FOMC Minutes

Meeting of Federal Open Market Committee

October 19, 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, October 19, 1971, at

9:30 a.m.

PRESENT:

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Burns, Chairman

Hayes, Vice Chairman

Brimmer

Clay

Kimbrel

Maisel

Mayo

Mitchell

Morris

Robertson

Sherrill

Messrs. Coldwell, Eastburn, Swan, and Winn,

Alternate Members of the Federal Open

Market Committee

Messrs. Francis and MacLaury, Presidents of

the Federal Reserve Banks of St. Louis

and Minneapolis, respectively

Mr. Holland, Secretary

Mr. Broida, Deputy Secretary

Messrs. Bernard and Molony, Assistant

Secretaries

Mr. Hackley, General Counsel

Mr. Hexter, Assistant General Counsel

Mr. Partee, Economist

Messrs. Axilrod, Eisenmenger, Gramley,

Hersey, Scheld, Taylor, and Tow,

Associate Economists

Mr. Coombs, Special Manager, System Open

Market Account

10/19/71

Mr. Melnicoff, Deputy Executive Director,

Board of Governors

Mr. Altmann, Assistant Secretary, Office of

the Secretary, 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 Eaton, Open Market Secretariat Assistant,

Office of the Secretary, Board of

Governors

Mrs. Rehanek, Secretary, Office of the

Secretary, Board of Governors

Mr. Black, First Vice President, Federal

Reserve Bank of Richmond

Messrs. Link, Parthemos, Andersen, and

Craven, Senior Vice Presidents, Federal

Reserve Banks of New York, Richmond,

St. Louis, and San Francisco, respectively

Messrs. Sternlight, Boehne, Hocter, and

Green, Vice Presidents, Federal Reserve

Banks of New York, Philadelphia, Cleveland,

and Dallas, respectively

Mr. Kareken, Economic Adviser, Federal

Reserve Bank of Minneapolis

Mr. Sandberg, Securities Trading Officer,

Federal Reserve Bank of New York

By unanimous vote, the minutes of actions taken at the

meetings of the Federal Open Market Committee held on August 24

and September 21, 1971, were approved.

The memoranda of discussion for the meetings of the Federal

Open Market Committee on August 24 and September 21, 1971, were

accepted.

10/19/71

-3

By unanimous vote, the System open market transactions in

foreign currencies during the period September 21 through October

18, 1971, were approved, ratified, and confirmed.

By unanimous vote, renewal of the ten System drawings on

the National Bank of Belgium maturing in the period November 3-26,

1971, was authorized.

By unanimous vote, the open market transactions in Govern

ment securities, agency obligations, and bankers' acceptances during

the period September 21 through October 18, 1971, 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 indi

cates that real output of goods and services expanded

modestly in the third quarter and that unemployment

remained substantial. However, there are indications

of a strengthening in economic activity since the

mid-August announcement of the Government's new

economic program. The 90-day freeze has thus far

effectively limited increases in prices and wages,

and the general framework of the post-freeze

stabilization program has been established. The

narrowly defined money stock, which had grown rapidly

through July, increased much less in August and

declined in September. The broadly defined money

stock increased slightly in September as inflows of

consumer-type time and savings deposits to banks

continued at the moderate August rate. However, the

volume of large-denomination CD's outstanding rose

sharply, and the rate of expansion in the bank credit

10/19/71

proxy remained relatively rapid. Market interest rates

have declined in recent weeks and are appreciably below

their mid-August levels. The U.S. foreign trade balance

remained in heavy deficit in August. Outflows of short

term capital, which had been massive in August, were

much smaller in September. In recent weeks the market

exchange rates for some foreign currencies against the

dollar rose further, while foreign official reserve

holdings increased substantially. In light of the

foregoing developments, it is the policy of the Federal

Open Market Committee to foster financial conditions

consistent with the aims of the new governmental program,

including sustainable real economic growth and increased

employment, abatement of inflationary pressures, and

attainment of reasonable equilibrium in the country's

balance of payments.

To implement this policy, the Committee seeks to

achieve moderate growth in monetary and credit aggre

gates over the months ahead. System open market

operations until the next meeting of the Committee

shall be conducted with a view to achieving bank

reserve and money market conditions consistent with

that objective, taking account of the forthcoming

Treasury financing.

It was agreed that the next meeting of the Federal Open Market

Committee would be held on Tuesday, November 16, 1971, at 9:30 a.m.

The meeting adjourned.

Secretary