FOMC Minutes

Meeting of Federal Open Market Committee

November 16, 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, November 16, 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

Daane

Kimbrel

Maisel

Mayo

Mitchell

Morris

Robertson

Messrs. Coldwell, Eastburn, Swan, and Winn,

Alternate Members of the Federal Open

Market Committee

Messrs. Heflin and MacLaury, Presidents of

the Federal Reserve Banks of Richmond

and Minneapolis, respectively

Mr. Holland, Secretary

Mr. Broida, Deputy Secretary

Messrs. Bernard and Molony, Assistant

Secretaries

Mr. Hackley, General Counsel

Mr. Partee, Economist

Messrs. Axilrod, Eisenmenger, Gramley,

Hersey, Scheld, Solomon, Taylor,

and Tow, Associate Economists

Mr. Holmes, Manager, System Open Market

Account

Mr. Coombs, Special Manager, System Open

Market Account

11/16/72

Mr. Altmann, Assistant Secretary, Office

of the Secretary, Board of Governors

Mr. Chase, Deputy Director, Division of

Research and Statistics, 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. 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

Mrs. Rehanek, Secretary, Office of the

Secretary, Board of Governors

Mr. Leonard, First Vice President,

Federal Reserve Bank of St. Louis

Messrs. Parthemos and Craven, Senior

Vice Presidents, Federal Reserve

Banks of Richmond and San Francisco,

respectively

Messrs. Boehne, Hocter, and Green,

Vice Presidents, Federal Reserve

Banks of Philadelphia, Cleveland,

and Dallas, respectively

Mr. Kareken, Economic Adviser, Federal

Reserve Bank of Minneapolis

Messrs. Meek, Puckett, and Bowsher, Assistant

Vice Presidents, Federal Reserve Banks

of New York, New York, and St. Louis,

respectively

By unanimous vote, the minutes of actions taken at the

meeting of the Federal Open Market Committee held on October 19,

1971, were approved.

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The memorandum of discussion for the meeting of the Federal

Open Market Committee on October 19, 1971, was accepted.

By unanimous vote, the System open market transactions in

foreign currencies during the period October 19 through November 15,

1971, were approved, ratified, and confirmed.

By unanimous vote, the Committee approved the renewal for

further periods of one year of the following swap arrangements,

having the indicated amounts and maturity dates, subject to a

determination by Chairman Burns that such action was in the

national interest:

Amount of

Foreign bank

Austrian National Bank

National Bank of Belgium

Bank of Canada

National Bank of Denmark

Bank of England

Bank of France

German Federal Bank

Bank of Italy

Bank of Japan

Bank of Mexico

Netherlands Bank

Bank of Norway

Bank of Sweden

Swiss National Bank

Bank for International Settlements:

Dollars against Swiss francs

Dollars against authorized Euro

pean currencies other than

Swiss francs

arrangement

(millions of

dollars

equivalent)

Maturity

date

200

600

1,000

200

2,000

1,000

1,000

1,250

1,000

130

300

200

250

1,000

December

December

December

December

December

December

December

December

December

December

December

December

December

December

1971

1971

1971

1971

1971

1971

1971

1971

1971

1971

1971

1971

1971

1971

600

December

2, 1971

1,000

December

2, 1971

Secretary's note: Chairman Burns made the indicated

determination on November 30, 1971.

11/16/71

By unanimous vote, the open market transactions in Govern

ment securities, agency obligations, and bankers' acceptances during

the period October 19 through November 15, 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 executive transactions in the System Account in

accordance with the following current economic policy directive:

The information reviewed at this meeting indicates

that real output of goods and services expanded mod

estly in the third quarter, but greater growth appears

in prospect for the current quarter. Although the

unemployment rate has declined recently, it remains

high. Available data indicate that the 90-day freeze

effectively limited increases in price and wages, and

basic policies for the post-freeze stabilization program

have been announced. The narrowly defined money stock

declined further in October, but inflows of consumer

type time and savings deposits to banks expanded consid

erably and the broadly defined money stock increased

moderately. Expansion in the bank credit proxy slowed

substantially as the volume of large-denomination CD's

outstanding rose less than in September and as U.S. Gov

ernment deposits were reduced. Interest rates on both

short- and long-term market securities have continued

to decline in recent weeks and Federal Reserve discount

rates were reduced by one-quarter of a percentage point to

4-3/4 per cent. The U.S. foreign trade balance was

raised in September by a sharp acceleration of export

shipments in advance of an East Coast port strike. In

recent weeks net outflows of short-term capital appar

ently have diminished further, market exchange rates

for foreign currencies against the dollar on average

have not changed much, and foreign official reserve

holdings have increased less than they did in September.

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

11/16/71

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 promote somewhat greater growth in monetary and credit

System open market

aggregates over the months ahead.

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.

It was agreed that the next meeting of the Federal Open

Market Committee would be held on Tuesday, December 14, 1971,

at 9:30 a.m.

The meeting adjourned.

Secretary