FOMC Minutes

Meeting of Federal Open Market Committee

May 26, 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 26, 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

Francis

Hickman

Maisel

Mitchell

Robertson

Sherrill

Swan

Morris, Alternate for Mr. Heflin

Messrs. Galusha and Kimbrel, Alternate Members of

the Federal Open Market Committee

Messrs. Eastburn and Coldwell, Presidents of the

Federal Reserve Banks of Philadelphia and

Dallas, respectively

Mr. Holland, Secretary

Mr. Broida, Deputy Secretary

Messrs. Kenyon and Molony, Assistant

Secretaries

Mr. Hexter, Assistant General Counsel

Mr. Partee, Economist

Messrs. Axilrod, Craven, Gramley, Hersey, Hocter,

Jones, Parthemos, and Solomon, Associate

Economists

Mr. Holmes, Manager, System Open Market Account

Mr. Bernard, Assistant Secretary, Office of the

Secretary, Board of Governors

Mr, Cardon, Assistant to the Board of Governors

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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. Baker, Economist, 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

Messrs. Black, Fossum, and Baughman, First

Vice Presidents, Federal Reserve Banks

of Richmond, Atlanta, and Chicago,

respectively

Messrs. Eisenmenger, Link, Taylor, and Tow,

Senior Vice Presidents, Federal Reserve

Banks of Boston, New York, Atlanta, and

Kansas City, respectively

Messrs. Bodner, Scheld, and Green, Vice

Presidents, Federal Reserve Banks of

New York, Chicago, and Dallas, respectively

Messrs. Gustus and Kareken, Economic Advisers,

Federal Reserve Banks of Philadelphia and

Minneapolis, respectively

Mr. Sandberg, Securities Trading Officer,

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 May 5, 1970, were

approved.

The memorandum of discussion for the meeting of the Federal

Open Market Committee held on May 5,

1970,

was accepted.

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By unanimous vote, the System open market transactions in

foreign currencies during the period May 5 through 25, 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 May 5 through 25, 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:

The information reviewed at this meeting indicates

that real economic activity declined more than previously

estimated in the first quarter of 1970, but little further

change is projected in the second quarter. Prices and

costs generally are continuing to rise at a rapid pace,

although some components of major price indexes recently

have shown moderating tendencies. Since early May most

long-term interest rates have remained under upward

pressure, partly as a result of continued heavy demands

for funds and possible shifts in liquidity preferences,

and prices of common stocks have declined further. Atti

tudes in financial markets generally are being affected

by the widespread uncertainties arising from recent

international and domestic events, including doubts

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; in May

bank credit appears to be changing little while the

money supply appears to be expanding rapidly. The over

all balance of payments continued in considerable deficit

in April and early May. In light of the foregoing

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

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growth and the attainment of reasonable equilibrium in

the country's balance of payments.

To implement this policy, in view of current market

uncertainties and liquidity strains, open market opera

tions until the next meeting of the Committee shall be

conducted with a view to moderating pressures on financial

markets, while, to the extent compatible therewith,

maintaining bank reserves and money market conditions

consistent with the Committee's longer run objectives

of moderate growth in money and bank credit.

It was agreed that the next meeting of the Federal Open

Market Committee would be held on Tuesday,

June 23,

1970,

9:30 a.m.

The meeting adjourned.

Secretary

at