FOMC Minutes
Meeting of Federal Open Market Committee
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, March 10, 1970, at 9:30 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Burns, Chairman
Hayes, Vice Chairman
Brimmer
Daane
Heflin
Hickman
Maisel
Mitchell
Robertson
Sherrill
Swan
Kimbrel, Alternate for
Mr. Francis
Messrs. Galusha and Morris, Alternate Members
of the Federal Open Market Committee
Messrs. Eastburn, Clay, and Coldwell, Presi
dents of the Federal Reserve Banks of
Philadelphia, Kansas City, and Dallas,
respectively
Mr. Holland, Secretary
Mr. Broida, Deputy Secretary
Messrs. Kenyon and Molony, Assistant
Secretaries
Mr. Hackley, General Counsel
Mr. Partee, Economist
Messrs. Axilrod, Craven, Garvy, Hocter,
Jones, Parthemos, and Solomon,
Associate Economists
Mr. Holmes, Manager, System Open Market
Account
Mr. Coombs, Special Manager, System Open
Market Account
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Mr. Bernard, Assistant Secretary, Board of
Governors
Mr. Cardon, Assistant to the Board of Governors
Messrs. Coyne and Nichols, Special Assistants
to the Board of Governors
Mr. Williams, Adviser, Division of Research
and Statistics, Board of Governors
Mr. Keir, Associate Adviser, Division of
Research and Statistics, Board of Governors
Mr. Wendel, Chief, Government Finance Section,
Division of Research and Statistics, Board
of Governors
Miss Ormsby, Special Assistant, Office of the
Secretary, Board of Governors
Miss Eaton, Open Market Secretariat Assistant,
Office of the Secretary, Board of Governors
Mr. Lewis, First Vice President, Federal
Reserve Bank of St. Louis
Messrs. Baughman and Tow, Senior Vice Presi
dents of the Federal Reserve Banks of
Chicago and Kansas City, respectively
Messrs. Brandt and Green, Vice Presidents of
the Federal Reserve Banks of Atlanta and
Dallas, respectively
Messrs. Gustus and Kareken, Economic Advisers
of the Federal Reserve Banks of Phila
delphia and Minneapolis, respectively
Mr. Friedman, Consultant, Federal Reserve
Bank of Boston
Mr. Sandberg, Securities Trading Officer,
Federal Reserve Bank of New York
The Secretary reported that advices had been received of the
election by the Federal Reserve Banks of members and alternate mem
bers of the Federal Open Market Committee for the term of one year
beginning March 1, 1970, that it appeared that such persons were
legally qualified to serve, and that they had executed their oaths
of office.
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The elected members and alternates were as follows:
Alfred Hayes, President of the Federal Reserve Bank of
New York, with William F. Treiber, First Vice President
of the Federal Reserve Bank of New York, as alternate;
W. Braddock Hickman, President of the Federal Reserve Bank
of Cleveland, with Charles J. Scanlon, President of the
Federal Reserve Bank of Chicago, as alternate;
Aubrey N. Heflin, President of the Federal Reserve Bank
of Richmond, with Frank E. Morris, President of the
Federal Reserve Bank of Boston, as alternate;
Darryl R. Francis, President of the Federal Reserve Bank
of St. Louis, with Monroe Kimbrel, President of the
Federal Reserve Bank of Atlanta, as alternate;
Eliot J. Swan, President of the Federal Reserve Bank of
San Francisco, with Hugh D. Galusha, Jr., President of
the Federal Reserve Bank of Minneapolis, as alternate.
By unanimous vote, the following officers of the Federal
Open Market Committee were elected to serve until the election of
their successors at the first meeting of the Committee after Febru
ary 28, 1971, with the understanding that in the event of the
discontinuance of their official connection with the Board of
Governors or with a Federal Reserve Bank, as the case might be,
they would cease to have any official connection with the Federal
Open Market Committee:
Arthur F. Burns
Alfred Hayes
Robert C. Holland
Arthur L. Broida
Kenneth A. Kenyon and Charles Molony
Howard H. Hackley
David B. Hexter
Chairman
Vice Chairman
Secretary
Deputy Secretary
Assistant Secretaries
General Counsel
Assistant General Counsel
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J. Charles Partee
Economist
Stephen H. Axilrod, J. Howard
Craven, George Garvy, Lyle E.
Gramley, A. B. Hersey, William J.
Hocter, Homer Jones, John E.
Reynolds, James Parthemos, and
Robert Solomon
Associate Economists
By unanimous vote, the Federal Reserve Bank of New York
was selected to execute transactions for the System Open Market
Account until the adjournment of the first meeting of the Federal
Open Market Committee after February 28, 1971.
By unanimous vote, Alan R. Holmes and Charles A. Coombs
were selected to serve at the pleasure of the Federal Open Market
Committee as Manager of the System Open Market Account and as
Special Manager for foreign currency operations for such Account,
respectively, it being understood that their selection was subject
to their being satisfactory to the Board of Directors of the Federal
Reserve Bank of New York.
Advice subsequently
Secretary's Note:
was received that Messrs. Holmes and
Coombs were satisfactory to the Board of
Directors of the Federal Reserve Bank
of New York for service in the respec
tive capacities indicated.
By unanimous vote, the minutes of actions taken at the
meeting of the Federal Open Market Committee held on February 10,
1970, were approved.
The memorandum of discussion for the meeting of the Federal
Open Market Committee held on February 10, 1970, was accepted.
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Consideration was then given to the continuing authoriza
tions of the Committee, according to the customary practice of
reviewing such matters at the first meeting in March of every
year.
By unanimous vote, the following procedures with respect
to allocations of securities in the System Open Market Account
were approved without change:
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
note liabilities of the twelve 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 following list for distribution of
periodic reports prepared by the Federal Reserve Bank of New York
for the Federal Open Market Committee was approved without
change:
1.
Members and Alternate Members of the Committee,
other Reserve Bank Presidents, and officers
of the Committee.
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*2.
*3.
*4.
*5.
6.
7.
8.
9.
The Secretary of the Treasury.
The Under Secretary of the Treasury for Monetary
Affairs and the Deputy Under Secretary for
Monetary Affairs.
The Assistant to the Secretary of the Treasury
working on debt management problems.
The Fiscal Assistant Secretary of the Treasury.
The Director of the Division of Federal Reserve
Bank Operations, Board of Governors.
The officer in charge of research at each of the
Federal Reserve Banks not represented by its
President on the Committee.
The officers of the Federal Reserve Bank of New York
working under the Manager and Special Manager of
the System Open Market Account.
With the approval of a member of the Committee or
any other President of a Federal Reserve Bank,
with notice to the Secretary, any other employee
of the Board of Governors or of a Federal Reserve
Bank.
By unanimous vote, the Committee reaffirmed the authoriza
tion, first given on March 1, 1951, for the Chairman to appoint a
Federal Reserve Bank to operate the System Open Market Account
temporarily in case the Federal Reserve Bank of New York is unable
to function.
By unanimous vote, the following resolution to provide for
the continued operation of the Federal Open Market Committee during
an emergency was reaffirmed:
In the event of war or defense emergency, if the
Secretary or Assistant Secretary of the Federal Open
Market Committee (or in the event of the unavailability
of both of them, the Secretary or Acting Secretary of
the Board of Governors of the Federal Reserve System)
certifies that as a result of the emergency the avail
able number of regular members and regular alternates
* Weekly reports only.
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of the Federal Open Market Committee is less than seven,
all powers and functions of the said Committee shall be
performed and exercised by, and authority to exercise
such powers and functions is hereby delegated to, an
Interim Committee, subject to the following terms and
conditions:
Such Interim Committee shall consist of seven mem
bers, comprising each regular member and regular
alternate of the Federal Open Market Committee then
available, together with an additional number, suffi
cient to make a total of seven, which shall be made up
in the following order or priority from those available:
(1) each alternate at large (as defined below); (2) each
President of a Federal Reserve Bank not then either a
regular member or an alternate; (3) each First Vice
President of a Federal Reserve Bank; provided that
(a) within each of the groups referred to in clauses
(1), (2), and (3) priority of selection shall be in
numerical order according to the numbers of the Federal
Reserve Districts, (b) the President and the First Vice
President of the same Federal Reserve Bank shall not
serve at the same time as members of the Interim Committee,
and (c) whenever a regular member or regular alternate of
the Federal Open Market Committee or a person having a
higher priority as indicated in clauses (1), (2), and
(3) becomes available he shall become a member of the
Interim Committee in the place of the person then on
the Interim Committee having the lowest priority. The
Interim Committee is hereby authorized to take action by
majority vote of those present whenever one or more mem
bers thereof are present, provided that an affirmative
vote for the action taken is cast by at least one regular
member, regular alternate, or President of a Federal
Reserve Bank. The delegation of authority and other
procedures set forth above shall be effective only during
such period or periods as there are available less than
a total of seven regular members and regular alternates
of the Federal Open Market Committee.
As used herein the term "regular member" refers to
a member of the Federal Open Market Committee duly
appointed or elected in accordance with existing law;
the term "regular alternate" refers to an alternate of
the Committee duly elected in accordance with existing
law and serving in the absence of the regular member for
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whom he was elected; and the term "alternate at large"
refers to any other duly elected alternate of the Com
mittee at a time when the member in whose absence he
was elected to serve is available.
By unanimous vote, the following resolution authorizing
certain actions by the Federal Reserve Banks during an emergency
was reaffirmed:
The Federal Open Market Committee hereby author
izes each Federal Reserve Bank to take any or all of
the actions set forth below during war or defense
emergency when such Federal Reserve Bank finds itself
unable after reasonable efforts to be in communication
with the Federal Open Market Committee (or with the
Interim Committee acting in lieu of the Federal Open
Market Committee) or when the Federal Open Market Com
mittee (or such Interim Committee) is unable to
function.
(1) Whenever it deems it necessary in the light
of economic conditions and the general credit situation
then prevailing (after taking into account the possi
bility of providing necessary credit through advances
secured by direct obligations of the United States under
the last paragraph of section 13 of the Federal Reserve
Act), such Federal Reserve Bank may purchase and sell
obligations of the United States for its own account,
either outright or under repurchase agreement, from and
to banks, dealers, or other holders of such obligations.
(2) In case any prospective seller of obligations
of the United States to a Federal Reserve Bank is unable
to tender the actual securities representing such obliga
tions because of conditions resulting from the emergency,
such Federal Reserve Bank may, in its discretion and
subject to such safeguards as it deems necessary, accept
from such seller, in lieu of the actual securities, a
"due bill" executed by the seller in form acceptable to
such Federal Reserve Bank stating in substantial effect
that the seller is the owner of the obligations which are
the subject of the purchase, that ownership of such
obligations is thereby transferred to the Federal Reserve
Bank, and that the obligations themselves will be delivered
to the Federal Reserve Bank as soon as possible.
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(3) Such Federal Reserve Bank may in its discre
tion purchase special certificates of indebtedness
directly from the United States in such amounts as may
be needed to cover overdrafts in the general account of
the Treasurer of the United States on the books of such
Bank or for the temporary accommodation of the Treasury,
but such Bank shall take all steps practicable at the
time to insure as far as possible that the amount of
obligations acquired directly from the United States
and held by it, together with the amount of such obliga
tions so acquired and held by all other Federal Reserve
Banks, does not exceed $5 billion at any one time.
Authority to take the actions set forth shall be
effective only until such time as the Federal Reserve
Bank is able again to establish communications with
the Federal Open Market Committee (or the Interim Com
mittee), and such Committee is then functioning.
There was unanimous agreement that no action should be
taken to change the existing procedure, as called for by resolu
tion adopted June 21, 1939, requesting the Board of Governors to
cause its examining force to furnish the Secretary of the Federal
Open Market Committee a report of each examination of the System
Open Market Account.
It was agreed unanimously that no action should be taken
at this time to amend the procedure authorized at the meeting of
the Committee on March 2, 1955, and most recently reaffirmed on
March 4, 1969, whereby, in addition to members and officers of the
Committee and Reserve Bank Presidents not currently members of the
Committee, minutes and other records could be made available to
any other employee of the Board of Governors or of a Federal
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Reserve Bank with the approval of a member of the Committee or
another Reserve BankPresident, with notice to the Secretary.
By unanimous vote, the continuing authority directive to
the Federal Reserve Bank of New York with regard to transactions
in U.S. Government securities, bankers' acceptances, and agency
issues was amended to read as follows:
1. The Federal Open Market Committee authorizes
and directs the Federal Reserve Bank of New York, to
the extent necessary to carry out the most recent cur
rent economic policy directive adopted at a meeting
of the Committee:
(a) To buy or sell U.S. Government
securities in the open market, from or to
Government securities dealers and foreign
and international accounts maintained at
the Federal Reserve Bank of New York, on
a cash, regular, or deferred delivery basis,
for the System Open Market Account at market
prices and, for such Account, to exchange
maturing U.S. Government securities with the
Treasury or allow them to mature without
replacement; provided that the aggregate
amount of such securities held in such
Account at the close of business on the day
of a meeting of the Committee at which
action is taken with respect to a current
economic policy directive shall not be
increased or decreased by more than $2.0
billion during the period commencing with the
opening of business on the day following such
meeting and ending with the close of business
on the day of the next such meeting;
(b) To buy or sell prime bankers' ac
ceptances of the kinds designated in the
Regulation of the Federal Open Market Com
mittee in the open market, from or to
acceptance dealers and foreign accounts maintained
at the Federal Reserve Bank of New York, on a
cash, regular, or deferred delivery basis,
for the account of the Federal Reserve Bank
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vided that the aggregate amount of bankers'
acceptances held at any one time shall not
exceed (1) $125 million or (2) 10 per cent of
the total of bankers' acceptances outstanding
as shown in the most recent acceptance survey
conducted by the Federal Reserve Bank of New
York, whichever is the lower;
(c) To buy U.S. Government securities,
obligations that are direct obligations of,
or fully guaranteed as to principal and
interest by, any agency of the United States,
and prime bankers' acceptances with maturities
of 6 months or less at the time of purchase,
from nonbank dealers for the account of the
Federal Reserve Bank of New York under agree
ments for repurchase of such securities,
obligations, or acceptances in 15 calendar
days or less, at rates not less than (1) the
discount rate of the Federal Reserve Bank of
New York at the time such agreement is entered
into, or (2) the average issuing rate on the
most recent issue of 3-month Treasury bills,
whichever is the lower; provided that in the
event Government securities or agency issues
covered by any such agreement are not repur
chased by the dealer pursuant to the
agreement or a renewal thereof, they shall be
sold in the market or transferred to the
System Open Market Account; and provided
further that in the event bankers' acceptances
covered by any such agreement are not
repurchased by the seller, they shall continue
to be held by the Federal Reserve Bank or
shall be sold in the open market.
2. The Federal Open Market Committee authorizes
and directs the Federal Reserve Bank of New York, or, if
the New York Reserve Bank is closed, any other Federal
Reserve Bank, to purchase directly from the Treasury 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 indebtedness as may be necessary from
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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.
3. 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.
By unanimous vote, the authorization for System foreign
currency operations given below was reaffirmed:
AUTHORIZATION FOR SYSTEM FOREIGN CURRENCY OPERATIONS
1.
The Federal Open Market Committee authorizes and
directs the Federal Reserve Bank of New York, for System
Open Market Account, to the extent necessary to carry out
the Committee's foreign currency directive and express
authorizations by the Committee pursuant thereto:
A. To purchase and sell the following foreign
currencies in the form of cable transfers through spot or
forward transactions on the open market at home and abroad,
including transactions with the U.S. Stabilization Fund
established by Section 10 of the Gold Reserve Act of 1934,
with foreign monetary authorities, and with the Bank for
International Settlements:
Austrian schillings
Belgian francs
Canadian dollars
Danish
Pounds
French
German
kroner
sterling
francs
marks
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Italian lire
Japanese yen
Mexican pesos
Netherlands guilders
Norwegian kroner
Swedish kronor
Swiss francs
B. To hold foreign currencies listed in
graph A above, up to the following limits:
para
(1) Currencies purchased spot, in
cluding currencies purchased from the Stabiliza
tion Fund, and sold forward to the Stabilization
Fund, up to $1 billion equivalent;
(2) Currencies purchased spot or
forward, up to the amounts necessary to fulfill
other forward commitments;
(3) Additional currencies purchased
spot or forward, up to the amount necessary for
System operations to exert a market influence
but not exceeding $250 million equivalent; and
(4) Sterling purchased on a covered
or guaranteed basis in terms of the dollar, under
agreement with the Bank of England, up to $300
million equivalent.
C. To have outstanding forward commitments under
taken under paragraph A above to deliver foreign currencies,
up to the following limits:
(1) Commitments to deliver foreign
currencies to the Stabilization Fund, up to
the limit specified in paragraph 1B(1) above;
(2) Commitments to deliver Italian
lire, under special arrangements with the
Bank of Italy, up to $500 million equivalent;
and
(3) Other forward commitments to
deliver foreign currencies, up to $550 million
equivalent.
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D. To draw foreign currencies and to permit
foreign banks to draw dollars under the reciprocal cur
rency arrangements listed in paragraph 2 below, provided
that drawings by either party to any such arrangement
shall be fully liquidated within 12 months after any
amount outstanding at that time was first drawn, unless
the Committee, because of exceptional circumstances,
specifically authorizes a delay.
2. 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
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
200
500
1,000
200
2,000
1,000
1,000
1,000
1,000
130
300
200
250
600
600
1,000
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3. Unless otherwise expressly authorized by the
Committee, all transactions in foreign currencies under
taken under paragraph 1(A) above shall be at prevailing
market rates and no attempt shall be made to establish
rates that appear to be out of line with underlying
market forces.
4. It shall be the practice to arrange with foreign
central banks for the coordination of foreign currency
transactions. In making operating arrangements with
foreign central banks on System holdings of foreign
currencies, the Federal Reserve Bank of New York shall
not commit itself to maintain any specific balance,
unless authorized by the Federal Open Market Committee.
Any agreements or understandings concerning the admin
istration of the accounts maintained by the Federal
Reserve Bank of New York with the foreign banks designated
by the Board of Governors under Section 214.5 of
Regulation N shall be referred for review and approval
to the Committee.
5. Foreign currency holdings shall be invested
insofar as practicable, considering needs for minimum
working balances. Such investments shall be in accord
ance with Section 14(e) of the Federal Reserve Act.
6. A Subcommittee consisting of the Chairman and
the Vice Chairman of the Committee and the Vice Chairman
of the Board of Governors (or in the absence of the
Chairman or of the Vice Chairman of the Board of
Governors the members of the Board designated by the
Chairman as alternates, and in the absence of the Vice
Chairman of the Committee his alternate) is authorized
to act on behalf of the Committee when it is necessary
to enable the Federal Reserve Bank of New York to engage
in foreign currency operations before the Committee can
be consulted. All actions taken by the Subcommittee
under this paragraph shall be reported promptly to the
Committee.
7. The Chairman (and in his absence the Vice Chair
man of the Committee, and in the absence of both, the
Vice Chairman of the Board of Governors) is authorized:
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A. With the approval of the Committee, to enter
into any needed agreement or understanding with the
Secretary of the Treasury about the division of respon
sibility for foreign currency operations between the
System and the Secretary;
B. To keep the Secretary of the Treasury
fully advised concerning System foreign currency opera
tions, and to consult with the Secretary on such policy
matters as may relate to the Secretary's responsibilities;
and
C. From time to time, to transmit appropriate
reports and information to the National Advisory Council
on International Monetary and Financial Policies.
8. Staff officers of the Committee are authorized
to transmit pertinent information on System foreign
currency operations to appropriate officials of the
Treasury Department.
9. All Federal Reserve Banks shall participate in
the foreign currency operations for System Account in
accordance with paragraph 3 G(1) of the Board of
Governors' Statement of Procedure with Respect to
Foreign Relationships of Federal Reserve Banks dated
January 1, 1944.
10. The Special Manager of the System Open Market
Account for foreign currency operations shall keep the
Committee informed on conditions in foreign exchange
markets and on transactions he has made and shall render
such reports as the Committee may specify.
By unanimous vote, the foreign currency directive given
below was reaffirmed:
FOREIGN CURRENCY DIRECTIVE
1. The basic purposes of System operations in
foreign currencies are:
A. To help safeguard the value of the dollar
in international exchange markets;
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B. To aid in making the system of
international payments more efficient;
C. To further monetary cooperation with
central banks of other countries having convertible
currencies, with the International Monetary Fund,
and with other international payments institutions;
D. To help insure that market movements
in exchange rates, within the limits stated in the
International Monetary Fund Agreement or established
by central bank practices, reflect the interaction
of underlying economic forces and thus serve as
efficient guides to current financial decisions,
private and public; and
E. To facilitate growth in international
liquidity in accordance with the needs of an expand
ing world economy.
2. Unless otherwise expressly authorized by the
Federal Open Market Committee, System operations in
foreign currencies shall be undertaken only when
necessary:
A. To cushion or moderate fluctuations in
the flows of international payments, if such fluctu
ations (1) are deemed to reflect transitional market
unsettlement or other temporary forces and therefore
are expected to be reversed in the foreseeable future;
and (2) are deemed to be disequilibrating or otherwise
to have potentially destabilizing effects on U.S. or
foreign official reserves or on exchange markets, for
example, by occasioning market anxieties, undesirable
speculative activity, or excessive leads and lags in
international payments;
B, To temper and smooth out abrupt changes
in spot exchange rates, and to moderate forward premiums
and discounts judged to be disequilibrating. Whenever
supply or demand persists in influencing exchange rates
in one direction, System transactions should be modified
or curtailed unless upon review and reassessment of the
situation the Committee directs otherwise;
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C. To aid in avoiding disorderly
conditions in exchange markets. Special factors that
might make for exchange market instabilities include
(1) responses to short-run increases in international
political tension, (2) differences in phasing of
international economic activity that give rise to
unusually large interest rate differentials between
major markets, and (3) market rumors of a character
likely to stimulate speculative transactions. When
ever exchange market instability threatens to produce
disorderly conditions, System transactions may be
undertaken if the Special Manager reaches a judgment
that they may help to reestablish supply and demand
balance at a level more consistent with the prevailing
flow of underlying payments. In such cases, the
Special Manager shall consult as soon as practicable
with the Committee or, in an emergency, with the
members of the Subcommittee designated for that
purpose in paragraph 6 of the Authorization for
System foreign currency operations; and
D. To adjust System balances within the
limits established in the Authorization for System
foreign currency operations in light of probable
future needs for currencies.
3. System drawings under the swap arrangements
are appropriate when necessary to obtain foreign
currencies for the purposes stated in paragraph 2 above.
4. Unless otherwise expressly authorized by the
Committee, transactions in forward exchange, either
outright or in conjunction with spot transactions, may
be undertaken only (i) to prevent forward premiums or
discounts from giving rise to disequilibrating move
ments of short-term funds; (ii) to minimize speculative
disturbances; (iii) to supplement existing market
supplies of forward cover, directly or indirectly, as
a means of encouraging the retention or accumulation
of dollar holdings by private foreign holders; (iv)
to allow greater flexibility in covering System or
Treasury commitments, including commitments under swap
arrangements, and to facilitate operations of the
Stabilization Fund; (v) to facilitate the use of one
currency for the settlement of System or Treasury
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3/10/70
commitments denominated in other currencies; and
(vi) to provide cover for System holdings of foreign
currencies.
By unanimous vote, the System open market transactions in
foreign currencies during the period February 10 through March 9,
1970, were approved, ratified, and confirmed.
By unanimous vote, an increase of $250 million, to $1,250
million, in the swap arrangement with the Bank of Italy, together
with the conforming amendment to paragraph 2 of the authorization
for System foreign currency operations, was approved, subject to
the understanding that the action would become effective upon a
determination by Chairman Burns that it was in the national
interest.
Secretary's note: Chairman Burns
made the indicated determination
later on the day of this meeting.
Accordingly, effective March 10,
1970, paragraph 2 of the authori
zation was amended to read as
follows:
The Federal Open Market Committee directs the Fed
eral 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 ap
proval of the Committee to renew such arrangements
on maturity:
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3/10/70
Amount of
Foreign bank
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
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
200
500
1,000
200
2,000
1,000
1,000
1,250
1,000
130
300
200
250
600
600
1,000
By unanimous vote, the open market transactions in
Government securities, agency obligations, and bankers'
acceptances during the period February 10 through March 9, 1970,
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:
-21-
3/10/70
The information reviewed at this meeting suggests
that real economic activity, which leveled off in the
fourth quarter of 1969, is weakening further in early
1970. Prices and costs, however, are continuing to
rise at a rapid pace. Market interest rates have
declined considerably in recent weeks, partly as a
result of changing investor attitudes regarding the
outlook for economic activity and monetary policy.
Both bank credit and the money supply declined on
average in February, but both were tending upward in
the latter part of the month. Outflows of time and
savings funds at banks and nonbank thrift institutions,
which had been sizable in January, apparently ceased in
February, reflecting advances in rates offered on such
funds following the recent increases in regulatory
ceilings, together with declines in short-term market
interest rates. The U.S. foreign trade surplus
narrowed in January and the over-all balance of payments
deficit has remained large in recent weeks. In light of
the foregoing developments, it is the policy of the
Federal Open Market Committee to foster financial con
ditions conducive to orderly reduction in the rate of
inflation, while encouraging the resumption of sustainable
economic growth and the attainment of reasonable equi
librium in the country's balance of payments.
To implement this policy, the Committee desires to
see moderate growth in money and bank credit over the
months ahead. System open market operations until the
next meeting of the Committee shall be conducted with a
view to maintaining money market conditions consistent
with that objective.
It was agreed that the next meeting of the Federal
Open Market Committee would be held on Tuesday, April 7, 1970,
at 9:30 a.m.
The meeting adjourned.
Secretary
Cite this document
Federal Reserve (1970, March 9). FOMC Minutes. Fomc Minutes, Federal Reserve. https://whenthefedspeaks.com/doc/fomc_minutes_19700310
@misc{wtfs_fomc_minutes_19700310,
author = {Federal Reserve},
title = {FOMC Minutes},
year = {1970},
month = {Mar},
howpublished = {Fomc Minutes, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/fomc_minutes_19700310},
note = {Retrieved via When the Fed Speaks corpus}
}