FOMC Minutes

Meeting of Federal Open Market Committee

January 21-22, 1974

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, January 21-22,

1974, beginning at 8:15 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, 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.

Mr.

Mr.

Mr.

Mr.

1/

Broida, Secretary

Assistant Secretary

Altmann,

O'Connell,1/ General Counsel

Partee, Senior Economist

Axilrod,1/ Economist (Domestic Finance)

Attended Tuesday session only.

1/21-22/74

Messrs. Andersen, 1/ Bryant, Eisenmenger, 1/

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

Sims, 1/ Associate Economists

Mr. Holmes, 1/ Manager, System Open Market

Account

Mr. Coombs, Special Manager, System Open

Market Account

Mr. Melnicoff, Managing Director for Operations

and Supervision, Board of Governors

Messrs Cardon 2/ and Coyne, Assistants to the

Board of Governors

Mr. Pierce, 1/ Associate Director, Division

of Research and Statistics, Board of

Governors

Mr. McWhirter, 3/ Associate Director, Division

of Federal Reserve Bank Operations,

Board of Governors

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

Advisers, Division of Research and

Statistics Board of Governors

Mr. Gemmill, 1/ Adviser, Division of

International Finance, Board of Governors

Mr. Ettin, 1/ Associate Adviser, Division of

Research and Statistics, Board of Governors

Mr. Wendel, 1/ Assistant Adviser, Division of

Research and Statistics, Board of Governors

Miss Pruitt, 1/ Economist, Open Market

Board of Governors

Secretaria,

Mrs. Ferrell, 1/ Open Market Secretariat

Assistant, Board of Governors

Mr. Doll, 1/ Senior Vice President, Federal

Reserve Bank of Kansas City

Messrs. Brandt, 1/ Davis, 1/ Hocter, 1/ and

Nelson, 1/ Vice Presidents, Federal Reserve

Banks of Atlanta, New York, Cleveland, and

Minneapolis, respectively

1/

2/

3/

Attended Tuesday session only.

Attended Monday session only.

Participated in meeting at point indicated.

1/21-22/74

Mr. Kaminow, 1/ Economic Adviser, Federal

Reserve Bank of Philadelphia

Mr. Meek, 1/ Monetary Adviser, Federal Reserve

Bank of New York

Messrs. Broaddus 1/ and Pardee, 1/ Assistant

Vice Presidents, Federal Reserve Banks

of Richmond and New York, respectively

Secretary's Note: All of the actions listed

below were taken on Tuesday, January 22, 1974.

By unanimous vote,

the action of Committee members on January

4, 1974, increasing from $2 billion to $3 billion the limit specified

in paragraph 1(a) of the authorization for domestic open market

operations on net changes between Committee meetings in System Account

holdings of securities,

effective January 4,

business on January 22,

1974,

By unanimous vote,

1974,

through the close of

was ratified.

the minutes of actions taken at the

meeting of the Federal Open Market Committee held on December 17-18,

1973, were approved.

The memorandum of discussion for the meeting of the Federal

Open Market Committee held on December 17-18, 1973, was accepted.

By unanimous vote,

the System open market transactions in

foreign currencies during the period December 18, 1973,

January 21,

1974, were approved,

ratified,and

1/ Attended Tuesday session only.

through

confirmed.

1/22/74

By unanimous vote, the Committee authorized an increase from

$2 billion to $3 billion in the System's swap line with the Bank of

Italy, and the corresponding amendment to paragraph 2 of the authori

zation for foreign currency operations, to become effective upon

approval by the Subcommittee named in Section 272.4(c) of the Com

mittee's rules of procedure after consultation with responsible

officials of the U. S. Treasury.

Secretary's Note: Pursuant to the foregoing action, on

January 29, 1974, the Subcommittee approved the indicated

increase in the System's swap line with the Bank of Italy

and the corresponding amendment to the authorization for

foreign currency operations, effective February 1, 1974.

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 February 1 to February 15, 1974, was authorized.

The reports of audit of the System Open Market Account and

of foreign currency transactions, made by the Board's Division of

Federal Reserve Bank Operations as at the close of business July

27, 1973, together with the supplementary letter from Mr. McWhirter

dated January 14, 1974, were accepted.

Mr. McWhirter joined the meeting for the discussion of the

foregoing item.

By unanimous vote, the open market transactions in Government

securities, agency obligations, and bankers' acceptances during the

period December 18, 1973, through January 21, 1974, were approved,

1/22/74

ratified, and confirmed.

With Messrs. Hayes and 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 indicates

that growth in real output of goods and services was

slow in the fourth quarter of 1973, in part because of

the fuel situation. Prices continued to rise sharply

in December, reflecting additional increases for petroleum

products and widespread advances among other goods and

services. A further weakening in activity and sharp rise

in prices appear to be in prospect for early 1974. In

December nonfarm payroll employment changed little and

the unemployment rate increased further. Wage rates have

continued to rise substantially in recent months, although

not so sharply as prices.

Major foreign currencies have depreciated further

against the dollar since mid-December, and some foreign

monetary authorities have continued to sell dollars in

exchange markets.

Steep price increases imposed by

oil-producing countries have heightened fears of economic

disruption in many countries and of large and erratic

international flows of funds.

The narrowly defined money stock increased substantially

in the last 2 months of 1973, partly reflecting increased

foreign deposits, but it has changed little on balance over

recent weeks. Net inflows of consumer-type time deposits

remained sizable at both banks and nonbank thrift institu

tions. Bank credit expansion, which was moderate over the

closing months of 1973, has accelerated in recent weeks

as banks have stepped up issuance of large-denomination CD's.

Since mid-December, interest rate movements have been mixed;

yields on most long-term securities and on Treasury bills

have risen on balance, while some private short-term rates

have declined.

1/22/74

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 shortage, and maintaining

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 Wednesday,

February 20,

1974.

The meeting adjourned.

Secretary