FOMC Minutes

Meeting of Federal Open Market Committee

May 21,

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,

PRESENT:

D. C. on Tuesday, May 21,

1974,

at 9:30 a.m.

Mr. Burns, Chairman

Mr. Hayes, Vice Chairman

Mr. Black

Mr. Brimmer

Mr. Bucher

Mr. Clay

Mr. Holland

Mr.

Mr.

Mr.

Mr.

Mr.

Kimbrel

Mitchell

Sheehan

Wallich

Winn

Messrs. Coldwell, MacLaury, Mayo, and Morris,

Alternate Members of the Federal Open Market

Committee

Messrs. Balles and Francis, Presidents of

the Federal Reserve Banks of San Francisco

and St. Louis, respectively

Mr. Broida, Secretary

Mr. Altmann, Deputy Secretary

Mr. Bernard, Assistant Secretary

Mr. Nicoll, Assistant General Counsel

Mr. Partee, Senior Economist

Mr. Axilrod, Economist (Domestic Finance)

Messrs. Brandt, Bryant, Davis, Doll, Gramley,

Hocter, Parthemos, Pierce, and Reynolds,

Associate Economists

Mr. Holmes, Manager, System Open Market Account

Mr. Coombs, Special Manager, System Open Market

Account

5/21/74

Mr.

Melnicoff, Managing Director for

Operations and Supervision,

Board

of Governors

Mr. Chase, Adviser to the Board of

Governors

Mr. Coyne, Assistant to the Board of

Governors

Mr. Wonnacott, Associate Director,

Division of International Finance,

Board of Governors

Messrs. Keir and Williams, Advisers,

Division of Research and Statistics,

Board of Governors

Mr. Gemmill, Adviser, Division of

International Finance, Board of

Governors

Mr. Struble, Senior Economist, 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

Mr. Willes, First Vice President, Federal Reserve

Bank of Philadelphia

Messrs. Eisenmenger, Boehne, Scheld, and

Sims, Senior Vice Presidents, Federal

Reserve Banks of Boston, Philadelphia,

Chicago, and San Francisco,

respectively

Messrs. Jordan and Green, Vice Presidents,

Federal Reserve Banks of St Louis and

Dallas, respectively

Mr. Kareken, Economic Adviser, Federal Reserve

Bank of Minneapolis

Mr. Cooper, Assistant Vice President, Federal

Reserve Bank of New York

5/21/74

By unanimous vote, the minutes of actions taken at the

meeting of the Federal Open Market Committee held on April 15-16,

1974, were approved.

The memorandum of discussion for the meeting of the

Federal Open Market Committee held on April 15-16, 1974, was

accepted.

By unanimous vote, the System open

market transactions

in foreign currencies during the period April 6 through May 20,

1974, were approved, ratified, and confirmed.

By unanimous vote, the open market transactions in

Government securities,

agency obligations,

and bankers'

ances during the period April 16 through May 20,

1974,

accept

were

approved, ratified, and confirmed.

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:

5/21/74

The information reviewed at this meeting suggests

that real output of goods and services--which had declined

appreciably in the first quarter--is likely to change little

in the current quarter and that price increases are con

tinuing exceptionally large. In April industrial production

and manufacturing employment expanded somewhat, after having

declined for 4 months. The unemployment rate edged down to

5 per cent, as the civilian labor force declined. Wholesale

prices of farm and food products declined substantially further,

but increases among industrial commodities again were wide

spread and extraordinarily large. The advance in wage rates

has accelerated somewhat in recent months, and unit labor costs

have been rising at a fast pace.

In April and early May the dollar depreciated further

against leading foreign currencies, and the balance of pay

ments remained in deficit on the official settlements basis.

Rising import costs for petroleum and other products con

tributed to a sizable deficit in U.S. foreign trade in March.

Growth in the narrowly defined money stock slackened

somewhat in April from the rapid pace in the preceding 2

months, and the more broadly defined money stock continued

to expand moderately. Deposit experience at nonbank thrift

institutions deteriorated sharply. Business short-term credit

demands remained exceptionally strong. These demands were con

centrated in banks, and to help finance loan growth, banks

issued a record amount of large-denomination CD's and

continued to borrow in the commercial paper and Euro-dollar

markets. Private short-term market interest rates have risen

sharply further in recent weeks and conditions in financial

markets have been uneasy. Treasury bill rates also rose in

late April and early May, but have declined markedly in recent

days. Long-term rates have continued upward. Effective April

25, Federal Reserve discount rates were raised one-half point

to 8 per cent.

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, supporting a

resumption of real economic growth, and achieving equilibrium

in the country's balance of payments.

5/21/74

To implement this policy, while taking account of

developments in domestic and international financial markets,

the Committee seeks to maintain about the prevailing restrict

ive money market conditions, provided that the monetary aggre

gates appear to be growing at rates within the specified

ranges of tolerance.

It was agreed that the next meeting of the Federal Open

Market Committee would be held on Tuesday, June 18, 1974, at

9:30 a.m.

The meeting adjourned.

Secretary