FOMC Minutes

Meeting of Federal Open Market Committee

October 16, 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, October 16, 1973, at

9:30 a.m.

PRESENT:

Burns, Chairman

Hayes, Vice Chairman

Balles

Brimmer

Bucher

Daane

Francis

Holland

Mayo

Mitchell

Mr. Morris

Mr. Sheehan

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Messrs. Clay, Eastburn, Kimbrel, and Winn,

Alternate Members of the Federal Open

Market Committee

Messrs. Black and Coldwell, Presidents of

the Federal Reserve Banks of Richmond

and Dallas, respectively

Mr. Broida, Secretary

Messrs. Altmann and Bernard, Assistant

Secretaries

Mr. Guy, Deputy General Counsel

Mr. Nicoll, Assistant General Counsel

Mr. Partee, Senior Economist

Mr. Axilrod, Economist (Domestic Finance)

Messrs. Andersen, Bryant, Eisenmenger,

Reynolds, and Scheld, Associate

Economists

10/16/73

Mr. Holmes, Manager, System Open Market

Account

Mr. Coombs, Special Manager, System Open

Market Account

Mr. Melnicoff, Deputy Executive Director,

Board of Governors

Mr. Feldberg, Secretary to the Board of

Governors

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

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

Miss Pruitt, Economist, Office of the

Secretary, 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

Mr. Strothman, First Vice President,

Federal Reserve Bank of Minneapolis

Messrs. Boehne, Doll, and Taylor, Senior

Vice Presidents, Federal Reserve Banks

of Philadelphia, Kansas City, and

Atlanta, respectively

Messrs. Hocter, Green, and Sims, Vice

Presidents, Federal Reserve Banks of

Cleveland, Dallas, and San Francisco,

respectively

Messrs. Garvy and Kareken, Economic Advisers,

Federal Reserve Banks of New York and

Minneapolis, respectively

Mr. Meek, Monetary Adviser, Federal Reserve

Bank of New York

Mr. McTeer, Assistant Vice President,

Federal Reserve Bank of Richmond

10/16/73

By unanimous vote, the minutes of actions taken at the

meeting of the Federal Open Market Committee on September 18,

1973, were approved.

The memorandum of discussion for the meeting of the

Federal Open Market Committee held on September 18, 1973, was

accepted.

By unanimous vote, the System open market transactions

in foreign currencies during the period September 18 through

October 15, 1973, were approved, ratified, and confirmed.

By unanimous vote, renewal for further periods of 3 months

of System drawings on the National Bank of Belgium, the Swiss

National Bank, and the Bank for International Settlements

maturing in the period November 2-16, 1973, was authorized.

By unanimous vote, the open market transactions in

Government securities, agency obligations, and bankers'

acceptances during the period September 18 through October 15,

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.

10/16/73

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

that growth in real output of goods and services in the

fourth quarter is likely to remain at about the moderate

rate indicated for the third quarter. In recent months

manufacturing employment has leveled off and total non

farm employment has expanded less rapidly than earlier;

the unemployment rate has remained at 4.8 per cent.

The

advance in wage rates has been somewhat faster than earlier.

In September wholesale prices of industrial commodities

rose appreciably; farm and food prices declined, but by

far less than they had risen in August. The U.S. merchan

dise trade balance weakened slightly in August. Net foreign

purchases of U.S. stocks continued large, however, and the

balance of payments on an official settlements basis was

in surplus in both August and September. Exchange rates

for the dollar against most foreign currencies have changed

little since mid-August.

The narrowly defined money stock, which had risen

sharply during the second quarter, declined in September

for the second successive month. The more broadly defined

money stock expanded slightly in September as a result of

The

net inflows at banks of consumer-type time deposits.

deposit experience at nonbank thrift institutions improved

somewhat in September following a period of sizable out

Bank credit--which had been expanding rapidlyflows.

increased little as business loan growth slowed markedly,

and after mid-September the outstanding volume of large

denomination CD's declined substantially. Short-term market

interest rates fell sharply from mid-September to early

October, partly as a result of a shift in market expectations

regarding monetary policy, and rates on long-term market

securities declined moderately further.

10/16/73

In light of the foregoing developments, it is the

policy of the Federal Open Market Committee to foster

financial conditions conducive to abatement of infla

tionary pressures, a sustainable rate of advance in

economic activity, and continued progress toward

equilibrium in the country's balance of payments.

To implement this policy, while taking account of

the forthcoming Treasury financing and 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 Committee

would be held on November 19-20,

1973,

beginning at 4 p.m.

on November 19.

The meeting adjourned.

Secretary