FOMC Minutes

Meeting of Federal Open Market Committee

November 19-20, 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 Monday and Tuesday, November 19-20, 1973,

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

PRESENT:

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Burns, Chairman

Hayes, Vice Chairman

Balles

Brimmer

Bucher

Daane

Francis

Ho land

Mayo

Mitchell

Morris

Sheehan

Messrs. Clay, Eastburn, Kimbrel, and Win,

Alternate Members of the Federal Open

Market Committee

Messrs. Black and MacLaury, Presidents of the

Federal Reserve Banks of Richmond and

Minneapolis, respectively

Mr. Broida, Secretary

Mr. Altmann, Assistant Secretary

Mr. O'Connell, General Counsel

Mr. Partee, Senior Economist

Mr. Axilrod, Economist (Domestic Finance)

Messrs. Andersen, Bryant, Gramley, Reynolds,

Scheld, and Sims, Associate Economists

11/19-20/73

Mr. Holmes, Manager, System Open

Market Account

Mr. Coombs, Deputy Special Manager,

System Open Market Account

Mr. Melnicoff, Managing Director for

Operation, and Supervision,

Board of Governors

Mr. Feldberg, Secretary, Board of

Governors

Mr. Coyne, 1/ Assistant to the Board

of Governors

Mr. Pierce, Associate Director,

Division of Research and Statistics,

Board of Governors

Messrs. Keir, Wernick, and Williams,

Advisers, Division of Research and

Statistics, Board of Governors

Mr. Pizer, Adviser, Division of

International Finance, Board of Governors

Mr. Zeisel, 2/ Associate Adviser, Division of

Research and Statistics, Board of Governors

Messrs. Ettin and Taylor, 2/Assistant Advisers,

Division of Research and Statistics,

Board of Governors

2/and Messrs. Fieleke 2 / and Henry, 2/

Assistant Advisers, Division of International

Finance, Board of Governors

Messrs. Kichline 2/and Wendel, Chiefs, Capital

Markets and Government Finance Sections,

Mrs. Junz

respectively, Division of Research and

Statistics Board of Governors

Mrs. Smelker 2/ and Mr. Peret, 2/ Senior Econo

mists, Division of Research and Statistics,

Board of Governors

Mr. Roxon, 2/ Senior Economist, Division of

International Finance, Board of Governors

Messrs. Beeman, 2/ Enzler,, 2/ and Wyss, 2/

Economists, Division of Research and

Statistics Board of Governors

Miss Morisse

and Mr. Smith, 2/

Economists,

Division of International Finance,

Board of Governors

1/ Attended Tuesday session only.

2/ Attended Monday session only.

11/19-20/73

Miss Pruitt, Economist, Open Market

Secretariat, Board of Governors

Mrs.

Ferrell, Open Market Secretariat

Assistant, Board of Governors

Mr. Plant, First Vice President, Federal

Reserve Bank of Dallas

Messrs. Boehne, Parthemos, Taylor, and

Doll, Senior Vice Presidents, Federal

Reserve Banks of Philadelphia, Richmond,

Atlanta, and Kansas City, respectively

Messrs. Davis, Hocter, and Green, Vice

Presidents, Federal Reserve Banks of

New York, Cleveland, and Dallas,

respectively

Mr. Kareken, Economic Adviser, Federal

Reserve Bank of Minneapolis

Mr.

Cooper, Assistant Vice President,

Federal Reserve Bank of New York

Mr. McNees, Economist, Federal Reserve

Bank of Boston

Secretary's Note: All of the actions listed

below were taken on Tuesday, November 20, 1973.

By unanimous vote, the minutes of actions taken at the

meeting of the Federal Open Market Committee held on October 16,

1973,were approved.

The memoranda of discussion for the meetings of the Federal

Open Market Committee held on October 2,

10,

and 16,

1973,

were

accepted.

By unanimous vote, the System open market transactions in

foreign currencies during the period October 16 through November

19,

1973, were approved,

ratified and confirmed.

11/19-20/73

By unanimous vote, the Committee approved the renewal, for

further periods of one year, of the following swap arrangements

having the indicated amounts and maturity dates:

Amount of

Foreign bank

arrangement

(millions of

dollars

equivalent)

250

Austrian National Bank

1,000

National Bank of Belgium

2,000

Bank of Canada

250

National Bank of Denmark

2,000

Bank of England

2,000

Bank of France

2,000

German Federal Bank

2,000

Bank of Italy

2,000

Bank of Japan

Bank of Mexico

180

Netherlands Bank

500

250

Bank of Norway

300

Bank of Sweden

1,400

Swiss National Bank

Bank for International Settlements:

Dollars against

600

Swiss francs

Dollars against other

authorized European

1,250

currencies

Term

(monthly)

Maturity date

December

December

December

December

December

December

December

1973

1973

1973

1973

1973

1973

1973

1973

1973

1973

1973

1973

1973

1973

12

December

3, 1973

12

December

3, 1973

December

December

December

December

December

December

December

By unanimous vote, the open market transactions in Government

securities, agency obligations, and bankers' acceptances during the

period October 16 through November 19, 1973, were approved, ratified,

and confirmed.

-5-

11/19-20/73

With Mr. Morris 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 economic activity in the fourth quarter is likely

to remain at about the moderate rate of the third quarter,

but curtailment of oil supplies from abroad has generated

considerable uncertainty about subsequent prospects. In

October total nonfarm employment expanded substantially

further, and the unemployment rate dropped from 4.8 to 4.5

per cent. The advance in wage rates has remained relatively

rapid, and unit labor costs have been increasing at a fast

pace. Wholesale prices of industrial commodities rose sharply

in October, reflecting in part large increases for petroleum

products; although farm and food prices declined considerably

further, they remained well above the pre-freeze level of early

June. In foreign exchange markets, the dollar appreciated

against major foreign currencies following announcement in

late October of a large surplus in the U.S. merchandise

trade balance, and the dollar strengthened markedly further in

early November as expectations grew that the developing oil

crisis would create particularly severe problems for Western

Europe and Japan. In the third quarter and in October, the

balance of payments on an official settlements basis was in

substantial surplus.

The narrowly defined money stock, which had declined

in August and September, rose moderately in October. The

more broadly defined money stock expanded sharply as a

result of large net inflows at banks of consumer-type time

deposits. Net deposit inflows at nonbank thrift institutions

improved somewhat further. Bank credit expansion remained

moderate in October, reflecting in part a lack of growth in

business loans as borrowers shifted to the commercial paper

market.

The outstanding volume of large-denomination CD's,

which had begun to decline in late September, fell substan

tially further. Short-term market interest rates, while

fluctuating widely, rose on balance from mid-October to mid

November. Rates on most types of long-term market securities

also advanced somewhat.

11/19-20/73

-6

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 activity, and equilibrium in the

country's balance of payments.

To implement this policy, while taking account

of international and domestic financial market develop

ments, 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, December 18, 1973,

at 9:30 a.m.

The meeting adjourned.

Secretary