FOMC Minutes

Meeting of Federal Open Market Committee

May 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., on Tuesday, May 18, 1976,

at 9:00 a.m.

PRESENT:

Mr. Burns, Chairman

Mr. Volcker, Vice Chairman

Mr. Balles

Mr. Black

Mr. Coldwell

Mr. Gardner

Mr. Jackson

Mr. Kimbrel

Mr. Partee

Mr. Wallich

Mr. Winn

Messrs. Baughman, Guffey, Mayo, and Morris,

Alternate Members of the Federal Open

Market Committee

Messrs. MacLaury and Roos, Presidents of

the Federal Reserve Banks of Minneapolis

and St. Louis, respectively

Mr. Broida, Secretary

Mr. Altmann, Deputy Secretary

Mr. Bernard,1/ Assistant Secretary

Mr. O'Connell, General Counsel

Mr. Axilrod, Economist (Domestic Finance)

Mr. Gramley,1/ Economist (Domestic Business)

Messrs. Brandt,1/ Hocter,1/ Keran,1/ Kichline, 1/

Parthemos,1/ Reynolds,1/ and Zeisel,1/

Associate Economists

1/

Entered meeting at point indicated.

Mr. Holmes, Manager, System Open Market Account

Mr. Pardee,1/ Deputy Manager for Foreign

Operations

Mr. Sternlight,1/ Deputy Manager for Domestic

Operations

Mr. Coyne, Assistant to the Board of Governors

Mr. Keir,1/ 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. Deck,1/ Staff Assistant, Open Market

Secretariat, Board of Governors

Mr. Willes,1/ First Vice President of the

Federal Reserve Bank of Philadelphia

Messrs. Boehne

1/ and Doll,1/ Senior Vice

Presidents, Federal Reserve Banks of

Philadelphia and Kansas City, respectively

Messrs. Balbach,1/ Burns,1/ and Davis,1/ Vice

Presidents, Federal Reserve Banks of St.

Louis, Dallas, and New York respectively

Mrs. Nichols 1/ and Mr. Kareken,1/ Economic

Advisers, Federal Reserve Banks of Chicago

and Minneapolis, respectively

Mr. McNees,1/ Assistant Vice President, Federal

Reserve Bank of Boston

Mr. Hill,1/ Senior Economist, Federal Reserve

Bank of New York

With Mr. Coldwell dissenting, the Committee approved

a motion that the memorandum of discussion be discontinued after

the memorandum for the meeting of March 15-16, 1976.

With Mr. Coldwell abstaining, the Committee approved a

motion that the record of policy actions for each meeting of the

Committee be released to the public shortly after the next regularly

scheduled meeting.

1/

Entered meeting at point indicated.

By unanimous vote, the Committee amended Section 271.5(a)

of its Rules Regarding the Availability of Information to delete

the sentence reading "For example, the Committee's domestic

policy directive adopted at each meeting of the Committee is

published in the Federal Register approximately 45 days after

the date of its adoption; and no information in the records of

the Committee relating to the adoption of any such directive

is made available for public inspection or copying before it

is published in the Federal Register or is otherwise released

to the public by the Committee."

With this amendment, Section 271.5(a) read as follows:

(a) Deferred availability of information.In some instances, certain types of information of

the Committee are not published in the Federal

Register or made available for public inspection

or copying until after such period of time as the

Committee may determine to be reasonably necessary

to avoid the effects described in paragraph (b)

of this section or as may otherwise be necessary

to prevent impairment of the effective discharge

of the Committee's statutory responsibilities.

Staff members who were not present at the outset entered

the meeting prior to the following actions.

By unanimous vote, the minutes of actions taken at the

meeting of the Federal Open Market Committee held on April 20,

1976, were approved.

By unanimous vote, the System open market transactions

in foreign currencies during the period April 20 through May 17,

1976, were approved, ratified, and confirmed.

By unanimous vote, System open market transactions in

Government securities, agency obligations, and bankers' accep

tances, during the period April 20 through May 1.7, 1976, were

approved, ratified, and confirmed.

With Mr. Coldwell, dissenting, the Federal Reserve Bank

of New York was authorized and directed, until otherwise directed by

the Committee, to execute transactions for the System Account in

accordance with the following domestic policy directive;

The information reviewed at this meeting suggests

that growth in real output of goods and services is

continuing at a vigorous pace in the current quarter.

In April recovery in industrial production continued,

and gains in employment were large and widespread.

However, the civilian labor force also increased

substantially, and the unemployment rate continued

at 7.5 per cent. Retail sales remained at the March

level. The wholesale price index for all commodities

rose appreciably in April, reflecting a sharp

increase in average prices of farm products and foods

and a modest increase in prices of industrial

commodities. Over recent months, the index of average

wage rates has advanced moderately.

The average value of the dollar against leading

foreign currencies has been relatively steady in

recent weeks. During the first quarter, there was

a sizable U.S. foreign trade deficit, in contrast to

the large surpluses in the preceding four quarters.

M1, which had expanded moderately in February and

March, increased sharply in April, reflecting in part

a drop in U.S. Government deposits. Inflows of time

and savings deposits other than negotiable CD's were

strong at banks and nonbank thrift institutions, and

M2 and M3 increased substantially. In recent weeks,

both short- and long-term market interest rates have

risen.

In light of the foregoing developments, it is

the policy of the Federal Open Market Committee to

foster financial conditions that will encourage con

tinued 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 period ahead.

It was agreed that the next meeting of the Committee would

be held on June 22, 1976.

The meeting adjourned.

Secretary