FOMC Minutes

Meeting of Federal Open Market Committee

October 20, 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, October 20, 1970, at

9:30 a.m.

PRESENT:

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Burns, Chairman

Hayes, Vice Chairman

Brimmer

Francis

Hickman

Maisel

Mitchell

Robertson

Sherrill

Swan

Morris, Alternate for Mr. Heflin

Messrs. Galusha, Kimbrel, and Mayo, 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

Mr. Kenyon, Assistant Secretary

Mr. Hackley, General Counsel

Mr. Partee, Economist

Messrs. Axilrod, Craven, Garvy, Gramley,

Hersey, Hocter, Parthemos, Reynolds, and

Solomon, Associate Economists

Mr. Holmes, Manager, System Open Market

Account

Mr. Coombs, Special 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

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

Miss Orr, Secretary, Office of the Secretary,

Board of Governors

Messrs. Black and Fossum, First Vice

Presidents, Federal Reserve Banks of

Richmond and Atlanta, respectively

Messrs. Eisenmenger, Taylor, and Tow, Senior

Vice Presidents, Federal Reserve Banks of

Boston, Atlanta, and Kansas City,

respectively

Messrs. Scheld, Andersen, and Green, Vice

Presidents, Federal Reserve Banks of

Chicago, St. Louis, 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 September 15,

1970, were approved.

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The memorandum of discussion for the meeting of the Federal

Open Market Committee held on September 15, 1970, was accepted.

By unanimous vote, the System open market transactions

in foreign currencies during the period September 15 through

October 19, 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 September 15 through October 19, 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

accordance with the following current economic policy directive:

The information reviewed at this meeting suggests

that real output of goods and services increased

slightly further in the third quarter but that employ

ment declined and unemployment continued to rise;

activity in the current quarter is being adversely

affected by a major strike in the automobile industry.

Wage rates generally are continuing to rise at a rapid

pace, but improvements in productivity appear to be

slowing the increase in costs, and some major price

measures are rising less rapidly than before. Most

interest rates have declined since mid-September,

although yields on corporate and municipal bonds have

been sustained by the continuing heavy demands for

funds in capital markets. The money supply rose

slightly on average in September and increased moder

ately over the third quarter as a whole. Bank credit

expanded further in September but at a rate consider

ably less than the fast pace of the two preceding

months. Banks continued to issue large-denomination

CD's at a relatively rapid rate and experienced heavy

inflows of consumer-type time and savings funds, while

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making substantial further reductions in their use of

nondeposit sources of funds. The balance of payments

deficit on the liquidity basis diminished in the third

quarter from the very large second-quarter rate, but

the deficit on the official settlements 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 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 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 those objec

tives, taking account of the forthcoming Treasury

financings.

It was agreed that the next meeting of the Federal Open

Market Committee would be held on Tuesday, November 17, 1970, at

9:30 a.m.

The meeting adjourned.

Secretary