FOMC Minutes

Meeting of Federal Open Market Committee

September 16,

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, September 16, 1975, at

9:30 a.m.

PRESENT:

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Burns, Chairman

Volcker, Vice Chairman

Baughman

Bucher

Coldwell

Eastburn

Holland

Jackson

MacLaury

Mayo

Mitchell

Wallich

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. Broida, Secretary

Mr. Altmann, Deputy Secretary

Mr. Bernard, Assistant 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, Davis, Green, Kareken,

Reynolds, and Scheld, Associate Economists

9/16/75

Mr. Holmes, Manager, System Open Market Account

Mr. Pardee, Deputy Manager for Foreign

Operations

Mr. Sternlight, Deputy Manager for Domestic

Operations

Mr. Coyne, Assistant to the Board of

Governors

Mr. Keir, Adviser, Division of Research and

Statistics, Board of Governors

Mr. Gemmill, Adviser, Division of International

Finance, Board of Governors

Mrs. Farar, Economist, Open Market Secretariat,

Board of Governors

Mrs. Ferrell, Open Market Secretariat

Assistant, Board of Governors

Messrs. Eisenmenger and Doll, Senior Vice

Presidents, Federal Reserve Banks of

Boston and Kansas City, respectively

Messrs. Hocter, Snellings, Brandt, and Balbach,

Vice Presidents, Federal Reserve Banks of

Cleveland, Richmond, Atlanta, and St. Louis,

respectively

Mr. Keran, Director of Research, Federal Reserve

Bank of San Francisco

Mr. Meek, Monetary Adviser, Federal Reserve Bank

of New York

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

of the Federal Open Market Committee on August 19, 1975, were approved.

The memorandum of discussion for the meeting of the Federal

Open Market Committee on July 15, 1975, was accepted.

By unanimous vote, the System open market transactions in

foreign currencies during the period August 19 through September 15,

1975, were approved, ratified, and confirmed.

9/16/75

By unanimous vote, renewal for further periods of 3 months

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

October 17 and 24, 1975, was authorized.

By unanimous vote, the open market transactions in Government

securities, agency obligations, and bankers' acceptances during the

period August 19 through September 15, 1975, 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 in the System Account in accordance with

the following domestic policy directive:

The information reviewed at this meeting suggests

that output of goods and services--which had turned up

in the second quarter--is increasing appreciably further

in the current quarter.

In August industrial production

and nonfarm payroll employment expanded at a faster pace

than in July, and the average workweek in manufacturing

continued to lengthen. The unemployment rate remained

at 8.4 per cent, as the civilian labor force increased

about as much as total employment. Retail sales apparently

declined slightly, following 4 months of large gains.

The index of wholesale prices of industrial commodities

rose somewhat more in August than in July, chiefly be

cause of increases in prices of energy products; prices

of farm and food products declined slightly. The advance

in average wage rates over recent months has been some

what less rapid than in 1974 and early 1975.

In recent weeks the exchange value of the dollar

against leading foreign currencies has risen somewhat

further. In July the U.S. foreign trade surplus declined

from the very high second-quarter level, as imports rose

9/16/75

sharply.

Bank-reported capital movements showed a net

inflow, in contrast to the net outflows of earlier months,

while U.S. liabilities to foreign official agencies, which

earlier had been rising, declined.

Expansion in M1 picked up somewhat in August from

the low July rate. Growth in M2 and M 3 slowed further,

however, as inflows of consumer-type time and savings

deposits to banks and to nonbank thrift institutions

continued to moderate, reflecting in part the increased

attractiveness of alternative investments. Interest

rates on short-term securities and on longer-term

Treasury and corporate securities have shown little

net change in recent weeks, except that longer-term

yields adjusted upward following the Treasury's Septem

ber 10 announcement of its sizable borrowing requirements

over the rest of this year. Yields on State and local

government securities rose to new highs in early

September, as a result of widespread concern about

possible repercussions of New York City's financial

crisis; on September 9 a State program to assist the

City was enacted.

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

contributing to a sustainable pattern of international

transactions.

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.

It was agreed that the next meeting of the Committee would

be held on October 21, 1975, at 9:00 a.m.

The meeting adjourned.

Secretary