FOMC Minutes

Meeting of Federal Open Market Committee

June 16-17, 1975

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, June 16-17,

1975, beginning at 3:30 p.m. on Monday.

PRESENT:

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Burns, Chairman

Baughman

Bucher

Coldwell

Eastburn

Holland

MacLaury

Mayo

Mitchell

Wallich

Debs, Alternate for Mr. Hayes

Messrs. Balles, Black, Francis, and Winn,

Alternate Members of the Federal Open

Market Committee

Messrs. Clay, Kimbrel, and Morris,

Presidents of the Federal Reserve Banks

of Kansas City, Atlanta, and Boston,

respectively

Mr.

Mr.

Mr.

Mr.

Mr.

Altmann, Deputy Secretary

Bernard, Assistant Secretary

O'Connell, General Counsel

Partee, Senior Economist

Axilrod, Economist (Domestic Finance)

Mr. Gramley, Economist (Domestic Business)

6/16-17/75

Messrs. Boehne, Bryant, Davis, Green,

Kareken, Reynolds, and Scheld,

Associate Economists

Mr. Holmes, Manager, System Open Market Account

Mr. Sternlight, Deputy Manager for Domestic

Operations

Mr. Pardee, Deputy Manager for Foreign

Operations

Mr. Allison, 1 / Secretary of the Board of

Governors

Mr. Coyne, Assistant to the Board of

Governors

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

Advisers, Division of Research and

Statistics, Board of Governors

Mr. Pizer,1/ Adviser, Division of Inter

national Finance, Board of Governors

Mr. Kalchbrenner,1/ Associate Adviser,

Division of Research and Statistics,

Board of Governors

Messrs. Peret,1/ Taylor,1/ and Wendel,1/

Assistant Advisers, Division of Research

and Statistics, Board of Governors

Mr. Siegman,1/ Assistant Adviser, Division of

International Finance, Board of Governors

Mr. Beeman,1/ Chief, National Income, Labor

Force and Trade Section, Division of

Research and Statistics, Board of

Governors

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

Division of International Finance, Board

of Governors

Mr. Enzler,1/ Senior Economist, Division of

Research and Statistics, Board of

Governors

Mr. Annable, 1/ Economist, Division of Research

and Statistics, Board of Governors

Messrs. Fleisig,1/ Hooper,1/ and Wilson,1/

Economists, Division of International

Finance, Board of Governors

1/

Attended Monday session only.

6/16-17/75

Mrs. Cooper,1/ Economic Assistant, Division

of International Finance, Board of

Governors

Mrs. Ferrell, Open Market Secretariat Assist

ant, Board of Governors

Messrs. Eisenmenger, Parthemos, Jordan, and

Doll, Senior Vice Presidents, Federal

Reserve Banks of Boston, Richmond,

St. Louis, and Kansas City, respectively

Messrs. Hocter and Brandt, Vice Presidents,

Federal Reserve Banks of Cleveland and

Atlanta, respectively

Mr. Keran, Director of Research, Federal

Reserve Bank of San Francisco

Mr. Ozog, Manager, Securities and Acceptances

Division, Federal Reserve Bank of New York

The actions listed immediately

Secretary's Note:

below were taken on Monday, June 16, 1975.

By unanimous vote, the minutes of actions taken at the

meeting of the Federal Open Market Committee on May 20, 1975, were

approved.

The memorandum of discussion for the meeting of the Federal

Open Market Committee on April 14-15, 1975, was accepted.

Secretary's Note: All of the actions listed below

were taken on Tuesday, June 17, 1975.

By unanimous vote, the System open market transactions in

foreign currencies during the period May 20 through June 16, 1975,

were approved, ratified, and confirmed.

1/

Attended Monday session only.

6/16- 17/75

By unanimous vote, renewal for further periods of 3 months

of System drawings on the National Bank of Belgium maturing on

July 17 and 24, 1975, was authorized.

By unanimous vote, the open market transactions in Govern

ment securities, agency obligations, and bankers' acceptances

during the period May 20 through June 16, 1975, were approved,

ratified, and confirmed.

With Messrs. Bucher and Coldwell 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--after having fallen

sharply for two quarters--has leveled off in the current

quarter. In May retail sales strengthened considerably.

Industrial production declined slightly further, but

total employment advanced for the second consecutive

month. The unemployment rate increased again, from

8.9 to 9.2 per cent, as the civilian labor force rose

substantially further. The rise in average wholesale

prices of industrial commodities continued to be slow;

prices of farm and food products increased moderately

further. The advance in average wage rates so far this

year has been considerably less rapid than the increase

during the second half of 1974.

The foreign exchange value of the dollar has changed

little since mid-May. The U.S. foreign trade balance

continued in substantial surplus in April but at a rate

6/16-17/75

much reduced from the first quarter. After large net

outflows in the first quarter, there was a small net

inflow of funds through banks in April, as liabilities

to foreigners rose more than claims.

Growth in M1, M2, and M3 was substantial in May,

reflecting in part large Federal income tax rebates

deposited at both banks and nonbank thrift institutions.

Business demands for short-term credit both at banks

and in the commercial paper market remained unusually

weak, while demands in the long-term market continued

very strong. Market interest rates in general changed

little during the latter part of May, but since then

rates in longer-term markets and on Treasury bills have

declined. Mortgage rates have eased over the past month.

In light of the foregoing developments, it is the

policy of the Federal Open Market Committee to foster

financial conditions conducive to stimulating economic

recovery, while resisting inflationary pressures and

working toward 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 moderate

growth in monetary aggregates over the months ahead.

With Mr. Holland dissenting, number 5 of the guidelines

for the conduct of System operations in Federal agency issues was

amended to read as follows:

5.

System holdings of any one issue at any one time will

not exceed 30 per cent of the amount of the issue out

standing. Aggregate holdings of the issues of any one

agency will not exceed 15 per cent of the amount of

outstanding issues of that agency.

6/16-17/75

By unanimous vote, paragraph 1(c) of the Authorization for

Domestic Open Market Operations was amended to read as follows:

(c) To buy U.S. Government securities, obligations

that are direct obligations of, or fully guaranteed as

to principal and interest by, any agency of the United

States, and prime bankers' acceptances of the types

authorized for purchase under 1(b) above, from dealers

for the account of the Federal Reserve Bank of New

York under agreements for repurchase of such securities,

obligations, or acceptances in 15 calendar days or less,

at rates that, unless otherwise expressly authorized

by the Committee, shall be determined by competitive

bidding, after applying reasonable limitations on the

volume of agreements with individual dealers; provided

that in the event Government securities or agency issues

covered by any such agreement are not repurchased by the

dealer pursuant to the agreement or a renewal thereof,

they shall be sold in the market or transferred to the

System Open Market Account; and provided further that

in the event bankers' acceptances covered by any such

agreement are not repurchased by the seller, they shall

continue to be held by the Federal Reserve Bank or shall

be sold in the open market.

It was agreed that the next meeting of the Committee would

be held on July 15, 1975.

The meeting adjourned.

Deputy Secretary