FOMC Minutes

Meeting of Federal Open Market Committee

August 21, 1973

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 21, 1973, at

9:30 a.m.

PRESENT:

Mr. Burns, Chairman

Mr. Hayes, Vice Chairman

Mr. Balles

Mr. Brimmer

Mr. Bucher

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Daane

Francis

Holland

Mayo

Morris

Sheehan

Messrs. Clay, Eastburn, Kimbrel, and Winn,

Alternate Members of the Federal Open

Market Committee

Messrs. Black, MacLaury, and Coldwell, Presidents

of the Federal Reserve Banks of Richmond,

Minneapolis and Dallas, respectively

Mr. Broida, Secretary

Messrs. Altmann and Bernard, Assistant

Secretaries

Mr. O'Connell, General Counsel

Mr. Partee, Senior Economist

Mr. Axilrod, Economist (Domestic Finance)

Messrs. Bryant, Gramley, Reynolds, Scheld,

and Sims, Associate Economists

Mr. Holmes, Manager, System Open Market Account

Mr. Coombs, Special Manager, System Open Market

Account

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Mr. Melnicoff, Deputy Executive Director,

Board of Governors

Mr. Coyne, Assistant to the Board of Governors

Mr. O'Brien, Special Assistant to the Board

of Governors

Messrs. 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. Ettin, Assistant Adviser, Division of

Research and Statistics, Board of Governors

Mr. Wendel, Chief, Government Finance Section,

Division of Research and Statistics,

Board of Governors

Miss Pruitt, Economist, Office of the Secretary,

Board of Governors

Mr. Crow, Staff Assistant, Board Members' Offices,

Board of Governors

Mrs. Peters, Secretary, Office of the Secretary,

Board of Governors

Mrs. Stanier, Secretary, Office of the Secretary,

Board of Governors

Messrs. Parthemos and Doll, Senior Vice

Presidents, Federal Reserve Banks of

Richmond and Kansas City, respectively

Messrs. Hocter, Brandt, and Green, Vice

Presidents, Federal Reserve Banks of

Cleveland, Atlanta, and Dallas, respectively

Messrs. Kaminow and Kareken, Economic Advisers,

Federal Reserve Banks of Philadelphia and

Minneapolis, respectively

Miss Greenwald and Messrs. Cooper, Thunberg, and

Balbach, Assistant Vice Presidents, Federal

Reserve Banks of Boston, New York, New York,

and St. Louis, respectively

8/21/73

By unanimous vote, the minutes of actions taken at the

meetings of the Federal Open Market Committee on June 18-19 and

July 9, 1973, were approved.

The memoranda of discussion for the meetings of the Federal

Open Market Committee held on June 18-19 and July 9, 1973, were

accepted.

By unanimous vote, the System open market transactions in

foreign currencies during the period July 17 through August 20, 1973,

were approved, ratified, and confirmed.

By unanimous vote, the open market transactions in Government

securities, agency obligations, and bankers' acceptances during the

period July 17 through August 20, 1973, were approved, ratified, and

confirmed.

With Mr. Francis dissenting, 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 that

growth in real output of goods and services, which slowed

in the second quarter from the exceptionally rapid pace of

the two preceding quarters, will be moderate in the third

quarter. Increases in nonfarm employment also have slowed

in recent months, but the unemployment rate has declined.

The rate of rise in wage rates has remained relatively

moderate. The exceptionally rapid advance in prices was

8/21/73

interrupted in July by the temporary freeze imposed in

mid-June. However, farm and food prices adjusted sharply

upward after mid-July, when the freeze was lifted on most

such products. The U.S. merchandise trade balance improved

in June, and the balance on goods and services was in sur

plus in the second quarter for the first time in nearly two

years.

Since the end of July the dollar has strengthened

markedly in foreign exchange markets, and the price of gold

has dropped sharply.

Both the narrowly and more broadly defined money stock,

which had increased rapidly in May and June, grew more

slowly in July. Inflows of consumer-type time and savings

deposits strengthened again at banks in late July and early

August, while net outflows were experienced at nonbank

thrift institutions. Expansion in bank credit has continued

at a substantial pace. Since mid-July short-term market

interest rates have advanced considerably further on bal

ance. Long-term rates also rose substantially for much

of that period, but most recently they have declined in the

course of a sharp market rally. On August 13 increases

were announced in Federal Reserve discount rates from 7

to 7-1/2 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 sustainable rate of advance in economic acti

vity, 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

and the forthcoming Treasury financing, the Committee

seeks to achieve bank reserve and money market conditions

consistent with slower growth in monetary aggregates over

the months immediately ahead than has occurred on average

thus far this year.

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It was agreed that the next meeting of the Committee would

be held on September 18, 1973, at 9:30 a.m.

The meeting adjourned.

Secretary