FOMC Minutes

Meeting of Federal Open Market Committee

December 12, 1967

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.,

PRESENT:

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

on Tuesday, December 12,

1967, at 9:30 a.m.

Martin, Chairman

Hayes, Vice Chairman

Brimmer

Francis

Maisel

Mitchell

Robertson

Scanlon

Sherrill 1/

Swan

Wayne

Messrs. Ellis, Hickman, Patterson, and Galusha,

Alternate Members of the Federal Open Market

Committee

Messrs. Bopp, Clay, and Irons, Presidents of the

Federal Reserve Banks of Philadelphia, Kansas

City, and Dallas, respectively

Mr. Holland, Secretary

Mr. Sherman, Assistant Secretary

Mr. Kenyon, Assistant Secretary

Mr. Broida, Assistant Secretary

Mr. Molony, Assistant Secretary

Mr. Hackley, General Counsel

Mr. Brill, Economist

Messrs. Baughman, Hersey, Koch, Partee,

Parthemos, and Solomon, Associate

Economists

Mr. Holmes, Manager, System Open Market Account

1/

Entered the meeting at the point indicated.

12/12/67

Mr. Cardon, Legislative Counsel, Board of

Governors

Mr. Fauver, Assistant to the Board of

Governors

Mr. Williams, Adviser, Division of Research

and Statistics, Board of Governors

Mr. Reynolds, Adviser, Division of

International Finance, Board of Governors

Mr. Axilrod, Associate Adviser, Division of

Research and Statistics, Board of

Governors

Miss Eaton, General Assistant, Office of the

Secretary, Board of Governors

Miss McWhirter, Analyst, Office of the

Secretary, Board of Governors

Messrs. Eisenmenger, Link, Eastburn, Mann,

Taylor, Andersen, Tow, and Green, Vice

Presidents of the Federal Reserve Banks of

Boston, New York, Philadelphia, Cleveland,

Atlanta, St. Louis, Kansas City, and

Dallas, respectively

Mr. Lynn, Director of Research, Federal

Reserve Bank of San Francisco

Messrs. MacLaury and Meek, Assistant Vice

Presidents of the Federal Reserve Bank of

New York

Mr. Kareken, Consultant, Federal Reserve Bank

of Minneapolis

By unanimous vote, the minutes of actions taken at the meeting

of the Federal Open Market Committee held on November 14, 1967, were

approved.

The memorandum of discussion for the meeting of the Federal

Open Market Committee held on November 14, 1967, was accepted.

By unanimous vote, the action taken by members of the Federal

Open Market Committee on November 30, 1967, increasing effective as

of that date the swap arrangement with the Bank of Canada by $250

million equivalent, from $500 million to $750 million equivalent,

12/12/67

-3

and the corresponding change in paragraph 2 of the authorization

for System foreign currency operations, was ratified.

Mr. Sherrill entered the meeting.

By unanimous vote, the System open market transactions

in foreign currencies during the period November 27 through

December 11, 1967, were approved, ratified, and confirmed.

Renewal for further periods of twelve months of the $750

million swap arrangements with the Bank of Canada, maturing

December 28,

1967,

and with the Bank of Italy, maturing December 29,

1967, was approved.

Renewal for a period of twelve months of the $225 million

swap arrangement with the Netherlands Bank, maturing December 29,

1967, was approved.

Renewal for a period of three months of the $100 million

swap arrangement with the Bank of France, maturing December 29, 1967,

was approved.

By unanimous vote,

the open market transactions

in Govern

ment securities, agency obligations, and bankers' acceptances

during the period November 27 through December 11, 1967, were

approved, ratified, and confirmed.

With Mr. Maisel dissenting, 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 accord

ance with the following current economic policy directive:

12/12/67

The information reviewed at this meeting indicates

that industrial output and employment have rebounded

following strike settlements in the automobile and other

industries, and that prospects have heightened for more

rapid expansion of over-all economic activity in the

months ahead. Both industrial and consumer prices have

continued to rise at a substantial rate. The imbalance

in U.S. international transactions has worsened, partly

because of weakening in the export surplus since midyear.

Foreign purchases of gold have been large following the

devaluation of the pound sterling. Bank credit expansion

has lessened, with diminished bank buying of Government

securities and continued moderate loan growth. Most

interest rates have risen further in reaction to the

British devaluation and Bank rate increase, the rise

in Federal Reserve discount rates, and waning expectations

of enactment of the President's fiscal program. In this

situation, it is the policy of the Federal Open Market

Committee to foster financial conditions conducive to

resistance of inflationary pressures and progress toward

reasonable equilibrium in the country's balance of

payments.

To implement this policy, System open market opera

tions until the next meeting of the Committee shall be

conducted with a view to moving slightly beyond the firmer

conditions that have developed in money markets partly

as a result of the increase in Federal Reserve discount

rates; provided, however, that operations shall be

modified as needed to moderate any apparently significant

deviations of bank credit from current expectations or

any unusual liquidity pressures.

It was agreed the next meeting of the Committee would be

held on Tuesday, January 9, 1968, at 9:30 a.m.

The meeting adjourned.

Secretary