FOMC Minutes

Meeting of Federal Open Market Committee

September 18, 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, September 18, 1973, at

9:30 a.m.

PRESENT:

Mr. Burns, Chairman

Mr. Balles

Mr. Bucher

Mr. Daane

Mr. Francis

Mr. Holland

Mr. Mayo

Mr. Mitchell

Mr. Morris

Mr. Sheehan

Mr. Debs, Alternate for Mr. Hayes

Messrs. Clay, Eastburn, 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. Axilrod, Economist (Domestic Finance)

Messrs. Andersen, Bryant, Eisenmenger, Gramley,

Reynolds, and Scheld, Associate Economists

Mr. Holmes, Manager, System Open Market Account

Mr. Coombs, Special Manager, System Open Market

Account

9/18/73

Mr. Melnicoff, Deputy Executive Director,

Board of Governors

Mr. Feldberg, Secretary to the Board of

Governors

Mr. Coyne, Assistant to the Board of Governors

Messrs. Keir, Pierce, and Williams, Advisers,

Division of Research and Statistics,

Board of Governors

Mr. Pizer, Adviser, 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

Mrs. Ferrell, Open Market Secretariat Assistant,

Office of the Secretary, Board of Governors

Mrs. Peters, Secretary, Office of the Secretary,

Board of Governors

Fossum, First Vice President, Federal

Reserve Bank of Atlanta

Messrs. Boehne and Doll, Senior Vice Presidents,

Federal Reserve Banks of Philadelphia and

Kansas City, respectively

Messrs. Hocter, Brandt, Nelson, and Green,

Vice Presidents, Federal Reserve Banks of

Cleveland, Atlanta, Minneapolis, and Dallas,

respectively

Mr. Fousek, Economic Adviser, Federal Reserve

Bank of New York

Mr. Keran, Director of Research, Federal Reserve

Bank of San Francisco

Mr. Broaddus, Assistant Vice President, Federal

Reserve Bank of Richmond

Mr. Sandberg, Manager, Acceptance and Securities

Departments, Federal Reserve Bank of New

York

Mr.

9/18/73

By unanimous vote, the minutes of actions taken at the

meetings of the Federal Open Market Committee on July 17 and

August 21, 1973, were approved.

The memoranda of discussion for the meetings of the

Federal Open Market Committee held on July 17 and August 21,

1973, were accepted.

By unanimous vote, the System open market transactions

in foreign currencies during the period August 21 through September

17, 1973, were approved, ratified, and confirmed.

By unanimous vote, renewal for further periods of 3 months

of the two System drawings on the National Bank of Belgium

maturing on October 19 and 26, respectively, was authorized.

By unanimous vote, the open market transactions in

Government securities, agency obligations, and bankers' acceptances

during the period August 21 through September 17, 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:

9/18/73

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. Although nonfarm employment rose sharply

in August, the average gain in recent months has been smaller

than earlier and the unemployment rate has changed little

at a level somewhat below 5 per cent. The exceptionally rapid

advance in prices was interrupted in July by the temporary

freeze imposed in mid-June. However, farm and food prices

surged after mid-July--when the freeze was lifted on most

such products--and despite later appreciable declines, they

remained far above pre-freeze levels. The U.S. merchandise

trade balance improved further in July, and net foreign

purchases of U.S. stocks increased. In recent weeks exchange

rates for the dollar against most foreign currencies have

changed little on balance after strengthening in the first

half of August, and the balance of payments has been in

surplus on an official settlements basis.

The narrowly defined money stock, which had increased

moderately in July, declined somewhat in August. The more

broadly defined money stock continued to expand as a result

of net inflows at banks of consumer-type time deposits. Non

bank thrift institutions experienced net deposit outflows

in the July-August period. Expansion in bank credit has

continued at a substantial pace. On September 7 the Federal

Reserve announced an increase from 8 to 11 per cent in marginal

reserve requirements on large-denomination CD's. Interest

rates on long-term market securities declined from early

August to early September, partly because of growing expecta

tions that the maximum degree of monetary restraint had been

reached. Later, however, such expectations weakened and some

long-term rates turned up. Short-term rates generally remained

under upward pressure in recent weeks.

In light of the foregoing developments, it is the policy

the

Federal Open Market Committee to foster financial con

of

ditions conducive to abatement of inflationary pressures, a

sustainable rate of advance in economic activity, and continued

progress toward equilibrium in the country's balance of payments.

9/18/73

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 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, October 16, 1973, at

9:30 a.m.

The meeting adjourned.

Secretary