FOMC Minutes

6/22/76

Meeting of Federal Open Market Committee

June 22, 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, June 22, 1976,

at 9:30 a.m.

PRESENT:

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Burns, Chairman

Volcker, Vice Chairman

Balles

Black

Coldwell

Gardner

Jackson

Lilly

Partee

Wallich

Winn

Baughman, Alternate for Mr. Kimbrel

Messrs. Guffey, Mayo, and Morris, Alternate

Members of the Federal Open Market

Committee

Messrs. MacLaury, Eastburn, and Roos, Presidents

of the Federal Reserve Banks of Minneapolis,

Philadelphia, and St. Louis, respectively

Mr. Broida, Secretary

Mr. Altmann,1/ Deputy Secretary

Mr. Bernard,1/ Assistant Secretary

Mr. O'Connell, General Counsel

Mr. Axilrod, Economist (Domestic Finance)

Mr. Gramleyl 1/Economist (Domestic Business)

Messrs. Brandt 1/ Davis,1/ Hocter,1/

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

Associate Economists

1/ Entered meeting at point indicated.

2/ Left meeting at point indicated.

6/22/76

Mr. Sternlight,1/ Deputy Manager for

Domestic Operations

Mr. Keir,1 / Assistant to the Board of

Governors

Mr. Guenther,2/ Assistant to the Board

of Governors

Mr. O'Brien, Special Assistant to the

Board of Governors

Mr. Gemmill,1/ Adviser, Division of Inter

national Finance, Board of Governors

Mrs. Farar,1/ Economist, Open Market

Secretariat, Board of Governors

Mrs. Deck,1 / Staff Assistant, Open Market

Secretariat, Board of Governors

Mr. Fossum, First Vice President of the

Federal Reserve Bank of Atlanta

Messrs. Scheld,1/ Eisenmenger,1/ Sims,1/

and Doll,1/ Senior Vice Presidents,

Federal Reserve Banks of Chicago, Boston,

San Francisco, and Kansas City, respectively

Messrs. Burns 1 / and Karnosky,1/ Vice Presidents,

Federal Reserve Banks of Dallas and

St. Louis respectively

Mr. Kareken,1/ Economic Adviser, Federal

Reserve Bank of Minneapolis

Ms. Greene,1/ Assistant Vice President,

Federal Reserve Bank of New

York

Ms. Tschinkel,1/ Adviser, Federal Reserve

Bank of New York

Mr. Mullineaux,1/ Research Officer, Federal

Reserve Bank of Philadelphia

In connection with the suit relating to membership on

the Committee by Reserve Bank Presidents filed in Federal District

1/ Entered meeting at point indicated.

2/ Left meeting at point indicated.

6/22/76

Court on June 21, 1976, by Congressman Henry S. Reuss of Wisconsin,

the Committee, by unanimous vote, authorized its General Counsel

to employ, if determined by him to be necessary and appropriate,

outside legal counsel to assist the Committee in defense of the suit.

Prior to the following actions, Mr. Guenther left the

meeting and the staff members who were not present at the outset

entered.

By unanimous vote, the minutes of actions taken at the

meeting of the Federal Open Market Committee held on May 18, 1976,

were approved.

By unanimous vote, the System open market transactions in

foreign currencies during the period May 18 through June 21, 1976,

were approved, ratified, and confirmed.

Renewal for a further period of 3 months of a drawing on

the System by the Bank of Mexico, maturing on July 9, 1976, was

noted without objection.

By unanimous vote, System open market transactions in

Government securities, agency obligations, and bankers' accep

tances, during the period May 18 through June 21, 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

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-4-

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, which

had been vigorous in the first quarter, has moderated in

the current quarter. In May retail sales declined from

the March-April level and were near the monthly average

of the first quarter. However, recovery in industrial

production continued at about the average pace of the

first 4 months of the year, and the gain in employment

again was substantial. The unemployment rate declined

from 7.5 to 7.3 per cent. The rise in the wholesale

price index for all commodities, which had been large

in April, was moderate in May; average prices of farm

products and foods rose much less than in April. Average

prices of industrial commodities changed little in May,

but in recent weeks price increases have been announced

for some major industrial materials. The rise in con

sumer prices in May was somewhat faster than the average

increase in earlier months of the year, owing to increases

in prices of food and energy items. The advance in the

index of average wage rates was larger in May than the

gains in other recent months, owing in part to implemen

tation of a new labor contract in a major industry.

The average value of the dollar against leading

foreign currencies has been relatively steady in recent

weeks. On June 7 a total of $5.3 billion of 6-month

stand-by credits to the United Kingdom was announced,

including $1 billion under the Federal Reserve System's

swap line and $1 billion from the Exchange Stabilization

Fund. Subsequently, the decline in the pound sterling

was halted and partly reversed. In April the U. S.

foreign trade deficit was at the same rate as in the

first quarter.

Growth in monetary aggregates slowed substantially

in May and early June from the exceptionally rapid rates

recorded in April, mainly because of a sharp slackening

in expansion of demand deposits at commercial banks;

inflows of those time and savings deposits included in

the broader aggregates were relatively well maintained.

6/22/76

Market interest rates in general rose somewhat further

in the latter part of May, but since then, short-term

rates have fluctuated in a narrow range and long-term

rates have edged down.

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 expansion, while resisting inflationary pres

sures 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.

By unanimous vote, responsibility for making determinations

with respect to appeals of denial of access to Committee records,

under the provisions of 271.4(d) of the Committee's Rules Regarding

Availability of Information, was delegated to Mr. Gardner, and in

his absence, to Mr. Coldwell.

It was agreed that the next meeting of the Committee would

be held on July 20, 1976.

The meeting adjourned.

Secretary