FOMC Minutes

Meeting of Federal Open Market Committee

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, April 17, 1973, at

9:30 a.m.

PRESENT:

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Burns, Chairman

Hayes, Vice Chairman

Balles

Brimmer

Bucher

Daane

Francis

Mitchell

Morris

Robertson

Sheehan

Winn, Alternate for Mr.

Mayo

Messrs. Clay, Eastburn, and Kimbrel, Alternate

Members of the Federal Open Market Committee

MacLaury and Coldwell, Presidents of

the Federal Reserve Banks of Minneapolis

and Dallas, respectively

Messrs.

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. Andersen, Bryant, Garvy, Hersey,

Reynolds, Scheld, and Sims, Associate

Economists

Mr. Holmes, Manager, System Open Market Account

Mr. Coombs, Special Manager, System Open

Market Account

4/17/73

Mr. Melnicoff, Deputy Executive Director,

Board of Governors

Mr. Coyne, Assistant to the Board of

Governors

Messrs. Keir, Pierce, Wernick, and Williams,

Advisers, Division of Research and

Statistics, Board of Governors

Messrs. Gemmill and Pizer, Advisers, 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, Office of the

Secretary, Board of Governors

Messrs. Black and Baughman, First Vice

Presidents, Federal Reserve Banks of

Richmond and Chicago, respectively

Messrs. Boehne, Parthenos, Taylor, and

Doll, Senior Vice Presidents, Federal

Reserve Banks of Philadelphia, Richmond,

Atlanta, and Kansas City, respectively

Messrs. Hocter and Green, Vice Presidents,

Federal Reserve Banks of Cleveland and

Dallas, respectively

Messrs. Anderson and Cooper, Assistant

Vice Presidents, Federal Reserve Banks

of Boston and New York, respectively

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 February 13, 1973,

were approved.

The memoranda of discussion for the meetings of the Federal

Open Market Committee on February 13 and March 7, 1973, were

accepted.

4/17/73

By unanimous vote, the open market transactions in

Government securities, agency obligations, and bankers' accept

ances during the period March 20 through April 16, 1973, were

approved, ratified, and confirmed.

It was agreed that the authorization for the lending of

Government securities from the System Open Market Account should

be retained at this time.

By unanimous vote, transfer to the National Archives of

the FOMC minutes of actions and memoranda of discussion for the

year 1967, on the basis described in a memorandum from the

Secretariat dated March 13, 1973, was authorized.

By unanimous vote, numbers 3 and 4 of the guidelines for

the conduct of System operations in Federal agency issues were

amended to read as follows:

3. System holdings of agency issues shall be

modest relative to holdings of U.S. Government securi

ties, and the amount and timing of System transactions

in agency issues shall be determined with due regard

for the desirability of avoiding undue market effects.

4. System holdings of maturing agency issues

will be allowed to run off at maturity.

By unanimous vote, the System open market transactions in

foreign currencies during the period March 20 through April 16,

1973, were approved, ratified, and confirmed.

4/17/73

By unanimous vote, renewal for further periods of three

months of the eight System swap drawings on the National Bank of

Belgium maturing in the period May 2-23, 1973, was authorized.

By unanimous vote, renewal for further periods of three

months of the two System swap drawings on the Swiss National Bank

and the one drawing on the Bank for International Settlements

maturing in the period May 9-16, 1973, was authorized.

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 domestic policy directive:

The information reviewed at this meeting suggests

continued rapid growth in real output of goods and ser

vices in the first quarter, spurred by an extraordinary

increase in consumption expenditures. Over the first

3 months of this year, employment rose strongly but the

unemployment rate remained about 5 per cent. The recent

advance in wage rates has been more moderate than in the

latter part of 1972, but the increase in social security

taxes in January added significantly to payroll costs.

The rate of increase in prices stepped up very sharply

in the first quarter. Prices of foods have continued

to rise at wholesale and retail, and in both February

and March increases in wholesale prices of industrial

commodities were large and widespread. Foreign exchange

markets have been relatively quiet since mid-March, and

there has been a moderate reflow into dollars. The U.S.

merchandise trade balance improved a little in January

February, when both exports and imports were sharply

higher than in the fourth quarter of 1972.

Growth in both the narrowly and more broadly defined

money stock slowed markedly in the first quarter follow

ing a bulge toward the close of last year. However, in the

face of strong loan demand--especially from businesses--

4/17/73

banks sharply increased their issuance of large

denomination CD's, and the bank credit proxy expanded

very rapidly. Short-term market interest rates con

tinued to rise until the beginning of April, but since

then some rates--particularly those on Treasury billshave declined. Rates on long-term market securities have

moved down on balance in recent weeks.

In light of the foregoing developments, it is

the policy of the Federal Open Market Committee to

foster financial conditions conducive to abatement of

inflationary pressures, a more sustainable rate of

advance in economic activity, and progress toward equili

brium in the country's balance of payments.

To implement this policy, while taking account of

forthcoming Treasury financing, the Committee seeks to

achieve bank reserve and money market conditions con

sistent with 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,

May 15,

1973,

9:30 a.m.

The meeting adjourned.

Secretary

at