FOMC Minutes

10/19/76

Meeting of Federal Open Market Committee

October 19, 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, October 19,

1976, at 9:30 a.m.

PRESENT:

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Burns, Chairman

Volcker, Vice Chairman

Balles

Black

Coldwell

Gardner

Jackson

Kimbrel

Lilly

Partee

Wallich

Mr. Winn

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)

Mr. Gramley, Economist (Domestic Business)

Messrs. Brandt, Davis, Keran, Kichline,

Parthemos, Reynolds, and Zeisel,

Associate Economists

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10/19/76

Mr. Pardee, Deputy Manager for Foreign

Operations

Mr. Sternlight, Deputy Manager for

Domestic Operations

Messrs. Coyne and Keir, Assistants 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. Green, Vice President, Federal

Reserve Bank of Dallas

Mr. Sandberg, Assistant Vice President,

Federal Reserve Bank of New York

Mr. Kareken, Economic Adviser, Federal

Reserve Bank of Minneapolis

Mr. Hall, Economist, Federal Reserve

Bank of Cleveland

By unanimous vote, the minutes of actions taken at the

meeting of the Federal Open Market Committee held on September 21,

1976, were approved.

By unanimous vote, the System open market transactions in

foreign currencies during the period September 21 through October 18,

1976, were approved, ratified, and confirmed.

10/19/76

- 3 By unanimous vote, System open market transactions in

Government securities, agency obligations, and bankers' acceptances

during the period September 21 through October 18, 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 slowed

somewhat further in the third quarter. In September

retail sales changed little, following a sizable increase

in August. Industrial production was unchanged in September;

in the latter half of the month output of automobiles and

trucks was curtailed by a strike at plants of a major pro

ducer. Payroll employment in nonfarm establishments rose

further; according to household survey data, the unemploy

ment rate edged down from 7.9 to 7.8 per cent, as total

employment and the civilian labor force both declined.

The wholesale price index for all commodities rose sharply

in September; average prices of farm products and foods

increased, after 2 months of substantial declines, and

average prices of industrial commodities rose somewhat

more than in other recent months. The advance in the

index of average wage rates has remained somewhat below

the rapid rate of increase during 1975.

The average value of the dollar against leading

foreign currencies has remained relatively steady in

recent weeks, declining somewhat against the German mark

and associated European currencies but rising against

the pound sterling and the French franc. On October 18

the mark was revalued by an average of 3 per cent

against the associated European currencies. In August

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10/19/76

the U. S. foreign trade deficit remained larger than

the monthly average in the second quarter; over all,

the current account had been in surplus in the second

quarter.

M1 was about unchanged in September. However, M2

and M3 grew substantially, as inflows of the time and

savings deposits included in these broader aggregates

were exceptionally strong. Market interest rates gen

erally have declined 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 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 regular meeting of the

Committee would be held on November 16, 1976, at 9:30 a.m.

The meeting adjourned.

Secretary's Note:

At its meeting on September 21, 1976,

the Committee had unanimously approved the following special

authorization:

The Federal Open Market Committee authorizes and

directs the Federal Reserve Bank of New York to arrange

for repayment of the System's outstanding swap commit

ments to the Swiss National Bank (concurrent with repay

ment by the U. S. Treasury of Treasury notes denominated

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10/19/76

in Swiss francs and held by the Swiss National Bank),

within a 3-year period by means of quarterly payments

on a schedule that is mutually satisfactory to the Swiss

National Bank, the U. S. Treasury, and the Federal

Reserve. This authorization shall become effective upon

final approval of technical details by the Chairman of

the Federal Open Market Committee.

Chairman Burns approved the technical details of the arrange

ment on October 26, 1976, so that the special authorization became

effective on that date.

Secretary