FOMC Minutes

Meeting of Federal Open Market Committee

August 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, August 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

Bucher

Coldwell

Daane

Eastburn

MacLaury

Mitchell

Robertson

Sheehan

Winn

Messrs. Francis, Heflin, and Mayo, Alternate

Members 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

Messrs. Altmann and Bernard, Assistant

Secretaries

Mr. Hackley, General Counsel

Mr. O'Connell, Assistant General Counsel

Mr. Partee, Senior Economist

Messrs. Boehne, Bryant, Gramley, Green,

Hocter, Kareken, and Link, Associate

Economists

Mr. Coombs, Special Manager, System Open

Market Account

8/15/72

Mr. Melnicoff, Deputy Executive Director,

Board of Governors

Mr. Cardon, Assistant to the Board of

Governors

Mr. O'Brien, Special Assistant to the Board

of Governors

Mr. Reynolds, Associate Director, Division

of International Finance, Board of

Governors

Mr. Chase, Associate Director, Division of

Research and Statistics, Board of

Governors

Messrs. Keir, Pierce, and Wernick, Advisers,

Division of Research and Statistics,

Board of Governors

Mr. Pizer, Adviser, Division of International

Finance, Board of Governors

Mr. Wendel, Chief, Government Finance Section,

Division of Research and Statistics,

Board of Governors

Mrs. Rehanek, Open Market Secretariat Assistant,

Office of the Secretary, Board of Governors

Mrs. Sherman, Secretary, Legal Division, Board

of Governors

Mr. Merritt, First Vice President, Federal

Reserve Bank of San Francisco

Messrs. Eisenmenger, Taylor, Scheld, Tow,

and Craven, Senior Vice Presidents,

Federal Reserve Banks of Boston, Atlanta,

Chicago, Kansas City, and San Francisco,

respectively

Messrs. Sternlight, Snellings, and Jordan,

Vice Presidents, Federal Reserve Banks

of New York, Richmond, and St. Louis,

respectively

Mr. Meek, Assistant Vice President, Federal

Reserve Bank of New York

By unanimous vote, the minutes of actions taken at the

meeting of the Federal Open Market Committee on June 19-20, 1972,

were approved.

8/15/72

The memorandum of discussion for the meeting of the Federal

Open Market Committee on June 19-20, 1972, was accepted.

By unanimous vote, the System open market transactions in

foreign currencies during the period July 18 through August 14,

1972, were approved, ratified, and confirmed.

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 a

proposal for reducing the System's swap debt in Swiss francs.

By unanimous vote, the open market transactions in Govern

ment securities, agency obligations, and bankers' acceptances

during the period July 18 through August 14, 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, to execute transactions for 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 at a

rapid rate in the second quarter, and continued though

less rapid growth appears in prospect for the current

quarter. The unemployment rate was lower in June and

July, but it was still substantial. The pace of

advance in wage rates has slowed on balance in recent

months, and the rate of increase in average prices

of all goods and services in the private economy

8/15/72

moderated in the second quarter. In July, the rise in

wholesale prices of industrial commodities slowed, but

wholesale prices of farm and food products rose sharply

further. Since mid-July foreign exchange market con

ditions have been quiet and the central bank reserves

of most industrial countries have changed little. In

June, the large excess of U.S. merchandise imports over

exports persisted.

The narrowly defined money stock grew at an unusually

rapid rate in July, following relatively slow growth in

May and June. Growth in the broadly defined money stock

remained substantial, although inflows of consumer-type

time and savings deposits to banks slowed appreciably.

The bank credit proxy expanded sharply in July, reflecting

strength in both private demand deposits and large-denom

ination CD's. In recent weeks, interest rates on most

market securities have declined somewhat on balance, and

the Treasury completed a highly successful refunding.

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

developments in capital markets and international develop

ments, the Committee seeks to achieve bank reserve and

money market conditions that will support moderate 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, September 19, 1972,

at 9:30 a.m.

The meeting adjourned.

Secretary