FOMC Minutes

Meeting of Federal Open Market Committee

April 6,

1971

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

on Tuesday, April 6, 1971, at

System in Washington, D.C.,

9:30 a.m.

PRESENT:

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Burns, Chairman

Hayes, Vice Chairman

Brimmer

Clay

Daane

Kimbrel

Maisel

Mayo

Morris

Robertson

Mr. Sherrill

Mr.

Messrs.

Coldwell and Swan, Alternate Members of

the Federal Open Market Committee

Messrs. Heflin and Francis, Presidents of the

Federal Reserve Banks of Richmond and St. Louis,

respectively

Mr. Holland, Secretary

Mr. Broida, Deputy Secretary

Messrs. Bernard and Molony, Assistant

Secretaries

Mr. Hackley, General Coursel

Mr. Partee, Economist

Messrs. Axilrod, Liseameuger, Garvy, Gramley,

Hersey, Reynolds, Scheld, Solomon, and

Tow, Assocciate Economists

Open Market

Mr. Holmes, Manager, System

Account

Mr. Coombs, Special Manager, System Open

Market Account

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4/6/71

Mr. Kenyon, Deputy Secretary, Office of the

Secretary, Board of Governors

Mr. Leonard, Assistant Secretary, Office of

the Secretary, 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. Gemmill, Associate Adviser, Division of

International Finance, 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. Melnicoff, MacDonald, and Strothman,

First Vice Presidents, Feeral Reserve

Banks of Philadelphia, Cleveland, and

Minneapolis, respectively

Mr. Craven, Senior Vice President, Federal

Reserve Bank of San Francisco

Messrs. Hocter, Brandt, Andersen, and Green,

Vice Presidents, Federal Reserve Banks

of Cleveland, Atlanta, St. Louis, and

Dallas, respectively

Messrs. Gustus and Kareken, Economic Advisers,

Federal Reserve Banks of Philadelphia and

Minneapolis, respectively

Messrs. Geng and Wallace, Assistant Vice

Presidents, Federal Reserve Banks of

New York and Richmond, respectively

By unanimous vote, the minutes of actions taken at the

meeting of the Federal Open Market Committee held on March 9, 1971,

were approved.

4/6/71

-3The memorandum of discussion for the meeting of the Federal

Open Market Committee held on March 9, 1971, was accepted.

By unanimous vote, the System open market transactions in

foreign currencies during the period March 9 through April 5, 1971,

were approved, ratified, and confirmed.

By unanimous vote, the open market transactions in Government securities, agency obligations, and bankers' acceptances

during the period March 9 through April 5, 1971, were approved,

ratified, and confirmed.

With Messrs. Hayes and Kimbrel 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 rose substantially in the first quarter primarily because of the

resumption of higher automobile production, but that

the unemployment rate remained high. More moderate

growth in real GNP appears to be in prospect for the

current quarter. Wage rates in most sectors are continuing to rise at a rapid pace. The rate of advance

in consumer prices and in wholesale prices of industrial commodities appears to have moderated recently.

In March bank credit and the money stock both narrowly

and broadly defined again expanded substantially,

although the increases were less sharp than in February.

Inflows of consumer-type time and savings funds to banks

and nonbank thrift institutions reached unusually high

levels in the first quarter as interest rates on competitive short-term market instruments declined considerably further. In recent weeks, however, key shortterm interest rates have moved up somewhat on balance.

Yields on new issues of corporate and municipal bonds

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4/6/71

declined during much of March despite a continuing

heavy calendar of offerings, but most recently longterm market yields have also risen somewhat. The overall balance of payments deficit in the first quarter

was exceptionally large. The trade surplus for the

first two months was very small, and capital outflows

have been stimulated by wide short-term interest rate

differentials. Despite recent reductions in the discount rates of several European central banks, these

differentials remain wide. In light of the foregoing

developments, it is the policy of the Federal Open

Market Committee to foster financial conditions conducive to the resumption of sustainable economic growth,

while encouraging an orderly reduction in the rate of

inflation, moderation of short-term capital outflows,

and attainment of reasonable equilibrium in the

country's balance of payments.

To implement this policy, while taking account of

the Treasury financing the terms of which are to be

announced late in the month, System open market operations until the next meeting of the Committee shall be

conducted with a view to attaining temporarily some

minor firming in money market conditions, while continuing to meet some part of reserve needs through

purchases of coupon issues in the interest of promoting

accommodative conditions in long-term credit markets;

provided that money market conditions shall be modified

if it appears that the monetary and credit aggregates

are deviating significantly from the growth paths

desired.

It was agreed that the next meeting of the Federal Open

Market Committee would be held on Tuesday, May 4, 1971, at

9:30 a.m.

The meeting adjourned.

Secretary