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10/19/76 Meeting of Federal Open Market Committee October 19, 1976 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, October 19, 1976, at 9:30 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Burns, Chairman Volcker, Vice Chairman Balles Black Coldwell Gardner Jackson Kimbrel Lilly Partee Wallich Mr. Winn Messrs. Baughman, Guffey, Mayo, and Morris, Alternate Members of the Federal Open Market Committee Messrs. MacLaury, Eastburn, and Roos, Presidents of the Federal Reserve Banks of Minneapolis, Philadelphia, and St. Louis, respectively Mr. Broida, Secretary Mr. Altmann, Deputy Secretary Mr. Bernard, Assistant Secretary Mr. O'Connell, General Counsel Mr. Axilrod, Economist (Domestic Finance) Mr. Gramley, Economist (Domestic Business) Messrs. Brandt, Davis, Keran, Kichline, Parthemos, Reynolds, and Zeisel, Associate Economists - 2 - 10/19/76 Mr. Pardee, Deputy Manager for Foreign Operations Mr. Sternlight, Deputy Manager for Domestic Operations Messrs. Coyne and Keir, Assistants to the Board of Governors Mr. Gemmill, Adviser, Division of International Finance, Board of Governors Mrs. Farar, Economist, Open Market Secretariat, Board of Governors Mrs. Deck, Staff Assistant, Open Market Secretariat, Board of Governors Messrs. Balbach, Boehne, Doll, Eisenmenger, and Scheld, Senior Vice Presidents, Federal Reserve Banks of St. Louis, Philadelphia, Kansas City, Boston, and Chicago, respectively Mr. Green, Vice President, Federal Reserve Bank of Dallas Mr. Sandberg, Assistant Vice President, Federal Reserve Bank of New York Mr. Kareken, Economic Adviser, Federal Reserve Bank of Minneapolis Mr. Hall, Economist, Federal Reserve Bank of Cleveland By unanimous vote, the minutes of actions taken at the meeting of the Federal Open Market Committee held on September 21, 1976, were approved. By unanimous vote, the System open market transactions in foreign currencies during the period September 21 through October 18, 1976, were approved, ratified, and confirmed. 10/19/76 - 3 By unanimous vote, System open market transactions in Government securities, agency obligations, and bankers' acceptances during the period September 21 through October 18, 1976, 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: The information reviewed at this meeting suggests that growth in real output of goods and services slowed somewhat further in the third quarter. In September retail sales changed little, following a sizable increase in August. Industrial production was unchanged in September; in the latter half of the month output of automobiles and trucks was curtailed by a strike at plants of a major pro ducer. Payroll employment in nonfarm establishments rose further; according to household survey data, the unemploy ment rate edged down from 7.9 to 7.8 per cent, as total employment and the civilian labor force both declined. The wholesale price index for all commodities rose sharply in September; average prices of farm products and foods increased, after 2 months of substantial declines, and average prices of industrial commodities rose somewhat more than in other recent months. The advance in the index of average wage rates has remained somewhat below the rapid rate of increase during 1975. The average value of the dollar against leading foreign currencies has remained relatively steady in recent weeks, declining somewhat against the German mark and associated European currencies but rising against the pound sterling and the French franc. On October 18 the mark was revalued by an average of 3 per cent against the associated European currencies. In August - 4 - 10/19/76 the U. S. foreign trade deficit remained larger than the monthly average in the second quarter; over all, the current account had been in surplus in the second quarter. M1 was about unchanged in September. However, M2 and M3 grew substantially, as inflows of the time and savings deposits included in these broader aggregates were exceptionally strong. Market interest rates gen erally have declined further in recent weeks. In light of the foregoing developments, it is the policy of the Federal Open Market Committee to foster financial conditions that will encourage continued economic expansion, while resisting inflationary pres sures and contributing to a sustainable pattern of international transactions. To implement this policy, while taking account of developments 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 period ahead. It was agreed that the next regular meeting of the Committee would be held on November 16, 1976, at 9:30 a.m. The meeting adjourned. Secretary's Note: At its meeting on September 21, 1976, the Committee had unanimously approved the following special authorization: The Federal Open Market Committee authorizes and directs the Federal Reserve Bank of New York to arrange for repayment of the System's outstanding swap commit ments to the Swiss National Bank (concurrent with repay ment by the U. S. Treasury of Treasury notes denominated - 5 10/19/76 in Swiss francs and held by the Swiss National Bank), within a 3-year period by means of quarterly payments on a schedule that is mutually satisfactory to the Swiss National Bank, the U. S. Treasury, and the Federal Reserve. This authorization shall become effective upon final approval of technical details by the Chairman of the Federal Open Market Committee. Chairman Burns approved the technical details of the arrange ment on October 26, 1976, so that the special authorization became effective on that date. Secretary
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