FOMC Minutes

Meeting of Federal Open Market Committee

February 15, 1972

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, February 15, 1972, 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

Kimbrel

Maisel

Mayo

Mitchell

Morris

Robertson

Sheehan

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

Mr. Partee, Economist

Messrs. Axilrod, Eisenmenger, Garvy, Gramley,

Hersey, Scheld, Solomon, Taylor, and Tow,

Associate Economists

Mr. Holmes, Manager, System Open Market Account

Mr. Coombs, Special Manager, System Open Market

Account

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Mr. Cardon, Assistant to the Board of Governors

Mr. Altmann, Assistant Secretary, Office of the

Secretary, Board of Governors

Mr. Bryant, Director, Division of International

Finance, Board of Governors

Messrs. Keir, Pierce, Wernick, and Williams,

Advisers, 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 Eaton, Open Market Secretariat Assistant,

Office of the Secretary, Board of Governors

Mrs. Rehanek, Secretary, Office of the Secretary,

Board of Governors

Messrs. Parthemos, Andersen, and Craven, Senior

Vice Presidents, Federal Reserve Banks of

Richmond, St. Louis, and San Francisco,

respectively

Messrs. Boehne, Hocter, and Green, Vice Presi

dents, Federal Reserve Banks of Philadelphia,

Cleveland, and Dallas, respectively

Mr. Kareken, Economic Adviser, Federal Reserve

Bank of Minneapolis

Mr. Meek, Assistant Vice President, Federal

Reserve Bank of New York

With Mr. Robertson dissenting, the action of members of

the Federal Open Market Committee on January 26, 1972, suspending

until close of business on February 15, 1972, the lower limit on

interest rates on repurchase agreements specified in paragraph 1(c)

of the continuing authority directive, was ratified.

By unanimous vote, the minutes of actions taken at the

meeting of the Federal Open Market Committee held on December 14,

1971, were approved.

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2/15/72

The memorandum of discussion for the meeting of the Federal

Open Market Committee on December 14, 1971, was accepted.

By unanimous vote, the System open market transactions in

foreign currencies during the period January 11 through February 14,

1972, were approved, ratified, and confirmed.

By unanimous vote, renewal for further periods of three

months of the three System drawings on the German Federal Bank

maturing on February 29, 1972, was authorized.

By unanimous vote, the open market transactions in

Government securities, agency obligations, and bankers' accep

tances during the period January 11 through February 14, 1972,

were approved, ratified, and confirmed.

With Mr. Hayes

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 indicates

that real output of goods and services increased more

rapidly in the fourth quarter than it had in the third

quarter, but the unemployment rate remained high. For

the current quarter, growth is projected at a rate close

to that of the fourth quarter. Prices increased sharply

in December, in part reflecting termination of the 90

day freeze. Wage rates also rose substantially in Dec

ember when some increases that had been deferred under

the freeze were allowed to go into effect, but the rise

slowed in January. The narrowly defined money stock,

which had not grown on balance from August to November,

rose somewhat in December and January. Inflows of

time and savings funds at bank and nonbank thrift

institutions increased sharply in January, and both

2/15/72

the broadly defined money stock and the bank credit

proxy expanded rapidly. Some short-term interest

rates have declined further in recent weeks while

yields on long-term securities generally have

increased from the lows reached around mid-January.

Exchange rates for most major foreign currencies

against the dollar have appreciated to levels near or

above their new central values. Since the Smithsonian

meeting, capital reflows to the United States have

somewhat exceeded the underlying U.S. balance of

payments deficit. In light of the foregoing develop

ments, it is the policy of the Federal Open Market

Committee to foster financial conditions conducive

to 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, while taking account

of international developments, the Committee seeks

to achieve bank reserve and money market conditions

that will support moderate growth in monetary aggre

gates over the months ahead.

By unanimous vote, guideline 5 for the conduct of System

operations in Federal agency issues was amended to read as

follows:

Purchases will be limited to fully taxable issues

for which there is an active secondary market. Pur

chases will also be limited to issues outstanding in

amounts of $300 million or over in cases where the

obligations have a maturity of five years or less at

the time of issuance, and to issues outstanding in

amounts of $200 million or over in cases where the

securities have a maturity of more than five years

at the time of issuance.

It was agreed that the next meeting of the Federal Open

Market Committee would be held on Tuesday, March 21, 1972, at

9:30 a.m.

The meeting adjourned.

Secretary