FOMC Minutes

Meeting of Federal Open Market Committee

April 2, 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, April 2, 1968, at 9:30 a.m.

PRESENT:

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Martin, Chairman

Hayes, Vice Chairman

Brimmer

Daane

Ellis

Galusha

Hickman

Kimbrel

Maisel

Mitchell

Robertson

Sherrill

Messrs. Bopp, Clay, Coldwell, and Scanlon, Alternate

Members of the Federal Open Market Committee

Messrs. Heflin, Francis, and Swan, Presidents of the

Federal Reserve Banks of Richmond, St. Louis,

and San Francisco, 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. Axilrod, Hersey, Kareken, Mann, Partee,

Reynolds, Solomon, and Taylor, Associate

Economists

Mr. Holmes, Manager, System Open Market Account

Mr. Coombs, Special Manager, System Open Market

Account

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Messrs. Cardon and Fauver, Assistants

to the Board of Governors

Mr. Williams, Adviser, Division of

Research and Statistics, Board of

Governors

Mr. Wernick, Associate Adviser,

Division of Research and Statistics,

Board of Governors

Mr. Keir, Assistant Adviser, Division

of Research and Statistics, Board

of Governors

Mr. Bernard, Special Assistant, Office

of the Secretary, 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, Eastburn, Baughman,

Andersen, Tow, Green, and Craven,

Vice Presidents of the Federal Reserve

Banks of Boston, Philadelphia, Chicago,

St. Louis, Kansas City, Dallas, and

San Francisco, respectively

Mr. Wallace, Assistant Vice President,

Federal Reserve Bank of Richmond

Mr. Garvy, Economic Adviser, Federal

Reserve Bank of New York

Mr. Geng, Assistant Vice President,

Federal Reserve Bank of New York

By unanimous vote, the minutes of actions taken at the

meeting of the Federal Open Market Committee held on March 5, 1968,

were approved.

The memorandum of discussion for the meeting of the Federal

Open Market Committee held on March 5, 1968, was accepted.

By unanimous vote, the actions taken by members of the

Federal Open Market Committee on March 16 and 17, 1968, authorizing

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the Special Manager to undertake negotiations looking toward

increases in System swap arrangements with (1) the German Federal

Bank, from $750 million to $1,000 million equivalent, and

(2) the Bank of England, from $1,500 million to $2,000 million

equivalent, to become effective, along with corresponding amend

ments to paragraph 2 of the authorization for System foreign

currency operations, upon determinations by Chairman Martin that

such increases were in the national interest, were ratified.

By unanimous vote, the action taken on March 6, 1968,

under paragraph 3 of the authorization for System foreign

currency operations, by the Subcommittee designated in paragraph

6 of the authorization, approving a purchase from the Swiss

National Bank of $50 million equivalent of Swiss francs at a

rate other than the prevailing market rate, was ratified.

By unanimous vote, the action taken by members of the

Committee on March 19, 1968, approving revised procedures with

respect to allocations of securities in the System Open Market

Account, effective March 21, 1968, was ratified.

The revised

procedures were as follows:

1. Securities in the System Open Market Account

shall be reallocated on the last business day of each

month by means of adjustments proportionate to the

adjustments that would have been required to equalize

approximately the average ratios of gold holdings to

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note liabilities of the 12 Federal Reserve Banks based

on the ratios of gold to notes for the most recent five

business days.

2. Until the next reallocation the Account shall

be apportioned on the basis of the ratios determined in

paragraph 1.

3. Profits and losses on the sale of securities

from the Account shall be allocated on the day of

delivery of the securities sold on the basis of each

Bank's current holdings at the opening of business on

that day.

By unanimous vote, the System open market transactions in

foreign currencies during the period March 5 through April 1, 1968,

were approved, ratified, and confirmed.

By unanimous vote, the open market transactions in

Government securities, agency obligations, and bankers' acceptances

during the period March 5 through April 1, 1968, 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 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 expanded at a very

rapid pace in early 1968, with prices rising substantially,

and that prospects are for a continuing rapid advance in

activity and persisting inflationary pressures in the

period ahead. Since late fall, growth rates of bank

credit, the money supply, and time and savings accounts

at financial institutions have moderated considerably.

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Speculative activity in gold and foreign exchange markets,

which was intense in early March, abated after the mid

month agreement on gold policy by gold pool members and

appears to have slackened further following the Stockholm

agreement regarding Special Drawing Rights. The foreign

trade surplus, however, has remained at a sharply reduced

level in recent months and the imbalance in U.S. inter

national payments continues to be a matter of serious

concern. Most market interest rates have fluctuated

widely, although rising on balance, in reaction to

international financial developments, the firming of

monetary policy, and uncertainties regarding military

and fiscal prospects. In this situation, it is the

policy of the Federal Open Market Committee to foster

financial conditions conducive to resistance of infla

tionary pressures and attainment of 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 attaining slightly firmer

conditions in the money market; provided, however, that

operations shall be modified if bank credit appears to

be deviating significantly from current projections or

if unusual liquidity pressures should develop.

It was agreed that the next meeting of the Federal Open

Market Committee would be held on Tuesday, April 30, 1968, at

9:30 a.m.

The meeting adjourned.

Secretary