FOMC Minutes

9/21/76

Meeting of Federal Open Market Committee

September 21, 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, September 21,

1976, at 9:30 a.m.

PRESENT:

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Burns, Chairman

Volcker, Vice Chairman

Black

Coldwell

Gardner

Jackson

Kimbrel

Lilly

Wallich

Winn

Balles

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. Broida Secretary

Mr. Altmann, Deputy Secretary

Mr. Bernard, Assistant Secretary

Mr. O'Connell, General Counsel

Mr. Axilrod, Economist (Domestic Finance)

Messrs. Brandt, Davis, Keran, Kichline,

Parthemos, Reynolds, and Zeisel,

Associate Economists

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9/21/76

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

Mr. Keir, Assistant to the Board of

Governors

Mr. Gemmill, Adviser, Division of

International Finance, Board of

Governors

Mrs. Farar, Economist, Open Market

Secretariat, Board of Governors

Mrs. Deck, Staff Assistant, Open Market

Secretariat, Board of Governors

Messrs. Balbach, Boehne, Doll, Eisenmenger,

and Scheld, Senior Vice Presidents,

Federal Reserve Banks of St. Louis,

Philadelphia, Kansas City, Boston,

and Chicago, respectively

Mr. Burns, Vice President, Federal

Reserve Bank of Dallas

Mr. Kareken, Economic Adviser, Federal

Reserve Bank of Minneapolis

Mr. Hall, Economist, Federal Reserve

Bank of Cleveland

Mr. Hill, Senior Economist, Open Market

Operations, Federal Reserve Bank

of New York

By unanimous vote, the minutes of actions taken at the

meeting of the Federal Open Market Committee held on August 17,

1976, were approved.

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9/21/76

By unanimous vote, the System open market transactions in

foreign currencies during the period August 17 through September 20,

1976, were approved, ratified, and confirmed.

Renewal for further periods of 3 months of drawings on

the System by the Bank of England, maturing on September 23 and 30,

1976, was noted without objection.

By unanimous vote, System open market transactions in

Government securities, agency obligations, and bankers' acceptances

during the period August 17 through September 20, 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 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 has

remained moderate in the current quarter. In August

industrial production continued to expand at about the

average rate in the preceding 4 months. Retail sales

apparently rose vigorously, after having changed little

on balance since April. Payroll employment in nonfarm

establishments rose appreciably further, but according

to household survey data, the unemployment rate edged

up from 7.8 to 7.9 per cent. The wholesale price index

for all commodities was about unchanged in August, as a

substantial decline in average prices of farm products

and foods offset another large increase in average prices

of industrial commodities. So far this year the advance

in the index of average wage rates has been somewhat

below the rapid rate of increase during 1975.

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9/21/76

The average value of the dollar against leading

foreign currencies has remained relatively steady in

recent weeks, declining somewhat against most of these

currencies but rising against the pound sterling. The

Mexican peso was allowed to depreciate on September 1

and in recent days has been about 37 per cent below its

old value against the dollar. In July the U.S. foreign

trade deficit increased sharply.

M1 and M2 grew at moderate rates in August. Inflows

of the time and savings deposits included in M 2 were

relatively strong, although they slackened from the high

rate in July. Inflows of deposits to nonbank thrift

institutions accelerated, however, and growth in M

3

remained rapid. Most market interest rates have

declined somewhat further in recent weeks.

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 pressures

and contributing to a sustainable pattern of inter

national 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 October 19, 1976, at 9:30 a.m.

The meeting adjourned.