FOMC Minutes

Meeting of Federal Open Market Committee

December 16-17, 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,

December 16-17,

1974, beginning at 4:00 p.m. on Monday.

PRESENT:

Mr.

Mr.

Mr.

Mr.

Mr.

Burns,

Chairman

Hayes, Vice Chairman

Black

Bucher

Clay

Coldwell

Mr. Holland

Mr. Kimbrel

Mr. Mitchell

Mr. Sheehan

Wallich

Mr. Winn

Messrs. Baughman, MacLaury, Mayo, and Morris,

Alternate Members of the Federal Open

Market Committee

Messrs. Eastburn, Francis, and Balles,

Presidents of the Federal Reserve Banks

of Philadelphia, St. Louis, and San

Francisco, respectively

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

1/

Broida, Secretary

Altmann, Deputy Secretary

O'Connell, General Counsel

Guy,1/ Deputy General Counsel

Partee, Senior Economist

Axilrod, Economist (Domestic Finance)

Solomon, Economist (International Finance)

Attended Tuesday session only.

12/16-17/74

Messrs. Brandt, Bryant Davis, Doll, Gramley,1/

Hocter, Parthemos,1/ Pierce, and Reynolds,1/

Associate Economists

Mr. Holmes, Manager, System Open Market

Account

Mr. Coombs, Special Manager, System Open

Market Account

Mr. Wonnacott,1/ Associate Director, Division

of International Finance, Board of

Governors

Mr. O'Brien, Special Assistant to the Board

of Governors

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

Advisers, Division of Research and

Statistics, Board of Governors

Mr. Pizer,1/ Adviser, Division of International

Finance Board of Governors

Mr. Zeisel,1/ Associate Adviser, Division of

Research and Statistics, Board of

Governors

Mrs. Junz,1/ Associate Adviser, Division of

International Finance, Board of Governors

Messrs. Taylor 1/and Wendel,1/ Assistant Advisers,

Division of Research and Statistics, Board

of Governors

Messrs. Siegman 1/ and Truman,1/ Assistant

Advisers, Division of International Finance,

Board of Governors

Mr. Peret,1/ Assistant to the Director,

Division of Research and Statistics,

Board of Governors

Mr. Smith,1/ Chief, Financial Markets Section,

Division of International Finance, Board

of Governors

Messrs. Beeman

1/

and Enzler,1/ Senior Economists,

Division of Research and Statistics, Board

of Governors

Mr. Roxon,1/ Senior Economist, Division of

International Finance, Board of Governors

1/

Attended Monday session only.

12/16-17/74

Mr. Annable,1/ Economist, Division of Research

and Statistics, Board of Governors

Miss Morisse,1/ Economist, Division of Inter

national Finance, Board of Governors

Mrs. Farar,2/ Economist, Division of Research

and Statistics, Board of Governors

Miss Pruitt,1/ Economist, Open Market Secre

tariat, Board of Governors

Mrs. Ferrell, Open Market Secretariat

Assistant, Board of Governors

Mr. Rankin, First Vice President, Federal

Reserve Bank of Richmond

Messrs. Eisenmenger, Boehne, and Scheld,

Senior Vice Presidents, Federal Reserve

Banks of Boston, Philadelphia, and

Chicago, 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. Keran, Director of Research, Federal

Reserve Bank of San Francisco

Ms. Tschinkel,2/ Manager, Securities Department,

Federal Reserve Bank of New York

Secretary's note: All of the following actions were taken

on Tuesday, December 17, 1974.

By unanimous vote, the minutes of actions taken at the meeting

of the Federal Open Market Committee held on November 19, 1974, were

approved.

The memorandum of discussion for the meeting of the Federal

Open Market Committee held on November 19, 1974, was accepted.

1/

2/

Attended Monday session only.

Attended Tuesday session only.

12/16-17/74

By unanimous vote, the System open market transactions

in foreign currencies during the period November 19 through

December 16, 1974, were approved, ratified, and confirmed.

By unanimous vote, renewal for further periods of

3 months of two System drawings on the National Bank of Belgium,

maturing on January 17 and 24, 1975, respectively, was authorized.

By unanimous vote, the open market transactions in Govern

ment securities, agency obligations, and bankers' acceptances

during the period November 19 through December 16, 1974, were

approved, ratified, and confirmed.

With Messrs. Mitchell and Wallich dissenting, the Federal

Reserve Bank of New York was authorized and directed, until other

wise 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 falling substantially

further in the current quarter. Price and wage increases

are continuing large, although not so large as earlier this

year.

In November declines in industrial production and

employment were sharp and widespread, and the unemployment

rate increased further, from 6.0 to 6.5 per cent. In recent

weeks additional production cutbacks and layoffs have been

announced.

The November rise in wholesale prices of indus

trial commodities, although substantial, remained well below

the extraordinarily rapid rate in the first 8 months of the

year.

12/16-17/74

Since mid-November the dollar has declined somewhat

further against leading foreign currencies. In October

the U.S. foreign trade deficit was reduced sharply for

the second consecutive month, while there were continued

net inflows of bank-reported private capital and of invest

ments by oil-exporting countries.

Growth of the narrowly defined money stock increased

in November to an annual rate of about 7 per cent. Net

inflows of consumer-type time and savings deposits remained

strong at banks and continued to improve at nonbank thrift

institutions, and the more broadly defined money supply

measures again expanded appreciably.

Bank loans increased

only moderately. Most market interest rates, after rising

in the second half of November, subsequently turned down

again. Yields on State and local government securities,

however, continued under upward pressure. Effective

December 9, Federal Reserve discount rates were reduced

from 8 to 7-3/4 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, cushioning recessionary tendencies and encour

aging 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 achieve bank reserve

and money market conditions consistent with somewhat

more rapid growth in monetary aggregates over the

months ahead than has occurred in recent months.

It was agreed that the next meeting of the Committee would

be held on January 21, 1975, at 9:30 a.m.

The meeting adjourned.

Secretary