FOMC Minutes

Meeting of Federal Open Market Committee

June 29,

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

System in Washington, D.C., on Tuesday, June 29, 1971, at

9:30 a.m.

PRESENT:

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Burns, Chairman

Hayes, Vice Chairman

Brimmer

Clay

Daane

Maisel

Mayo

Mitchell

Morris

Robertson

Sherrill

Coldwell, Alternate for Mr. Kimbrel

Mr. Swan. Alternate Member 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

Mr. Molony, Assistant Secretary

Mr. Hackley, General Counsel

Mr. Hexter, Assistant General Counsel

Mr. Partee, Economist

Messrs. Garvy, Gramley, Hersey, Scheld,

Taylor, and Tow, Associate Economists

Mr. Holmes, Manager, System Open Market

Account

Mr.

Coombs, Special Manager, Syster Open

Market Account

6/29/71

Mr. Leonard, Assistant Secretary, Office of

the Secretary, Board of Governors

Mr. Cardon, Assistant to the Board of

Governors

Mr. O'Brien, 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. Bryant, Associate Adviser, Division of

International Finance, Board of

Governors

Mr. Zeisel, Assistant Adviser, Division of

Research and Statistics, Board of

Governors

Mr. Wendel, Chief, Government Finance

Section, Division of Research and

Statistics, 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, Fossum, and

Strothman, First Vice Presidents,

Federal Reserve Banks of Philadelphia,

Cleveland, Atlanta, and Minneapolis,

respectively

Messrs. Parthemos and Craven, Senior Vice

Presidents, Federal Reserve Banks of

Richmond and San Francisco,

respectively

Messrs. Willes, Hocter, Jordan, Nelson, and

Green, Vice Presidents, Federal Reserve

Banks of Philadelphia, Cleveland,

St. Louis, Minneapolis, and Dallas,

respectively

Mr. Anderson, Assistant Vice President,

Federal Reserve Bank of Boston

Mr. Cooper, Manager, Securities and

Acceptance Departments, Federal

Reserve Bank of New York

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6/29/71

By unanimous vote, the System open market transactions

in foreign currencies during the period June 8 through 28, 1971,

were approved, ratified, and confirmed.

By unanimous vote, renewal if necessary of the three

System drawings on the National Bank of Belgium maturing in the

period July 26-August 3, 1971, was authorized.

By unanimous vote, the open market transactions in

Government securities, agency obligations, and bankers' accep

tances during the period June 8 through 28, 1971, were approve,

ratified, and confirmed.

By unanimous vote, the dollar limit specified in para

graph 2 of the continuing authority directive, on Federal Reserve

Bank holdings of short-term certificates of indebtedness purchased

directly from the Treasury, was decreased from $2 billion to $1

billion.

As amended, paragraph 2 read as follows:

The Federal Open Market Committee authorizes and

directs the Federal Reserve Bank of New York, or, if

the New York Reserve Bank is closed, any other Federal

Reserve Bank, to purchase directly from the Treasury

for its own account (with discretion, in cases where

it seems desirable, to issue participations to one

or more Federal Reserve Banks) such amounts of special

short-term certificates of indebtedness as may be

necessary from time to time for the temporary accom

modation of the Treasury; provided that the rate

charged on such certificates shall be a rate 1/4 of

1 per cent below the discount rate of the Federal

Reserve Bank of New York at the time of such purchases,

and provided further that the total amount of such

certificates held at any one time by the Federal

Reserve Banks shall not exceed $1 billion.

6/29/71

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 suggests

that real output of goods and services is expanding

moderately in the current quarter and that the unem

ployment rate has remained high. Wage rates in most

sectors are continuing to rise at a rapid pace. The

rate of advance in both consumer prices and wholesale

prices of industrial commodities has stepped up again

recently after moderating earlier in the year. In

June, according to tentative estimates, the money

stock both narrowly and broadly defined is still grow

ing rapidly on average, although less than in May;

growth in the bank credit proxy remains below the

first-quarter rate. Interest rates on most types of

market securities have increased on balance in recent

weeks. The market exchange rate for the German mark

has advanced, and a substantial flow of funds from

Germany to other markets has occurred in recent weeks.

In consequence of a partial reversal of the earlier

speculative outflows of short-term capital from the

United States and of an increase in Euro-dollar bor

rowings of U.S. banks, there has been a surplus in

the U.S. payments balance on the official settlements

basis in this period. The U.S. merchandise trade

balance, which had been in small surplus in the first

quarter, was in deficit in April and May. 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 equi

librium in the country's balance of payments.

To implement this policy, the Committee seeks to

achieve more moderate growth in monetary aggregates

over the months ahead, taking account of developments

in capital markets. System open market operations

6/29/71

until the next meeting of the Committee shall be

conducted with a view to achieving bank reserve

and money market conditions consistent with those

objectives.

It was agreed that the next meeting of the Federal Open

Market Committee would be held on Tuesday, July 27, 1971, at

9:30 a.m.

The meeting adjourned.

Secretary