FOMC Minutes

Meeting of Federal Open Market Committee

May 5, 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., on Tuesday, May 5, 1970, at 10:00 a.m.

PRESENT:

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

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

Messrs. Kenyon and Molony, Assistant

Secretaries

Mr. Hackley, General Counsel

Mr. Partee, Economist

Mr. Holmes, Manager, System Open Market

Account

Mr. Baughman, First Vice President, Federal

Reserve Bank of Chicago

By unanimous vote, the provision of paragraph 1(a) of the

continuing authority directive limiting changes in System Account

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holdings of U.S. Government securities between meetings of the Com

mittee to $2 billion was suspended for the period from the opening

of business May 5, 1970, until the close of business May 26, 1970.

At this point the following entered the meeting:

Mr. Broida, Deputy Secretary

Messrs. Axilrod, Craven, Gramley, Hersey,

Hocter, Jones, and Solomon, Associate

Economists

Mr. Coombs, Special Manager, System Open

Market Account

Mr. Bernard, Assistant Secretary, Office of

the Secretary, Board of Governors

Mr. Cardon, Assistant to the Board of Governors

Mr. Coyne, Special Assistant 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. Melnicoff, First Vice President, Federal

Reserve Bank of Philadelphia

Messrs. Eisenmenger, Link, and Tow, Senior

Vice Presidents, Federal Reserve Banks of

Boston, New York, and Kansas City,

respectively

Messrs. Snellings, Scheld, and Green, Vice

Presidents, Federal Reserve Banks of

Richmond, Chicago, and Dallas, respectively

Messrs. Gustus and Kareken, Economic Advisers,

Federal Reserve Banks of Philadelphia and

Minneapolis, respectively

Mr. Cooper, Manager, Securities and Acceptance

Departments, Federal Reserve Bank of New York

Mr. Cox, Financial Economist, Federal Reserve

Bank of Atlanta

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By unanimous vote, the minutes of actions taken at the

meeting of the Federal Open Market Committee held on April 7,

1970, were approved.

The memorandum of discussion for the meeting of the Federal

Open Market Committee held on April

7, 1970, was accepted.

By unanimous vote, the System open market transactions in

foreign currencies during the period April 7 through May 4, 1970,

were approved, ratified, and confirmed.

By unanimous vote, the open market transactions in Govern

ment securities, agency obligations, and bankers' acceptances

during the period April 7 through May 4, 1970, were approved,

ratified, and confirmed.

With Mr. Francis dissenting, the Federal Reserve Bank of New

York was authorized and directed, until otherwise directed by the Com

mittee, to execute transactions in the System Account in accordance

with the following current economic policy directive:

The information reviewed at this meeting indicates

that real economic activity weakened further in the first

quarter of 1970. Growth in personal income, however, is

being stimulated in the second quarter by the enlargement

of social security benefit payments and the Federal pay

raise. Prices and costs generally are continuing to rise

at a rapid pace, although some components of major price

indexes recently have shown moderating tendencies. Most

market interest rates have risen sharply in recent weeks

as a result of heavy demands for funds, possible shifts

in liquidity preferences, and the disappointment of

earlier expectations regarding easing of credit market

conditions. Prices of common stocks have declined

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Attitudes in financial mar

markedly since early April.

kets generally are being affected by the expansion of

military operations in Southeast Asia and by concern

about the success of the Government's anti-inflationary

program. Both bank credit and the money supply rose

substantially from March to April on average, although

during the course of April bank credit leveled off and

the money supply receded sharply from the end-of-March

bulge. The over-all balance of payments was in consid

erable deficit during the first quarter. In light of

the foregoing developments, it is the policy of the

Federal Open Market Committee to foster financial condi

tions conducive to orderly reduction in the rate of

inflation, while encouraging the resumption of sustain

able 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 bank reserves and money market

conditions consistent with that objective, taking account

of the current Treasury financing; provided, however,

that operations shall be modified as needed to moderate

excessive pressures in financial markets, should they

develop.

It was agreed that the next meeting of the Federal Open

Market Committee would be held on Tuesday, May 26,

1970, at 9:30 a.m.

The meeting adjourned.

Secretary