FOMC Minutes

Meeting of Federal Open Market Committee

September 15, 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, September 15, 1970, at

9:30 a.m.

PRESENT:

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Burns, Chairman

Hayes, Vice Chairman

Brimmer

Daane

Francis

Heflin

Hickman

Maisel

Robertson

Sherrill

Mr. Swan

Messrs. Galusha, Kimbrel, Mayo, 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

Messrs. Axilrod, Craven, Gramley, Hersey,

Hocter, Parthemos, Jones, and Solomon,

Associate Economists

Mr. Holmes, Manager, System Open Market

Account

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Messrs. Bernard and Leonard, Assistant

Secretaries, Office of the Secretary,

Board of Governors

Mr. Cardon, Assistant to the Board of

Governors

Mr. Coyne, Special Assistant to the Board

of Governors

Mr. Wernick, 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

Miss Orr, Secretary, Office of the Secretary,

Board of Governors

Mr. Plant, First Vice President, Federal

Reserve Bank of Dallas

Messrs. Eisenmenger, Link, and Taylor,

Senior Vice Presidents, Federal Reserve

Banks of Boston, New York, and Atlanta,

respectively

Messrs. Bodner, Scheld, Doll, and Green, Vice

Presidents, Federal Reserve Banks of New

York, Chicago, Kansas City, and Dallas,

respectively

Messrs. Gustus and Kareken, Economic Advisers,

Federal Reserve Banks of Philadelphia and

Minneapolis, respectively

Mr. Meek, Assistant Vice President, 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 August 18,

1970, were approved.

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The memorandum of discussion for the meeting of the Federal

Open Market Committee held on August 18, 1970, was accepted,

By unanimous vote, the System open market transactions

in foreign currencies during the period August 18 through

September 14, 1970, were approved, ratified, and confirmed.

By unanimous vote, the open market transactions in Gov

ernment securities, agency obligations, and bankers' acceptances

during the period August 18 through September 14, 1970, were

approved, ratified, and confirmed.

With Mr. Hayes 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 accor

dance with the following current economic policy directive:

The information reviewed at this meeting suggests

that real economic activity, which edged up slightly

in the second quarter, is expanding somewhat further

in the third quarter, led by an upturn in residential

construction. Wage rates generally are continuing to

rise at a rapid pace, but improvements in productivity

appear to be slowing the rise in costs, and some major

price measures are rising less rapidly than before.

Interest rates declined in the last half of August, but

most yields turned up in early September, as credit

demands in securities markets have continued heavy;

existing yield spreads continue to suggest concern with

credit quality. The money supply rose rapidly in the

first half of August but moved back down through early

September. Bank credit expanded sharply further in

August as banks continued to issue large-denomination

CD's at a relatively rapid rate, while reducing their

reliance on the commercial paper market after the Board

of Governors acted to impose reserve requirements on

bank funds obtained from that source. The balance of

payments deficit on the liquidity basis diminished

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somewhat in July and August from the very large second

quarter rate, but the deficit on the official settle

ments basis remained high as banks repaid Euro-dollar

liabilities. 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 growth and the

attainment of reasonable equilibrium in the country's

balance of payments.

To implement this policy, the Committee seeks to

promote some easing of conditions in credit markets

and moderate growth in money and attendant bank credit

expansion 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.

It was agreed that the next meeting of the Federal Open

Market Committee would be held on Tuesday, October 20, 1970,

at 9:30 a.m.

The meeting adjourned.

Secretary