FOMC Minutes

Meeting of Federal Open Market Committee

June 18, 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 Tuesday, June 18, 1974, at 9:30 a.m.

PRESENT:

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Burns, Chairman

Black

Brimmer

Bucher

Clay

Holland

Kimbrel

Mitchell

Sheehan

Wallich

Winn

Debs, Alternate for Mr.

Hayes

Messrs. Coldwell, MacLaury, Mayo, and Morris,

Alternate Members of the Federal Open

Market Committee

Messrs. Eastburn and Balles, Presidents of the

Federal Reserve Banks of Philadelphia and

San Francisco, respectively

Mr. Broida, Secretary

Mr. Altmann, Deputy Secretary

Mr. Bernard, Assistant Secretary

Mr. O'Connell, General Counsel

Mr. Partee, Senior Economist

Mr. Axilrod, Economist (Domestic Finance)

Messrs. Brandt, Bryant, Doll, Gramley, Hocter,

Parthemos, Pierce, and Reynolds, Associate

Economists

6/18/74

Mr. Holmes, Manager, System Open Market Account

Mr. Coombs, Special Manager, System Open Market

Account

Mr. Feldberg, Secretary to the Board of

Governors

Mr. Wonnacott, Associate Director, Division of

International Finance, Board of Governors

Mr. O'Brien, Special Assistant to the Board

of Governors

Messrs. Keir and Wernick, Advisers, Division

of Research and Statistics, 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. Leonard, First Vice President, Federal

Reserve Bank of St. Louis

Messrs, Eisenmenger, Boehne, and Sims,

Senior Vice Presidents, Federal Reserve

Banks of Boston, Philadelphia, and San

Francisco, respectively

Mr. Garvy, Vice President and Senior Adviser,

Federal Reserve Bank of New York

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. Kalchbrenner, Senior Economist and Assistant

Vice President, Federal Reserve Bank of

Chicago

Mr. Sandberg, Assistant Vice President, Federal

Reserve Bank of New York

6/18/74

By unanimous vote, the minutes of actions taken at

the meeting of the Federal Open Market Committee held on May

21, 1974, were approved.

The memorandum of discussion for the meeting of the

Federal Open Market Committee held on May 21, 1974, was

accepted.

By unanimous vote, the System open market transactions

in foreign currencies during the period May 21 through June 17,

1974, 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 on

July 18 and July 25, 1974, was authorized.

By unanimous vote, the Subcommittee consisting of the

Chairman and Vice Chairman of the Committee and the Vice

Chairman

of the Board of Governors, or designated alternates, was authorized

to act on behalf of the Committee with respect to questions relating

to the terms of repayment of outstanding System swap debts in

Belgian francs and Swiss francs.

By unanimous vote, the open market transactions in

Government securities, agency obligations, and bankers' acceptances

during the period May 21 through June 17, 1974, were approved,

ratified, and confirmed.

6/18/74

With Mr. Clay 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 will be about the same in

the current quarter as a whole as in the first quarter, but

that there has been some improvement as the spring has pro

gressed. The over-all rate of price rise, while very large,

is not quite so rapid as in the first quarter. In May indus

trial production increased somewhat for the second consecutive

month, and nonfarm employment expanded substantially further.

The unemployment rate moved above 5 per cent, however, as the

civilian labor force rose sharply. Wholesale prices of farm

and food products declined substantially further, but increases

among industrial commodities again were widespread and extra

ordinarily large.

The advance in wage rates accelerated some

what further.

In May the depreciation of the dollar against leading

foreign currencies was arrested. U.S. international trans

actions were in approximate balance on the official settlements

basis, as bank-reported net outflows of capital apparently

abated. The foreign trade deficit narrowed in April, despite

a further large rise in the cost of petroleum imports.

Growth in the narrowly defined money stock moderated

in May, but apparently it accelerated in early June. Net

inflows of consumer-type time deposits at banks slowed in

May, and deposit experience at nonbank thrift institutions

continued poor. Business credit demands remained large,

although the expansion in short-term credit was below the

extraordinary pace of April and was less concentrated at

banks.

In May banks increased their outstanding large

denomination CD's substantially further and continued to

6/18/74

borrow in the Euro-dollar market; most recently, however,

they have reduced their reliance on these sources of funds.

Market interest rates have fluctuated in a narrow range in

recent weeks.

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.

To implement this policy, while taking account of

developments in domestic and international financial markets,

the Committee seeks to maintain about the prevailing

restrictive money market conditions, provided that the

monetary aggregates appear to be growing at rates within

the specified ranges of tolerance.

It was agreed that the next meeting of the Committee

would be held on July 16, 1974, at 9:30 a.m.

The meeting adjourned.

Secretary