FOMC Minutes

Meeting of Federal Open Market Committee

December 14. 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, December 14, 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, Francis, and MacLaury, Presidents

of the Federal Reserve Banks of Richmond,

St. Louis, and Minneapolis, respectively

Mr. Holland, Secretary

Mr. Broida, Deputy Secretary

Messrs. Bernard and Molony, Assistant

Secretaries

Mr. Hackley, General Counsel

Messrs. Axilrod, Eisenmenger, Garvy, Gramley,

Hersey, Scheld, Solomon, and Tow, Associate

Economists

Mr. Holmes, Manager, System Open Market Account

Mr. Coombs, Special Manager, System Open Market

Account

12/14/71

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. Bryant, Associate Adviser, Division

of International Finance, 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. Craven, Senior Vice President, Federal

Reserve Bank of San Francisco

Messrs. Boehne, Hocter, Snellings, and

Green, Vice Presidents, Federal Reserve

Banks of Philadelphia, Cleveland,

Richmond, and Dallas, respectively

Mr. Bowsher, Assistant Vice President,

Federal Reserve Bank of St. Louis

Mr. Supel, Senior Economist, Federal

Reserve Bank of Minneapolis

Mr. Dill, Financial Economist, Federal

Reserve Bank of Atlanta

Mr. Cooper, Manager, Securities and

Acceptance Departments, 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 November 16, 1971, were

approved.

The memorandum of discussion for the meeting of the Federal

Open Market Committee on November 16, 1971, was accepted.

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12/14/71

By unanimous vote, the System open market transactions in

foreign currencies during the period November 16 through December 13,

1971, were approved, ratified, and confirmed.

By unanimous vote, renewal of the five System drawings on

the National Bank of Belgium maturing in the period January 3-28,

1972, was authorized.

By unanimous vote, the open market transactions in Government

securities, agency obligations, and bankers' acceptances during the

period November 16 through December 13, 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 suggests

that real output of goods and services is increasing more

rapidly in the current quarter than it had in the third

quarter, but the unemployment rate remains high. Increases

in prices and wages were effectively limited by the 90

day freeze, which ended in mid-November. Since then some

wage and price increases have occurred, but other increases

requested have been cut back or not approved by the Pay

Board and the Price Commission. The narrowly defined

money stock changed little in November and has not grown

on balance since August. Inflows of consumer-type time

and savings deposits to banks remained rapid in November

and the broadly defined money stock continued to increase

moderately. Expansion in the bank credit proxy stepped

up as U.S. Government deposits and nondeposit liabilities

increased on average. After advancing in the latter part

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of November, most market interest rates have been declining

recently, and discount rates at four Federal Reserve Banks

were reduced by an additional one-quarter of a percentage

point. The U.S. foreign trade balance was heavily in

deficit in October. In recent weeks net outflows of short

term capital apparently have been substantial, market

exchange rates for foreign currencies against the dollar

on average have risen further, and official reserve holdings

of some countries have increased considerably. 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

promote the degree of ease in bank reserve and money

market conditions essential to greater growth in monetary

aggregates over the months ahead.

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

Committee would be held on Tuesday, January 18, 1972.

By unanimous vote, transfer to the National Archives of the

minutes of the Committee for the year 1966, on the basis described

in a memorandum from the Secretariat dated December 7, 1971, was

authorized.

The meeting adjourned.

Secretary