statistics, Board of Governors Messrs. Keir, Wernick, and Williams, Advisers, Division of Research and Statistics, Board of Governors Mr. Pizer, Adviser, Division of International Finance, Board of Governors Mr. Zeisel, 2/ Associate Adviser, Division of Research and Statistics, Board of Governors Messrs. Ettin and Taylor, 2/Assistant Advisers, Division of Research and Statistics, Board of Governors 2/and Messrs. Fieleke 2 / and Henry, 2/ Assistant Advisers, Division of International Finance, Board of Governors Messrs. Kichline 2/and Wendel, Chiefs, Capital Markets and Government Finance Sections, Mrs. Junz respectively, Division of Research and Statistics Board of Governors Mrs. Smelker 2/ and Mr. Peret, 2/ Senior Econo mists, Division of Research and Statistics, Board of Governors Mr. Roxon, 2/ Senior Economist, Division of International Finance, Board of Governors Messrs. Beeman, 2/ Enzler,, 2/ and Wyss, 2/ Economists, Division of Research and Statistics Board of Governors Miss Morisse and Mr. Smith, 2/ Economists, Division of International Finance, Board of Governors 1/ Attended Tuesday session only. 2/ Attended Monday session only. 11/19-20/73 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. Boehne, Parthemos, Taylor, and Doll, Senior Vice Presidents, Federal Reserve Banks of Philadelphia, Richmond, Atlanta, and Kansas City, respectively Messrs. Davis, Hocter, and Green, Vice Presidents, Federal Reserve Banks of New York, Cleveland, and Dallas, respectively Mr. Kareken, Economic Adviser, Federal Reserve Bank of Minneapolis Mr. Cooper, Assistant Vice President, Federal Reserve Bank of New York Mr. McNees, Economist, Federal Reserve Bank of Boston Secretary's Note: All of the actions listed below were taken on Tuesday, November 20, 1973. By unanimous vote, the minutes of actions taken at the meeting of the Federal Open Market Committee held on October 16, 1973,were approved. The memoranda of discussion for the meetings of the Federal Open Market Committee held on October 2, 10, and 16, 1973, were accepted. By unanimous vote, the System open market transactions in foreign currencies during the period October 16 through November 19, 1973, were approved, ratified and confirmed. 11/19-20/73 By unanimous vote, the Committee approved the renewal, for further periods of one year, of the following swap arrangements having the indicated amounts and maturity dates: Amount of Foreign bank arrangement (millions of dollars equivalent) 250 Austrian National Bank 1,000 National Bank of Belgium 2,000 Bank of Canada 250 National Bank of Denmark 2,000 Bank of England 2,000 Bank of France 2,000 German Federal Bank 2,000 Bank of Italy 2,000 Bank of Japan Bank of Mexico 180 Netherlands Bank 500 250 Bank of Norway 300 Bank of Sweden 1,400 Swiss National Bank Bank for International Settlements: Dollars against 600 Swiss francs Dollars against other authorized European 1,250 currencies Term (monthly) Maturity date December December December December December December December 1973 1973 1973 1973 1973 1973 1973 1973 1973 1973 1973 1973 1973 1973 12 December 3, 1973 12 December 3, 1973 December December December December December December December By unanimous vote, the open market transactions in Government securities, agency obligations, and bankers' acceptances during the period October 16 through November 19, 1973, were approved, ratified, and confirmed. -5- 11/19-20/73 With Mr. Morris 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 growth in economic activity in the fourth quarter is likely to remain at about the moderate rate of the third quarter, but curtailment of oil supplies from abroad has generated considerable uncertainty about subsequent prospects. In October total nonfarm employment expanded substantially further, and the unemployment rate dropped from 4.8 to 4.5 per cent. The advance in wage rates has remained relatively rapid, and unit labor costs have been increasing at a fast pace. Wholesale prices of industrial commodities rose sharply in October, reflecting in part large increases for petroleum products; although farm and food prices declined considerably further, they remained well above the pre-freeze level of early June. In foreign exchange markets, the dollar appreciated against major foreign currencies following announcement in late October of a large surplus in the U.S. merchandise trade balance, and the dollar strengthened markedly further in early November as expectations grew that the developing oil crisis would create particularly severe problems for Western Europe and Japan. In the third quarter and in October, the balance of payments on an official settlements basis was in substantial surplus. The narrowly defined money stock, which had declined in August and September, rose moderately in October. The more broadly defined money stock expanded sharply as a result of large net inflows at banks of consumer-type time deposits. Net deposit inflows at nonbank thrift institutions improved somewhat further. Bank credit expansion remained moderate in October, reflecting in part a lack of growth in business loans as borrowers shifted to the commercial paper market. The outstanding volume of large-denomination CD's, which had begun to decline in late September, fell substan tially further. Short-term market interest rates, while fluctuating widely, rose on balance from mid-October to mid November. Rates on most types of long-term market securities also advanced somewhat. 11/19-20/73 -6 In light of the foregoing developments, it is the policy of the Federal Open Market Committee to foster financial conditions conducive to abatement of inflationary pressures, a sustainable rate of advance in economic activity, and equilibrium in the country's balance of payments. To implement this policy, while taking account of international and domestic financial market develop ments, the Committee seeks to achieve bank reserve and money market conditions consistent with moderate growth in monetary aggregates over the months ahead. It was agreed that the next meeting of the Federal Open Market Committee would be held on Tuesday, December 18, 1973, at 9:30 a.m. The meeting adjourned. Secretary
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