FOMC Minutes

Meeting of Federal Open Market Committee

February 17 - 18, 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.,

17-18,

on Tuesday and Wednesday, February

1976, beginning at 4:00 p.m. on Tuesday.

PRESENT:

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Burns, Chairman

Volcker, Vice Chairman

Baughman

Coldwell

Eastburn

Holland

Jackson

MacLaury

Mayo

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)

Messrs. Boehne, Davis, Green, Kareken,

Reynolds, and Scheld, Associate Economists

2/17-18/76

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

Associate

Messrs. Kichline and Zeisel,

Directors, Division of Research and

Statistics, Board of Governors

Mr. Keir, Adviser, Division of Research

and Statistics, Board of Governors

Mr. Gemmill,1/ 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,2/ Parthemos, Balbach, and

Doll, Senior Vice Presidents, Federal Reserve

Banks of Boston, Richmond, St. Louis, and

Kansas City, respectively

Messrs. Brandt and Keran, Vice Presidents,

Federal Reserve Banks of Atlanta and

San Francisco, respectively

Ms. Tschinkel, Adviser, Open Market Operations,

Federal Reserve Bank of New York

Mr. Hall, Economist, Federal Reserve Bank of

Cleveland

Secretary's note: All of the following actions

were taken on Wednesday, February 18, 1976.

By unanimous vote, the minutes of actions taken at the

meeting of the Federal Open Market Committee on January 20,

were approved.

1/

2/

Attended Wednesday session only.

Attended Tuesday session only.

1976,

By unanimous vote, the System open market transactions in

foreign currencies during the period January 20, 1976, through

February 17, 1976, were approved, ratified, and confirmed.

By unanimous vote, paragraph 6 of the Authorization for Foreign

Currency Operations was amended to read as follows:

6.

The Foreign Currency Subcommittee is authorized to act

on behalf of the Committee when it is necessary to enable

the Federal Reserve Bank of New York to engage in foreign

currency operations before the Committee can be consulted.

The Foreign Currency Subcommittee consists of the Chairman

and Vice Chairman of the Committee, the Vice Chairman of the

Board of Governors, and such other member of the Board as the

Chairman may designate (or in the absence of members of the

Board serving on the Subcommittee, other Board Members

designated by the Chairman as alternates, and in the absence

of the Vice Chairman of the Committee, his alternate). All

actions taken by the Foreign Currency Subcommittee under this

paragraph shall be reported promptly to the Committee.

By unanimous vote, the open market transactions in Government

securities, agency obligations, and bankers' acceptances during the

period January 20, 1976, through February 17, 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 accordance with the following domestic

policy directive:

2/18/76

-4

The information reviewed at this meeting suggests

that output of goods and services is continuing to expand

at a moderate rate in the current quarter. In January

retail sales remained at an advanced level and recovery

in industrial production continued. Gains in nonfarm employ

ment were large and widespread and the unemployment rate

dropped from 8.3 per cent to 7.8 per cent. Average whole

sale prices of industrial commodities increased somewhat

less than in the preceding 2 months, and average prices

of farm products and foods declined appreciably further.

The index of average wage rates advanced substantially

in January, but a significant part of the rise reflected

an increase in the minimum wage on the first of the month.

The trade-weighted value of the dollar has changed

little over the past 4 weeks. There have been disturbances

in foreign exchange markets affecting primarily European

currencies, and rates for several currencies have moved

considerably. In December the foreign trade surplus was

substantial, although not as large as in other recent months,

and bank-reported private capital movements shifted to a

net outflow.

M1, which had declined in December, increased only a

little in January, but M2 and M3 rose considerably. At

commercial banks and nonbank thrift institutions, inflows

of time and savings deposits other than large-denomination

CD's expanded substantially. Inflows into savings accounts

were especially large in January, as short-term market

interest rates continued to decline early in the month and

fell below Regulation Q ceiling rates on such accounts. In

recent weeks, interest rates on both short- and long-term

securities have changed little, while mortgage interest

rates have declined 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.

-5-

2/18/76

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 Tuesday, March 16, 1976.

The meeting adjourned.

Secretary