FOMC Minutes

Meeting of Federal Open Market Committee

April 7, 1970

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.

Mr.

on Tuesday, April 7, 1970, at 9:30 a.m.

Burns, Chairman

Hayes, Vice Chairman

Brimmer

Daane

Francis

Heflin

Hickman

Maisel

Mitchell

Robertson

Sherrill

Swan

Messrs. Galusha, Kimbrel, and Morris, Alternate

Members of the Federal Open Market Committee

Messrs. Eastburn, Clay, and Coldwell, Presidents

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, Gramley, Hersey,

Hocter, Jones, and Solomon, Associate

Economists

Mr. Holmes, Manager, System Open Market Account

Mr. Bernard, Assistant Secretary, Board of

Governors

Mr. Cardon, Assistant to the Board of Governors

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Messrs. Coyne and Nichols, Special Assistants

to the Board of Governors

Messrs. Wernick and Williams, Advisers,

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. Baughman, First Vice President, Federal

Reserve Bank of Chicago

Messrs. Eisenmenger, Link, Taylor, and Tow,

Senior Vice Presidents, Federal Reserve

Banks of Boston, New York, Atlanta, and

Kansas City, respectively

Messrs. Bodner, Monhollon, Scheld, and Green,

Vice Presidents, Federal Reserve Banks of

New York, Richmond, Chicago, and Dallas,

respectively

Mr. Gustus, Economic Adviser, Federal Reserve

Bank of Philadelphia

Mr. Meek, Assistant Vice President, Federal

Reserve Bank of New York

Mr. Herder, Assistant Research Director,

Federal Reserve Bank of Minneapolis

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

ing of the Federal Open Market Committee held on March 10, 1970,

were approved.

The memorandum of discussion for the meeting of the Federal

Open Market Committee held on March 10, 1970, was accepted.

By unanimous vote, the System open market transactions

in

foreign currencies during the period March 10 through April 6, 1970,

were approved, ratified, and confirmed.

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By unanimous vote, paragraphs 1B and 1C of the authorization

for System foreign currency operations were amended to read as

follows:

B. To hold foreign currencies listed in para

graph A above, up to the following limits:

(1) Currencies purchased spot, in

cluding currencies purchased from the Stabili

zation 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 $200

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; and

(2) Other forward commitments to

deliver foreign currencies, up to $550 million

equivalent.

By unanimous vote, the open market transactions in Government

securities, agency obligations, and bankers' acceptances during the

period March 10 through April 6, 1970, were approved, ratified, and

confirmed.

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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 suggests

that real economic activity weakened further in early

1970, while prices and costs continued to rise at a

rapid pace. Fiscal stimulus, of dimensions that are

still uncertain, will strengthen income expansion in

the near term. Most long-term interest rates backed

up during much of March under the pressure of heavy

demands for funds, but then turned down in response

to indications of some relaxation of monetary policy

and to the reduction in the prime lending rate of

banks. Short-term rates declined further on balance

in recent weeks, contributing to the ability of banks

and other thrift institutions to attract time and

savings funds. Both bank credit and the money supply

rose on average in March; over the first quarter as

a whole bank credit was about unchanged on balance and

the money supply increased somewhat. The U.S. foreign

trade surplus increased in February, but the over-all

balance of payments appears to have been in considerable

deficit during the first quarter. In light of the fore

going developments, it is the policy of the Federal

Open Market Committee to foster financial conditions

conducive to orderly reduction in the rate of inflation,

while encouraging the resumption of sustainable economic

growth and the attainment of reasonable equilibrium 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, taking account of the forthcoming

Treasury financing.

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4/7/70

It was agreed the next meeting of the Federal Open

Market Committee would be held on Tuesday, May 5,

1970,

9:30 a.m.

The meeting adjourned.

Secretary

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