FOMC Minutes

Meeting of Federal Open Market Committee

May 23, 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, May 23, 1972, at 9:30 a.m.

PRESENT:

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Burns, Chairman

Hayes, Vice Chairman

Brimmer

Coldwell

Daane

Eastburn

MacLaury

Mitchell

Sheehan

Winn

Mr. Mayo, Alternate Member of the Federal Open

Market Committee

Messrs, Morris, Kimbrel, and Clay, Presidents of

the Federal Reserve Banks of Boston, Atlanta,

and Kansas City, respectively

Mr, Holland, Secretary

Mr, Broida, Deputy Secretary

Mr, Altmann, Assistant Secretary

Mr. Hackley, General Counsel

Mr, Partee, Senior Economist

Mr. Axilrod, Economist (Domestic Finance)

Mr. Solomon, Economist (International Finance)

Messrs. Boehne, Bryant, Gramley, Green, Hersey,

Hocter, Kareken, and Link, Associate

Economists

Mr. Holmes, Manager, System Open Market Account

Mr. Coombs, Special Manager, System Open Market

Account

5/23/72

Mr. Melnicoff, Deputy Executive Director,

Board of Governors

Mr. Cardon, Assistant to the Board of

Governors

Mr. Coyne, Special Assistant to the Board

of Governors

Messrs. Keir, Pierce, Wernick, and Williams,

Advisers, Division of Research and

Statistics, Board of Governors

Mr, Pizer, 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. Black, Leonard, and Merritt, First Vice

Presidents, Federal Reserve Banks of

Richmond, St. Louis, and San Francisco,

respectively

Messrs. Eisenmenger, Parthemos, Scheld, Andersen,

Tow, and Craven, Senior Vice Presidents,

Federal Reserve Banks of Boston, Richmond,

Chicago, St. Louis, Kansas City, and

San Francisco, respectively

Messrs. Debs and Brandt, Vice Presidents,

Federal Reserve Banks of New York and

Atlanta, respectively

By unanimous vote, the minutes of actions taken at the meet

ings of the Federal Open Market Committee on March 21 and April 17,

1972, were approved.

The memoranda of discussion for the meetings of the Federal

Open Market Committee on March 21 and April 17, 1972 were accepted.

By unanimous vote, the System open market transactions in

foreign currencies during the period April 18 through May 22,

were approved, ratified, and confirmed.

1972,

5/23/72

It was agreed that a subcommittee, consisting of the Chairman

and Vice Chairman of the Committee and the Vice Chairman of the Board

of Governors, or designated alternates, should be authorized to act

on behalf of the Committee with respect to the repayment of the

System's swap debt to the Bank of England.

It was agreed that the subcommittee indicated above should

be authorized to act on behalf of the Committee with respect to

repayments on the System's Swiss franc swap debt.

By unanimous vote, the Committee approved the renewal for

further periods of six months of the following swap arrangements,

having the indicated amounts and maturity dates:

Amount of

arrangement

Foreign bank

Bank of France

German Federal Bank

Bank of Italy

Netherlands Bank

(millions of

dollars

equivalent)

1,000

1,000

1,250

300

Maturity

date

June

June

June

June

28,

15,

30,

30,

1972

1972

1972

1972

By unanimous vote, the open market transactions in Govern

ment securities, agency obligations, and bankers' acceptances dur

ing the period April 18 through May 22, 1972, 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,

5/23/72

to execute transactions in the System Account in accordance with the

following current economic policy directive:

The information reviewed at this meeting, including

recent data for such measures of business activity as

industrial production and employment, suggests that real

output of goods and services may be growing at a faster

rate in the current quarter than in the two preceding

quarters, but the unemployment rate remains high. In

April wholesale prices of farm and food products changed

little--after having declined in March--but the rise in

prices of industrial commodities remained substantial.

The consumer price index, which had been stable in March,

increased somewhat. Wage rates continued to rise at a

substantial pace. The U.S. balance of payments on the

official settlements basis has been in small surplus

since mid-March, but the payments balance on the net

liquidity basis has apparently remained in deficit. In

March merchandise imports continued to be considerably

in excess of exports.

Growth in both the narrowly and broadly defined

money stock slowed in April from the rapid rates in

February and March, Inflows of savings funds to nonbank

thrift institutions also slowed, but they remained at a

relatively advanced pace. Reflecting a further increase

in U.S. Government deposits and a rise in the outstanding

volume of large-denomination CD's, the bank credit proxy

continued to expand at a rapid rate.

In recent weeks,

market interest rates have fluctuated in a narrow range.

In light of the foregoing developments, 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

capital market developments and possible Treasury refund

ing, the Committee seeks to achieve bank reserve and

money market conditions that will support somewhat slower

growth in monetary aggregates over the months ahead.

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-5

It was agreed that the next meetings of the Federal Open

Market Committee would be held on Monday and Tuesday, June 19-20,

1972.

The meeting adjourned.

Secretary