FOMC Minutes

Meeting of Federal Open Market Committee

December 17-18, 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 Monday and Tuesday,

December 17-18,

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 .

Holland

Mayo

Mitchell

Morris

Sheehan

Messrs. Clay, Eastburn, Kimbrel, 2/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. Guy, 3/ Deputy General Counsel

Mr. Nicoll, 3/ Assistant General Counsel

Mr. Partee, Senior Economist

1/

2/

3/

Attended Monday session only.

Served as alternate for Mr. Francis at Tuesday session.

Attended Tuesday session only.

12/17-18/73

Mr.

Axilrod, Economist (Domestic Finance)

Messrs. Andersen, 1/ Bryan 1/

Eisenmenger,

Gramley, 1/Reynolds, 1/ Scheld, 1/

and

1/

Sims, Associate Economists

Mr. Holmes,1/ Manager, System Open Market Account

Mr. Coombs, 1/Special Manager, System Open

Market Account

Mr. Melnicoff, 1/Managing Director for Operations

and Supervision, Board of Governors

Mr. Feldberg, 1/ Secretary to the Board of

Governors

Mr. Coyne, Assistant to the Board of

Governors

Mr. O'Brien, Special Assistant to the

Board of Governors

Mr. Pierce, 1/ Associate Director, Division

of Research and Statistics, Board of

Governors

Messrs. Keir, Wernick, 1/ and Williams, 1/

Advisers, Division of Research and

Statistics, Board of Governors

Messrs. Gemmill 2/ and Pizer, 1/ Advisers,

Division of International Finance,

Board of Governors

Mr. Ettin, 1/ Assistant Adviser, Division of

Research and Statistics, Board of

Governors

Mr. Wendel, 1/ Chief, Government Finance Section,

Division of Research and Statistics,

Board of Governors

Miss Pruitt, Economist, Open Market

Secretariat, Board of Governors

Mrs. Ferrell, Open Market Secretariat

Assistant, Board of Governors

Messrs. Boehne, Parthemos, Taylor,1 / and Doll,1/

Senior Vice Presidents, Federal Reserve Banks

of Philadelphia, Richmond, Atlanta, and

Kansas City,.respectively

Messrs. Hocter and Green, Vice Presidents,

Federal Reserve Banks of Cleveland and

Dallas, respectively

Messrs. Garvy 1/ and Kareken, Economic Advisers,

Federal Reserve Banks of New York and

Minneapolis, respectively

1/ Attended Tuesday session only.

2/ Attended Monday session only.

12/17-18/73

Mr.

1/ Manager, Acceptance and

Sandberg,

Securities Departments, Federal Reserve

Bank of New York

Secretary's Note: All of the actions listed

below were taken on Tuesday, December 18, 1973.

By unanimous vote, the minutes of actions taken at the

meeting of the Federal Open Market Committee held on November 19-20,

1973, were approved.

The memorandum of discussion for the meeting of the Federal

Open Market Committee held on November 19-20, 1973, was accepted.

By unanimous vote, the System open market transactions in

foreign currencies during the period November 20 through December

17, 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, maturing in the

period January 18 through February 1, 1974, was authorized.

By unanimous vote, renewal of the swap arrangements

with the National Bank of Belgium, the Bank of France, and the

Netherlands Bank for periods of less than one year, if desired

by those Banks, was approved.

By unanimous vote, the open market transactions in

Government securities, agency obligations, and bankers' acceptances

during the period November 20 through December 17, 1973,were approved,

ratified, and confirmed.

1/

Attended Tuesday session only.

12/17-18/73

With Mr. Hayes 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--including

recent developments in industrial production, residential

construction, and retail sales--suggests that growth in

economic activity is slowing in the fourth quarter. A

further weakening in activity and an appreciable rise in

prices are in prospect because of the curtailment in oil

supplies. In November nonfarm payroll employment expanded

further, but the unemployment rate, which had dropped in

October, rose again to about the level that had prevailed

since midyear. Wholesale prices of industrial commodities

continued to rise sharply in November, reflecting large

additional increases for petroleum products and widespread

advances among other commodities; farm and food prices

declined further.

In nearly all industrial countries abroad, concern

has grown that a sustained cut in oil supplies will dis

rupt economic activity. Major foreign currencies have

depreciated further against the dollar, and intervention

sales of dollars by foreign monetary authorities have

continued. The U.S. merchandise trade balance registered

a strong surplus in the September-October period.

The narrowly defined money stock, following little

net change over the third quarter, has grown at a relatively

rapid pace over the past 2 months. Growth in the more

broadly defined money stock has also been substantial,

as net inflows at banks of consumer-type time deposits

have been large. Net deposit inflows at nonbank thrift

institutions improved somewhat further. Bank credit

expansion remained moderate in November, although business

loans increased after 2 months of little or no growth.

On December 7 the Federal Reserve announced a reduction

from 11 to 8 per cent in marginal reserve requirements

12/17-18/73

on large-denomination CD's. Most short-term market

interest rates have declined somewhat on balance in

recent weeks, while movements in long-term market

rates have been mixed.

In light of the foregoing developments, it is

the policy of the Federal Open Market Committee to

foster financial conditions conducive to resisting

inflationary pressures, cushioning the effects on

production and employment growing out of the oil short

age, and maintaining 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 some easing in bank

reserve and money market conditions, provided that

the monetary aggregates do not appear to be growing

excessively.

It was agreed that the next meeting of the Federal Open

Market Committee would be held on Tuesday, January 22, 1974,

at 9:30 a.m.

The meeting adjourned.

Secretary