FOMC Minutes

Meeting of Federal Open Market Committee

October 7, 1969

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 7, 1969, at 9:30 a.m.

PRESENT:

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Martin, Chairman

Hayes, Vice Chairman

Bopp

Brimmer

Clay

Coldwell

Daane

Maisel

Mitchell

Robertson

Scanlon

Sherrill

Messrs. Francis, Heflin, Hickman,1/ and Swan,

Alternate Members of the Federal Open

Market Committee

Messrs. Morris, Kimbrel, and Galusha, Presidents

of the Federal Reserve Banks of Boston,

Atlanta, and Minneapolis, respectively

Mr. Holland, Secretary

Mr. Broida, Deputy Secretary

Messrs. Kenyon and Molony, Assistant

Secretaries

Mr. Hackley, General Counsel

Mr. Partee, Economist

Messrs. Axilrod, Baughman, Eastburn, Gramley,

Green, Hersey, Solomon, and Tow,

Associate Economists

Mr. Holmes, Manager, System Open Market

Account

1/

Entered the meeting at point indicated.

10/7/69

Mr. Cardon, Assistant to the Board of

Governors

Messrs. Coyne and Nichols, Special

Assistants to the Board of

Governors

Messrs. Keir and Wernick, Associate

Advisers, Division of Research and

Statistics, Board of Governors

Mr. Weiner, Assistant Adviser, Division

of Research and Statistics, Board

of Governors

Mr. Bernard, Special Assistant, Office

of the Secretary, Board of Governors

Mr. Wendel, Chief, Government Finance

Section, Division of Research and

Statistics, Board of Governors

Miss Eaton, Open Market Secretariat

Assistant, Office of the Secretary,

Board of Governors

Messrs. Eisenmenger, Parthemos, Jones,

and Craven, Senior Vice Presidents

of the Federal Reserve Banks of

Boston, Richmond, St. Louis, and

San Francisco, respectively

Messrs. Hocter and Brandt, Vice Presidents

of the Federal Reserve Banks of Cleveland

and Atlanta, respectively

Mr. Kareken, Economic Adviser, Federal Reserve

Bank of Minneapolis

Mr. Bodner, Assistant Vice President, Federal

Reserve Bank of New York

Mr. Davis, Adviser, Federal Reserve Bank

of New York

Mr. Cooper, Manager, Securities and

Acceptance Departments, Federal

Reserve Bank of New York

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

ing of the Federal Open Market Committee held on September 9, 1969,

were approved.

The memorandum of discussion for the meeting of the Federal

Open Market Committee held on September 9, 1969, was accepted.

10/7/69

By unanimous vote, the System open market transactions in

foreign currencies during the period September 9 through October 6,

1969, were approved, ratified, and confirmed.

Mr. Hickman entered the meeting.

By unanimous vote, increases of $100 million each, from

$100 million to $200 million, in the swap arrangements with the

Austrian National Bank, the National Bank of Denmark, and the Bank

of Norway, together with the conforming amendments to paragraph 2

of the Authorization for System foreign currency operations, were

approved, effective immediately.

As amended, the paragraph read

as follows:

The Federal Open Market Committee directs the Federal

Reserve Bank of New York to maintain reciprocal currency

arrangements ("swap" arrangements) for System Open Market

Account for periods up to a maximum of 12 months with the

following foreign banks, which are among those designated

by the Board of Governors of the Federal Reserve System

under Section 214.5 of Regulation N, Relations with Foreign

Banks and Bankers, and with the approval of the Committee

to renew such arrangements on maturity:

Foreign bank

Amount of

arrangement

(millions of

dollars equivalent)

Austrian National Bank

National Bank of Belgium

Bank of Canada

National Bank of Denmark

Bank of England

Bank of France

German Federal Bank

Bank of Italy

Bank of Japan

Bank of Mexico

Netherlands Bank

200

500

1,000

200

2,000

1,000

1,000

1,000

1,000

130

300

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Amount of

Foreign bank

Bank of Norway

Bank of Sweden

Swiss National Bank

Bank for International Settlements:

Dollars against Swiss francs

Dollars against authorized European

currencies other than Swiss francs

arrangement

(millions of

dollars equivalent)

200

250

600

600

1,000

By unanimous vote, paragraph 2 of the continuing authority

directive was amended to read as follows:

The Federal Open Market Committee authorizes and

directs the Federal Reserve Bank of New York to purchase

directly from the Treasury for the account of the Federal

Reserve Bank of New York, or, if the New York Reserve Bank

is closed, any other Reserve Bank for its own account

(with discretion, in cases where it seems desirable, to

issue participations to one or more Federal Reserve Banks)

such amounts of special short-term certificates of indebt

edness as may be necessary from time to time for the

temporary accommodation of the Treasury; provided that

the rate charged on such certificates shall be a rate

1/4 of 1 per cent below the discount rate of the Federal

Reserve Bank of New York at the time of such purchases,

and provided further that the total amount of such

certificates held at any one time by the Federal Reserve

Banks shall not exceed $1 billion.

By unanimous vote, the open market transactions in Government

securities, agency obligations, and bankers' acceptances during the

period September 9 through October 6, 1969, 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

accordance with the following current economic policy directive:

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The information reviewed at this meeting suggests

that the pace of expansion in real economic activity was

sustained in the third quarter by an acceleration of

inventory investment, which about offset a further slack

ening in growth of private final sales. Some monthly

economic measures have weakened recently, and slower

over-all growth is projected for the fourth quarter

Substantial upward pressures on prices and costs are

persisting. Most market interest rates recently have

risen to new highs as demands for funds have pressed

against limited supplies. In September, on average,

the money supply changed little as U.S. Government

deposits rose considerably further, and bank credit

increased slightly after 2 months of substantial

decline. The outstanding volume of large-denomination

CD's decreased further in September, and flows of con

sumer-type time and savings funds at banks and nonbank

thrift institutions appear to have remained relatively

weak. The U.S. foreign trade surplus increased a little

in August. In August and September the deficit in the

over-all balance of payments on the liquidity basis was

very large, although not as large as in preceding months;

and the official settlements balance, which had been in

surplus for more than a year, shifted into deficit,

reflecting slackened Euro-dollar borrowing by U.S. banks

and new speculative flows into Germany. Exchange market

tensions were reduced somewhat when the German Government

decided to cease temporarily official sales of marks,

after which the exchange rate for that currency rose

above the official parity. In light of the foregoing

developments, it is the policy of the Federal Open Market

Committee to foster financial conditions conducive to the

reduction of inflationary pressures, with a view to

encouraging sustainable economic growth and attaining

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

prevailing firm conditions in money and short-term

credit markets; provided, however, that operations

shall be modified if bank credit appears to be

deviating significantly from current projections.

By unanimous vote, the continuing authority directive was

amended by the addition of the following paragraph 3:

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In order to insure the effective conduct of open

market operations, the Federal Open Market Committee

authorizes and directs the Federal Reserve Banks to

lend U.S. Government securities held in the System

Open Market Account to Government securities dealers

and to banks participating in Government securities

clearing arrangements conducted through a Federal

Reserve Bank, under such instructions as the Committee

may specify from time to time.

It was agreed that the next meeting of the Committee would

be held on Tuesday, October 28, 1969, at 9:30 a.m.

The meeting adjourned.

Secretary