FOMC Minutes

Meeting of Federal Open Market Committee

January 9, 1968

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, January 9, 1968, at 9:30 a.m.

PRESENT:

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Martin, Chairman

1/

Hayes, Vice Chairman

Brimmer

Daane 1/

Francis

Maisel

Mitchell

Robertson

1/

Scanlon

Sherrill

Swan

Wayne

Messrs. Ellis, Hickman, and Patterson, 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. Kenyon, Assistant Secretary

Mr. Broida, Assistant Secretary

Mr. Molony, Assistant Secretary

Mr. Hackley, General Counsel

Mr. Brill, Economist

Messrs. Baughman, Craven, Hersey, Partee,

and R. Solomon,2/ Associate Economists

Mr. Holmes, Manager, System Open Market

Account

1/

2/

Entered the meeting at the point indicated.

Withdrew from the meeting at the point indicated.

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Mr. Coombs, Special Manager, System Open

Market Account

Mr. Fauver, Assistant to the Board

Mr. F. Solomon, Director, Division of

Examinations, Board of Governors 1 /

Messrs. Axilrod and Williams, Advisers,

Division of Research and Statistics,

Board of Governors

Mr. Reynolds, Associate Director, Division

of International Finance, 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. Heflin and Strothman, First Vice

Presidents of the Federal Reserve Banks

of Richmond and Minneapolis, respectively

Messrs. Eisenmenger, Link, Eastburn, Mann,

Brandt, Andersen, and Tow, Vice

Presidents of the Federal Reserve Banks

of Boston, New York, Philadelphia,

Cleveland, Atlanta, St. Louis, and

Kansas City, respectively

Messrs. Geng and Snellings, Assistant Vice

Presidents of the Federal Reserve Banks

of New York and Richmond, respectively

Mr. Kareken, Consultant, Federal Reserve

Bank of Minneapolis

By unanimous vote, the minutes of actions taken at the

meetings of the Federal Open Market Committee held on November 27

and December 12, 1967, were approved.

The memoranda of discussion for the meetings of the Federal

Open Market Committee held on November 27 and December 12,

were accepted.

1/

Withdrew from the meeting at the point indicated.

1967,

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By unanimous vote, the action taken by members of the

Federal Open Market Committee on December 14, 1967, increasing

the swap arrangement with the Bank for International Settlements

providing for System drawings in Swiss francs, and the arrangement

with the Swiss National Bank, each from $250 million to $400

million equivalent, effective immediately, and approving the

corresponding changes in paragraph 2 of the authorization for

System foreign currency operations, was ratified.

The reports of audit of the System Open Market Account and

of foreign currency transactions, made by the Board's Division of

Examinations as at the close of business September 22,

1967,

submitted by the Chief Federal Reserve Examiner under date of

October 31, 1967, and distributed to the Committee under date of

December 8, 1967, were accepted.

Messrs. Frederic Solomon and Robert Solomon withdrew from

the meeting.

By unanimous vote, the System open market transactions in

foreign currencies during the period December 12, 1967, through

January 8, 1968, were approved, ratified, and confirmed.

Chairman Martin and Mr. Robertson entered the meeting.

By unanimous vote, the open market transactions in

Government securities, agency obligations, and bankers' acceptances

during the period December 12, 1967, through January 8, 1968, were

approved, ratified, and confirmed.

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Mr. Daane entered the meeting.

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 current economic policy directive:

The information reviewed at this meeting indicates

that over-all economic activity has been expanding

vigorously, with both industrial and consumer prices

continuing to rise at a substantial rate, and that

prospects are for further rapid growth and persisting

inflationary pressures in the period ahead. The

imbalance in U.S. international transactions worsened

further in late 1967, but the new program announced

by the President should result in a considerable

reduction in the deficit this year. Following

announcement of the program, foreign purchases of gold

slackened abruptly and the dollar strengthened in

foreign exchange markets. Long-term bond yields have

declined in recent weeks but some short-term interest

rates have risen further. Bank credit has changed

little on balance recently as banks have disposed of

Government securities to accommodate strengthened loan

demands. Growth in the money supply has slackened and

flows into time and savings accounts at bank and

nonbank financial intermediaries have continued to

moderate.

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

operations until the next meeting of the Committee

shall be conducted with a view to maintaining the

somewhat firmer conditions that have developed in the

money market in recent weeks, partly as a result of

the increase in reserve requirements announced to

become effective in mid-January; provided, however,

that operations shall be modified as needed to moderate

any apparently significant deviations of bank credit

from current expectations.

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1/9/68

It was agreed that the next meeting of the Committee would

be held on Tuesday, February 6, 1968, at 9:30 a.m.

The meeting adjourned.

Secretary