FOMC Minutes

Meeting of Federal Open Market Committee

October 17, 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, October 17, 1972, at

11:15 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, Clay, and Balles,

Presidents of the Federal Reserve Banks

of Boston, Atlanta, Kansas City, and San

Francisco, 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

Mr. Axilrod, Economist (Domestic Finance)

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

Hocter, and Link, Associate Economists

10/17/72

Mr. Holmes, Manager, System Open Market

Account

Mr. Coombs, Special Manager, System Open

Market Account

Mr. Melnicoff, Deputy Executive Director,

Board of Governors

Mr. O'Brien, Special Assistant to the Board

of Governors

Mr. Reynolds, Associate Director, Division

of International Finance, Board of

Governors

Messrs. Keir, Pierce, Wernick, and Williams,

Advisers, Division of Research and

Statistics, Board of Governors

Mr. Wendel, Chief, Government Finance Section,

Division of Research and Statistics, Board

of Governors

Mrs. Sherman, Secretary, Office of the Secretary,

Board of Governors

Mr. Leonard, First Vice President, Federal

Reserve Bank of St. Louis

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. Brandt and Doll, Vice Presidents,

Federal Reserve Banks of Atlanta and

Kansas City, respectively

Mr. Sandberg, Manager, Acceptance and

Securities Departments, Federal Reserve

Bank of New York

Mr. Duprey, Senior Economist, Federal Reserve

Bank of Minneapolis

By unanimous vote, the minutes of actions taken at the

meeting of the Federal Open Market Committee on August 15, 1972,

were approved.

The memorandum of discussion for the meeting of the Federal

Open Market Committee on August 15, 1972, was accepted.

10/17/72

The reports of audit of the System Open Market Account

and of foreign currency transactions, made by the Board's Division

of Federal Reserve Bank Operations as at the close of business

August 18, 1972, and submitted by Mr. McWhirter, Chief Federal

Reserve Examiner,

were accepted.

By unanimous vote, the System open market transactions in

foreign currencies during the period September 19 through October 16,

1972, were approved, ratified, and confirmed.

By unanimous vote, renewal for further periods of 3 months

of the 8 System drawings on the National Bank of Belgium maturing

in the period November 3-24, 1972, was authorized.

By unanimous vote, renewal for further periods of 3 months

of the 2 System drawings on the Swiss National Bank maturing on

November 10 and 17, 1972, respectively, was authorized.

By unanimous vote, renewal for further periods of 3 months

of the 2 System drawings on the Bank for International Settlements,

in Swiss francs and Belgian francs and maturing on November 13 and

17, 1972, respectively, was authorized.

By unanimous vote, the open market transactions in Govern

ment securities, agency obligations, and bankers' acceptances

during the period September 19 through October 16, 1972, were

approved, ratified, and confirmed.

10/17/72

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 suggests

a substantial increase in real output of goods and

services in the third quarter, although well below the

unusually large rise recorded in the second quarter.

In September wages and prices advanced moderately,

while the unemployment rate remained substantial. In

the U.S. balance of payments, the current account

deficit has been largely offset by capital inflows in

recent weeks, and the central bank reserves of most

industrial countries have continued to change little.

In August, the excess of U.S. merchandise imports over

exports declined somewhat.

The narrowly and broadly defined money stock expanded

at moderate rates in August and September, following large

increases in July, but the bank credit proxy continued to

grow rapidly. Since mid-September, short-term interest

rates have increased somewhat, while yields on most long

term securities have changed little.

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

the effects of possible bank regulatory changes, Treasury

financing operations, and developments in credit markets,

the Committee seeks to achieve bank reserve and money

market conditions that will support more moderate growth

in monetary aggregates over the months ahead than recorded

in the third quarter.

-5

10/17/72

It was agreed that the next meeting of the Federal Open

20

Market Committee would be held on Monday and Tuesday, November

21,

1972.

Thereupon the meeting adjourned.

Secretary