FOMC Minutes

Meeting of Federal Open Market Committee

December 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, December 16, 1975, at

9:30 a.m.

PRESENT:

Mr.

Mr.

Mr.

Mr.

Burns, Chairman

Volcker, Vice Chairman

Baughman

Coldwell

Mr. Eastburn

Mr. Holland

Mr. Jackson

Mr. MacLaury

Mr. Mayo

Mr. Mitchell

Mr. 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

12/16/75

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, Parthemos, Doll, and Sims,

Senior Vice Presidents, Federal Reserve

Banks of Boston, Richmond, Kansas City,

and San Francisco, respectively

Messrs. Hocter, Brandt, and Balbach, Vice

Presidents, Federal Reserve Banks of

Cleveland, Atlanta, and St. Louis,

respectively

Mr. Sandberg, Assistant Vice President,

Federal Reserve Bank of New York

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

of the Federal Open Market Committee on November 18, 1975, were

approved.

By unanimous vote, the memorandum of discussion for the

meeting of the Federal Open Market Committee on October 21, 1975,

was accepted.

12/16/75

By unanimous vote, the System open market transactions

in foreign currencies during the period November 18 through

December 15, 1975, were approved, ratified, and confirmed.

By unanimous vote, an adjustment in the exchange rate

on the System's outstanding Swiss franc swap debt, to reflect the

December 1971 Smithsonian realignment of currency values and the

February 1973 devaluation of the dollar, was authorized.

By unanimous vote, the open market transactions in

Government securities, agency obligations, and bankers' accept

ances during the period November 18 through December 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 increased

very sharply in the third quarter--is expanding more

moderately in the current quarter. In November the

rise in industrial production and in nonfarm payroll

employment slowed further. The dollar volume of retail

sales rose again, however, and residential construction

activity expanded, reflecting recent substantial increases

in private housing starts. The unemployment rate--which

had risen 0.3 percentage points to 8.6 per cent in

October--fell back to 8.3 per cent in November, reflect

ing a sizable decline in the civilian labor force. The

12/16/75

increase in average wholesale prices of industrial com

modities, although below that in October, was still

relatively large; prices of farm products declined

appreciably, following 2 months of large increases.

The advance in average wage rates in November was

again substantial.

The exchange value of the dollar against leading foreign

currencies has risen somewhat since mid-November. The net

outflow of bank-reported private capital appears to have

declined from the high rate reported for October. In October

the U.S. foreign trade surplus remained substantial.

M1--which had declined in October--rose sharply in

Novemer. Growth in M2 and M3 was substantial, as inflows

of consumer-type time and savings deposits to banks

strengthened while inflows to nonbank thrift institutions

remained relatively favorable. Long-term interest rates

have fluctuated in a narrow range in recent weeks, while

short-term market rates have risen somewhat.

In light of the foregoing developments, it is the policy

of the Federal Open Market Committee to foster financial

conditions that will encourage continued economic recovery,

while resisting inflationary pressures and contributing to a

sustainable pattern of international transactions.

To implement this policy, while taking account of develop

ments in domestic and international financial markets, the

Committee seeks to maintain prevailing bank reserve and money

market conditions over the period immediately ahead, provided

that monetary aggregates appear to be growing at about the

rates currently expected.

By unanimous vote, transfer to the National Archives of

the FOMC memoranda of discussion for 1970, on the basis described

in memoranda from the Secretariat dated December 4, 1975, was

authorized.

12/16/75

-5

It was agreed that the next meeting of the Committee

would be held on January 20, 1976.

The meeting adjourned.

Secretary