FOMC Minutes

Meeting of Federal Open Market Committee

February 20,

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 Wednesday, February 20, 1974, at 9:30 a.m.

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. Broida, Secretary

Messrs. Altmann and Bernard, Assistant

Secretaries

Mr. O'Connell, General Counsel

Mr. Partee, Senior Economist

Mr. Axilrod, Economist (Domestic Finance)

2/20/74

Messrs. Andersen, Bryant, Eisenmenger,

Gramley, Reynolds, Scheld, and Sims,

Associate Economists

Mr. Holmes, Manager, System Open Market

Account

Mr. Coombs, Special Manager, System Open

Market Account

Mr. Sternlight, Deputy Manager, System

Open Market Account

Mr. Melnicoff, Managing Director for

Operations and Supervision, Board of

Governors

Mr. Feldberg, Secretary to the Board of

Governors

Mr. Coyne, Assistant to the Board of

Governors

Mr. Pierce, Associate Director, Division of

Research and Statistics, Board of Governors

Messrs. Keir and Wernick, Advisers, Division

of Research and Statistics, Board of

Governors

Mr. Pizer, Adviser, Division of International

Finance, Board of Governors

Mr. Wendel, Assistant Adviser, 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, and Doll,

Senior Vice Presidents, Federal Reserve

Banks of Philadelphia, Richmond, Atlanta,

and Kansas City, respectively

Mr. Garvy, Vice President and Senior Adviser,

Federal Reserve Bank of New York

Messrs. Hocter 1/ and Green, Vice Presidents,

Federal Reserve Banks of Cleveland and

Dallas, respectively

Mr. Kareken, Economic Adviser, Federal Reserve

Bank of Minneapolis

1/

Attended morning session only.

2/20/74

By unanimous vote, the minutes of actions taken at the

meeting of the Federal Open Market Committee held on January 21-22,

1974, were approved.

By unanimous vote, the System open market transactions in

foreign currencies during the period January 22, 1974, through

February 19, 1974, were approved, ratified, and confirmed.

By unanimous vote, renewal of the swap arrangement with

the National Bank of Belgium for a further period of up to one year

was approved.

By unanimous vote, the open market transactions in

Government securities, agency obligations, and bankers' acceptances

during the period January 22 through February 19, 1974, were approved,

ratified, and confirmed.

With Messrs. Bucher, Francis, Morris, and Sheehan

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

real output of goods and services is declining in the current

quarter, mainly because of the oil situation, and that prices

are continuing to rise rapidly. In January industrial pro

duction declined again, nonfarm payroll employment dropped,

and the unemployment rate rose above 5 per cent. Prices of

2/20/74

both farm products and industrial commodities increased very

sharply. Wage rates have continued to rise substantially in

recent months, although not so sharply as prices.

After having appreciated for several months, the dollar

has declined somewhat on the average against foreign currencies

in recent weeks. U.S. controls on capital outflows were removed

at the end of January, and several foreign countries have

relaxed controls on capital inflows. The U.S. trade surplus

rose sharply in December and in the fourth quarter as a whole.

The narrowly defined money stock, after increasing

substantially in the last 2 months of 1973, declined in

January; most recently, however, it has appeared to strengthen.

Broader measures of the money stock continued to rise in January,

as net inflows of consumer-type time deposits remained relatively

strong. Expansion in business loans and in total bank credit

accelerated, and banks stepped up issuance of large-denomination

CD's. Since mid-January, short-term market interest rates have

fallen appreciably, and long-term rates have declined somewhat.

In light of the foregoing developments, it is the policy

of the Federal Open Market Committee to foster financial con

ditions conducive to resisting inflationary pressures, cushioning

declines in production and employment that are being induced in

large part by the oil situation, and maintaining equilibrium in

the country's balance of payments.

To implement this policy, while taking account of inter

national and domestic financial market developments, the

Committee seeks to achieve bank reserve and money market con

ditions consistent with moderate growth in monetary aggregates

over the months ahead.

By unanimous vote, transfer to the National Archives of the

FOMC minutes of actions and memoranda of discussion, on the basis

described in a memorandum from the Secretariat dated January 14,

1974, was authorized.

2/20/74

It

was agreed that the next meeting of the Committee

would be held on March 19,

1974,

at 9:30 a.m.

The meeting adjourned.

Secretary