FOMC Minutes

7/20/76

Meeting of Federal Open Market Committee

July 19-20, 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 Monday and Tuesday,

July 19-20, 1976, beginning at 6:00 p.m. on Monday.

PRESENT:

Burns, Chairman

Volcker, Vice Chairman

Balles

Black

Coldwell

Gardner

Jackson

Kimbrel

Lilly

Partee

Wallich

Winn 1/

Messrs. Baughman, 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.

Mr.

Mr.

Mr.

Mr.

Broida, Secretary

Altmann,1/ Deputy Secretary

Bernard,1/ Assistant Secretary

O'Connell, General Counsel

Gramley,1/ Economist (Domestic Business)

Messrs. Davis,1/ Keran,1/ Kichline,1/

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

Associate Economists.

1/ Attended Tuesday session only.

7/20/76

Mr. Pardee,./ Deputy Manager for Foreign

Operations

Mr. Sternlight,1/ Deputy Manager for

Domestic Operations

Mr. Coyne, Assistant to the Board of

Governors

Mr. Pizer, Advisor, Division of International

Finance, Board of Governors

Mr. Struble,1/ Chief, Government Finance

Section, Division of Research and

Statistics, Board of Governors

Mrs. Farar,1/ Economist, Open Market

Secretariat, Board of Governors

Mrs. Deck,1/ Staff Assistant, OpenMarket

Secretariat, Board of Governors

Messrs. Balbach,1/ Boehne,1/ Doll,1/

Eisenmenger,1/ and Scheld,1/ Senior

Vice Presidents, Federal Reserve

Banks of St. Louis, Philadelphia, Kansas

City, Boston, and Chicago, respectively

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

Federal Reserve Banks of Dallas and

Atlanta, respectively

Mr. Meek,1/ Monetary Adviser, Federal Reserve

Bank of New York

Mr. Duprey,/ Senior Economist, Federal

Reserve Bank of Minneapolis

With Mr. Coldwell dissenting, and with Mr. Mayo voting as

alternate for Mr. Winn, the Committee reaffirmed its decision of

May 18, 1976, to discontinue the memorandum of discussion after the

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

Secretary's note:

All of the following actions

were taken on Tuesday, July 20, 1976.

By unanimous vote, the minutes of actions taken at the

meeting of the Federal Open Market Committee held on June 22, 1976,

were approved.

1/

Attended Tuesday session only.

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7/20/76

By unanimous vote, the System open market transactions in

foreign currencies during the period June 22 through July 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 and the

Swiss National Bank maturing August 13, 1976, was authorized.

By unanimous vote, System open market transactions in

Government securities, agency obligations, and bankers' acceptances,

during the period June 22 through July 19, 1976, were approved,

ratified, and confirmed.

With Mr. Volcker 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, which

had been vigorous in the first quarter, moderated in the

second quarter as a consequence of a smaller advance in

consumer spending and little change in the rate of inventory

accumulation. In June growth in industrial production

slowed and nonfarm payroll employment changed little.

The unemployment rate edged up to 7.5 per cent from 7.3

per cent in May, but this increase may have partly

reflected seasonal adjustment problems. Retail sales

rebounded strongly in June. The rise in the wholesale

price index for all commodities remained moderate, as

the advance in average prices of farm products and foods

slowed further. However, average prices of industrial

commodities rose more than in other recent months. The

advance in. the index of average wage rates slowed con

siderably in June following a sharp rise in May; over

the second quarter as a whole the index rose at about

the same rate as in the first quarter.

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The average value of the dollar against leading

foreign currencies has remained relatively steady in

recent weeks. In May there was a small surplus in the

U.S. foreign trade balance.

M1, which had grown moderately in May, declined

slightly in June. From the first to the second quarter,

however, M1 expanded at an 8.4 per cent annual rate

because of the exceptional rise in April. Growth in

M 2 and M3 moderated in June, mainly because of the

decline in M1, although inflows of the time and savings

deposits included in the broader aggregates also slowed

somewhat. Short-term market interest rates have declined

somewhat in recent weeks, and most 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.

It was agreed that the next meeting of the Committee would

be held on August 17, 1976, at 9:30 a.m.

The meeting adjourned.

Secretary