FOMC Minutes

Meeting of Federal Open Market Committee

July 15, 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 Tuesday, July 15, 1975, at

9:30

a.m.

PRESENT:

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Burns, Chairman

Baughman

Bucher

Coldwell

Eastburn

Holland

Jackson

MacLaury

Mayo

Wallich

Debs, Alternate for Mr. Hayes

Messrs. Balles, Black, 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. Broida, Secretary

Mr. Altmann, Deputy Secretary

Mr. O'Connell, General Counsel

Mr. Partee, Senior Economist

Mr. Axilrod, Economist (Domestic Finance)

Mr. Gramley, Economist (Domestic Business)

Mr. Solomon, Economist (International Finance)

Messrs. Boehne, Bryant, Davis, Green,

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

7/15/75

Mr. Coyne, Assistant to the Board of

Governors

Mr. Keir, Adviser, Division of Research

and Statistics, Board of Governors

Mr. Wendel, Assistant Adviser, Division

of Research and Statistics, Board of

Governors

Mrs. Farar, Economist, Open Market Secretariat,

Board of Governors

Miss Klaput, Open Market Secretariat, Board

of Governors

Mr.

Leonard, First Vice President of the

Federal Reserve Bank of St. Louis

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. Duprey, Senior Economist, Federal Reserve

Bank of Minneapolis

Mr. Keran, Director of Research, Federal

Reserve Bank of San Francisco

Mr. Ozog, Manager, Securities and Acceptances

Department, Federal Reserve Bank of New York

By unanimous vote, the minutes of actions taken at the

meeting of the Federal Open Market Committee on June 16-17, 1975,

were approved.

The memorandum of discussion for the meeting of the Federal

Open Market Committee on May 20, 1975, was accepted.

By unanimous vote, the System open market transactions in

foreign currencies during the period June 17 through July 14, 1975,

were approved, ratified, and confirmed.

7/15/75

By unanimous vote, renewal for further periods of 3 months

of System drawings on the National Bank of Belgium, the Swiss

National Bank, and the Bank for International Settlements maturing

in the period from August 5 through 14, 1975, was authorized.

By unanimous vote, the open market transactions in Govern

ment securities, agency obligations, and bankers' acceptances

during the period June 17 through July 14, 1975, were approved,

ratified, and confirmed.

With Mr. Holland dissenting, the Federal Reserve Bank of New

York was authorized and directed, until otherwise directed by the

Committee, to execute transactions in the System Account in accord

ance with the following domestic policy directive:

The information reviewed at this meeting suggests

that real output of goods and services leveled off in

the second quarter of the year, as consumer spending

continued to strengthen. Activity in residential real

estate markets has picked up in recent months. In June

industrial production rose slightly, following 8 months

of decline. The calculated unemployment rate declined

substantially, but this was attributed mainly to prob

lems of seasonal adjustment. Average wholesale prices

of industrial commodities rose somewhat more in June

than in the preceding 3 months, chiefly because of

increases in prices of petroleum products, but prices

of farm and food products declined appreciably. From

the first to the second quarter of the year, the ad

vance in average wage rates continued to moderate.

In recent weeks the average exchange value of the

dollar against leading foreign currencies has risen

considerably, as interest rates on U.S. dollar assets

increased relative to rates on foreign currency assets

after mid-June. In May the U.S. foreign trade balance

7/15/75

registered a substantial surplus, as imports dropped

more sharply than exports. U.S. banks reported a

sizable increase in claims on foreigners, while

liabilities to foreigners were reduced slightly.

Growth in M 1 , M 2 , and M3 --which was substantial

in May--was extremely rapid in June, in part because

of Federal income tax rebates and of supplementary

social security payments; beginning late in the month,

after completion of such payments, the aggregates

weakened. Business demands for short-term credit

remained unusually weak both at banks and in the

commercial paper market, while demands in the long

term market continued exceptionally strong. Market

interest rates in general have risen appreciably 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 stimulating

economic recovery, while resisting inflationary pres

sures and working toward equilibrium in the country's

balance of payments.

To implement this policy, while taking account of

the forthcoming Treasury financing and of developments

in domestic and international financial markets, the

Committee seeks to maintain about the prevailing bank

reserve and money market conditions over the period

immediately ahead, provided that growth in monetary

aggregates appears to be slowing substantially from

the bulge during the second quarter.

It was agreed that the next meeting of the Committee

would be held on Tuesday, August 19, 1975.

The meeting adjourned.

Secretary

Secretary