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 Monday and Tuesday, June 18-19,

1973, beginning at 4:00 p.m. on Monday.

PRESENT:

Mr. Burns, Chairman

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Brimmer

Bucher

Daane

Francis

Holland

Mayo

Mitchell 1/

Morris

Sheehan 1/

Clay, Alternate for Mr. Balles

Debs, Alternate for Mr. Hayes

Messrs. Eastburn, Kimbrel, and Winn,

Alternate Members of the Federal Open

Market Committee

Messrs. MacLaury and Coldwell, Presidents

of the Federal Reserve Banks of

Minneapolis and Dallas, respectively

Mr. Broida, Deputy Secretary

Messrs. Altmann and Bernard, Assistant

Secretaries

Mr. O'Connell, 1/ General Counsel

Mr. Nicoll, 2 / Assistant General Counsel

Mr. Partee, Senior Economist

Mr. Axilrod, Economist (Domestic Finance)

Messrs. Bryant, Eisenmenger, Gramley, 2/ Hersey,

Reynolds, 1/Scheld, and Sims, Associate

Economists

1/ Attended Tuesday session only.

2/ Attended Monday session only.

6/18-19/73

Mr. Sternlight, Deputy Manager, System

Open Market Account

Mr. Bodner, Deputy Special Manager, System

Open Market Account

Mr. O'Brien, Special 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. Zeisel, 1 / Associate Adviser, Division of

Research and Statistics, Board of Governors

Miss Stockwell 1/and Messrs. Ettin 1/ and Taylor,1/

Assistant Advisers, Division of Research and

Statistics, Board of Governors

Mrs. Junz,1/Assistant Adviser, Division of

International Finance, Board of Governors

Mr. Wendel, Chief, Government Finance Section,

Division of Research and Statistics,

Board of Governors

Messrs. Peret 1/ and Wetzel, 1/ Senior Economists,

Division of Research and Statistics,

Board of Governors

Mr. Roxon, 1/ Senior Economist, Division of

International Finance, Board of Governors

Messrs. Enzler 1/ and Wyss, 1/ Economists,

Division of Research and Statistics, Board

of Govern rs

Miss Morisse 1/ and Mr. Smith,1/ Economists,

Division of International Finance,

Board of Governors

Mrs. Ferrell, Open Market Secretariat Assistant,

Office of the Secretary, Board of Governors

Mrs. Peters, Secretary, Office of the Secretary,

Board of Governors

Messrs. Black and Williams,1/ First Vice

Presidents, Federal Reserve Banks of

Richmond and San Francisco, respectively

Messrs. Boehne, Parthemos, Taylor, and Doll,

Senior Vice Presidents, Federal Reserve

Banks of Philadelphia, Richmond, Atlanta,

and Kansas City, respectively

1/ Attended Monday session only.

6-18/19-73

Messrs. Hocter and Green, Vice Presidents,

Federal Reserve Banks of Cleveland

and Dallas, respectively

Mr. Kareken, Economic Adviser, Federal Reserve

Bank of Minneapolis

Mr. Davis, Adviser, Federal Reserve Bank of

New York

Secretary's Note: All of the actions listed

below were taken on Tuesday, June 19, 1973.

By unanimous vote, Arthur L. Broida was elected Secretary of

the Federal Open Market Committee, effective immediately, to serve

until the election of his successor at the first meeting of the

Committee after February 28, 1974, with the understanding that in

the event of the discontinuance of his official connection with the

Board of Governors he would cease to have any official connection

with the Federal Open Market Committee.

By unanimous vote, the open market transactions in Government

securities, agency obligations, and bankers' acceptances during the

period May 15 through June 18, 1973, 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 domestic policy directive:

The information reviewed at this meeting, including

recent developments in industrial production, employment,

and retail sales, suggests that growth in economic activity

is slowing in the current quarter from an exceptionally rapid

pace in the two preceding quarters. The unemployment rate

6-18/19-73

has remained at 5 per cent. Wage rates have advanced mode

rately thus far this year, but the rise in both wholesale

and retail prices has been exceptionally rapid. On June 13

the President announced that prices will be frozen for a

maximum of 60 days while a new and more effective system

of controls is developed. Phase III controls affecting

wages, profit margins, dividends, and interest rates remain

in effect. In foreign exchange markets, several European

currencies have appreciated against the dollar by 7 to 10

per cent since early May. The U.S. merchandise trade balance

continued to improve in April, as exports other than

agricultural products increased sharply further and imports

dipped.

Following relatively slow growth earlier in the year,

the narrowly defined money stock rose sharply in May and

early June. Growth in consumer-type time and savings deposits

changed little, while banks' net sales of large-denomination

CD's declined further. On May 16 marginal reserve requirements

were imposed on large-denomination CD's and the remaining

Regulation Q ceilings on such CD's were suspended. Business

loan demands have remained strong, and since mid-May short

term market interest rates have advanced considerably further.

Interest rates on long-term market securities in general have

risen somewhat. On June 11 Federal Reserve discount rates

were raised one-half point to 6-1/2 per cent.

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 equilibrium in the country's balance of payments.

To implement this policy, while taking account of

international and domestic financial market developments, the

Committee seeks to achieve bank reserve and money market

conditions consistent with somewhat slower growth in monetary

aggregates over the months immediately ahead than appears

indicated for the first half of the year.

6/18-19/73

By unanimous vote, the System open market transactions

in foreign currencies during the period May 15 through June 18, 1973,

were approved, ratified, and confirmed.

By unanimous vote, the Subcommittee consisting of the Chairman

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

of Governors, or designated alternates, was authorized to act on

behalf of the Committee with respect to questions relating to possible

resumption of System foreign currency operations.

By unanimous vote, the Committee authorized the Special

Manager to negotiate increases of $50 million each in the System's

swap lines with the central banks of Austria, Denmark, Mexico, Norway,

and Sweden, on the understanding that those increases, and the corre

sponding amendments to paragraph 2 of the foreign currency authorization,

would become effective on the same date as the swap line increases

aggregating up to $6 billion for which negotiations had been authorized

by the Committee on March 20, 1973.

By unanimous vote, renewal for further periods of three

months of the two System drawings on the National Bank of Belgium

maturing on July 19 and 26, 1973, respectively, was authorized.

It was agreed that the next meeting of the Federal Open

Market Committee would be held on Tuesday, July 17, 1973, at 9:30 a.m.

The meeting adjourned.

Secretary