FOMC Minutes

Meeting of Federal Open Market Committee

January 20, 1976

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, January 20, 1976, at

9:00 a.m.

PRESENT:

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr,

Mr.

Mr.

Mr.

Burns, Chairman

Volcker, Vice Chairman

Baughman

Coldwell

Eastburn

Holland

Jackson

MacLaury

Mayo

Mitchell

Partee

Wallich

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. Bernard, Assistant Secretary

Mr. O'Connell, General Counsel

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

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

Messrs. Kichline and Zeisel, Associate

Directors, Division of Research and

Statistics, 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

Mr. Leonard, First Vice President, Federal

Reserve Bank of St. Louis

Messrs. Eisenmenger, Parthemos, Balbach, and

Doll, Senior Vice Presidents, Federal Reserve

Banks of Boston, Richmond, St. Louis, and

Kansas City, respectively

Messrs. Hocter, Brandt, and Keran, Vice

Presidents, Federal Reserve Banks of

Cleveland, Atlanta, and San Francisco,

respectively

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 December 16, 1975, were approved.

The memoranda of discussion for the meetings of the Federal

Open MarketCommittee on November 18 and December 16, 1975, were

By unanimous vote, the System open market transactions in

foreign currencies during the period December 16, 1975, through

January 19, 1976, were approved, ratified, and confirmed.

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 January 30 through February 28, 1976, was authorized.

It was understood that the System's outstanding drawing of

$600 million on the Bank for International Settlements, maturing

on February 13, 1976, would be transferred on that date to the Swiss

National Bank under arrangements made between those two institutions.

By unanimous vote, the Committee approved an agreement with

the Swiss National Bank for the sharing of losses incurred in the

repayment of the System's swap liability to that Bank on the basis

recommended by the Manager in his memorandum to the Committee

dated January 15, 1976, subject to final approval by the Chairman

on

receipt of advice that the agreement was acceptable to the

Board of Directors of the Swiss National Bank.

Secretary's note: Chairman Burns approved the agreement

on February 2, 1976, following receipt of advice that the

agreement was acceptable to the Board of Directors of the

Swiss National Bank.

By unanimous vote, the open market transactions in Government

securities, agency obligations, and bankers' acceptances during the

period December 16, 1975, through January 19, 1976, 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 accord

ance 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 of 1975--expanded more

moderately in the fourth quarter. In December retail

sales rose sharply, but the increase in the fourth

quarter as a whole was less than that in the third

quarter. After having slowed over the preceding 2

months, the rise in industrial production and in non

farm payroll employment accelerated in December.

However, the unemployment rate remained at 8.3 per cent,

as the civilian labor force grew about as much as total

employment. The increase in average wholesale prices of

industrial commodities was again relatively large, but

average prices of farm products and foods declined sharply

further. The index of average wage rates was unchanged

in December, following 2 months of large increases.

The exchange value of the dollar against leading

foreign currencies held steady in December but eased

somewhat in early January. Another sizable foreign

trade surplus was registered in November.

M1 declined in December, and growth in M2 and M3

slowed considerably. At commercial banks, inflows of

time and savings deposits other than large-denomination

CD's slowed, despite a continuing build-up of business

1/20/76

savings accounts, while inflows of deposits to nonbank

thrift institutions were relatively well maintained.

In terms of quarterly averages, growth in M1 from the

third to the fourth quarter was modest, while growth

in M2 and M 3 was more substantial. In recent weeks

interest rates on both short- and long-term securities

have declined appreciably. In mid-January Federal

Reserve discount rates were reduced from 6 to

5-1/2 per cent.

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 developments 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.

It was agreed that the next meeting of the Committee would

be held on Wednesday, February 18, 1976, at 9:00 a.m.

The meeting adjourned.

Secretary