FOMC Minutes

Meeting of Federal Open Market Committee

April 19, 1977

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, April 19,

1977, beginning at 9:00 a.m.

PRESENT:

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Burns, Chairman

Volcker, Vice Chairman

Coldwell

Gardner

Guffey

Jackson

Lilly

Mayo

Morris

Partee

Roos

Wallich

Messrs. Baughman, Eastburn, and Winn, Alternate

Members of the Federal Open Market

Committee

Messrs. Black, Kimbrel, and Willes, Presidents

of the Federal Reserve Banks of Richmond,

Atlanta, and Minneapolis, respectively

Mr. Broida, Secretary

Mr. Altmann, Deputy Secretary

Mr. Bernard, Assistant Secretary

Mr. O'Connell, General Counsel

Mr. Axilrod, Economist

Messrs. Balbach, R. Davis, T. Davis, Ettin,

Kichline, Reynolds, Scheld, Truman,

and Zeisel, Associate Economists

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Mr. Pardee, Deputy Manager for Foreign

Operations

Mr. Sternlight, Deputy Manager for

Domestic Operations

Mr. Hudson, Assistant to the Chairman,

Board of Governors

Messrs. Coyne and Keir, Assistants to

the Board of Governors

Mrs. Farar, Economist, Open Market

Secretariat, Board of Governors

Mrs. Deck, Staff Assistant, Open Market

Secretariat, Board of Governors

Messrs. Boehne, J. Davis, and Eisenmenger,

Senior Vice Presidents, Federal

Reserve Banks of Philadelphia,

Cleveland, and Boston, respectively

Messrs. Brandt, Broaddus, Burns, and

Keran, Vice Presidents, Federal

Reserve Banks of Atlanta, Richmond,

Dallas, and San Francisco,

respectively

Mr. Sandberg, Assistant Vice President,

Federal Reserve Bank of New York

Mr. Kareken, Economic Adviser, Federal

Reserve Bank of Minneapolis

By unanimous vote, the minutes of actions taken at

the meeting of the Federal Open Market Committee held on

March 15, 1977, were approved.

By unanimous vote, System open market transactions

in foreign currencies during the period March 15 through

April 18,

1977, were approved, ratified, and confirmed.

By unanimous vote, System open market transactions

in Government securities, agency obligations, and bankers'

acceptances during the period March 15 through April 18,

1977, were approved, ratified, and confirmed.

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4/19/77

With Mr. Partee dissenting, the Committee adopted

the following ranges for rates of growth in monetary aggregates

for the period from the first quarter of 1977 to the first

quarter of 1978:

9-1/2 per cent;

M-1, 4-1/2 to 6-1/2 per cent; M-2, 7 to

and M-3, 8-1/2 to 11 per cent.

By unanimous vote, the Federal Reserve Bank of

New York was authorized and directed, until otherwise directed

by the Committee, to execute transactions in 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 increased in the first quarter

from the reduced pace in the fourth quarter

In March industrial output, retail

of 1976.

sales, and employment expanded substantially

further.

Although the labor force also

increased sharply, the unemployment rate

The

declined from 7.5 to 7.3 per cent.

wholesale price index for all commodities

again rose substantially; increases were

particularly sharp among farm products and

foods, and there were sizable advances for

many industrial commodities. The index of

average wage rates rose in the first quarter

of 1977 at a somewhat faster pace than it

had on the average during 1976, reflecting

largely an increase in the minimum wage.

The average value of the dollar against

leading foreign currencies has declined some

what over the past month, returning to about

the level at the beginning of the year.

Demand for the Japanese yen and the U.K.

4/19/77

- 4 pound intensified. The U. S. foreign trade

deficit continued large in February.

M-1 grew at a moderate pace in March but

increased substantially in early April.

At

banks and thrift institutions, inflows of time

and savings deposits other than large

denomination CD's continued to slacken in

March. Market interest rates declined con

siderably in mid-April, after having changed

little since mid-March.

In light of the foregoing developments, it

is the policy of the Federal Open Market

Committee to foster bank reserve and other

financial conditions that will encourage con

tinued economic expansion, while resisting

inflationary pressures and contributing to a

sustainable pattern of international trans

actions.

Growth in M-1, M-2, and M-3 within ranges

of 4-1/2 to 6-1/2 per cent, 7 to 9-1/2 per cent,

and 8-1/2 to 11 per cent, respectively, from

the first quarter of 1977 to the first quarter

of 1978 appears to be consistent with these

objectives. These ranges are subject to

reconsideration at any time as conditions

warrant.

The Committee seeks to encourage near-term

rates of growth in M-1 and M-2 on a path

believed to be reasonably consistent with the

longer-run ranges for monetary aggregates cited

in the preceding paragraph. Specifically, at

present, it expects the annual growth rates over

the April-May period to be within the ranges of

6 to 10 per cent for M-1 and 8 to 12 per cent

In the judgment of the Committee such

for M-2.

growth rates are likely to be associated with a

weekly average Federal funds rate of about 4-3/4

per cent.

If, giving approximately equal weight

to M-1 and M-2, it appears that growth rates

over the 2-month period will deviate significantly

from the midpoints of the indicated ranges, the

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operational objective for the Federal funds

rate shall be modified in an orderly fashion

within a range of 4-1/2 to 5-1/4 per cent.

If it appears during the period before

the next meeting that the operating constraints

specified above are proving to be significantly

inconsistent, the Manager is promptly to notify

the Chairman who will then decide whether the

situation calls for supplementary instructions

from the Committee.

Secretary's Note:

On May 6,

1977, by unanimous

vote (with Mr. Winn voting as alternate for Mr. Mayo),

the

Committee modified the intermeeting range for the Federal

funds rate specified in the next to last paragraph of the

domestic policy directive issued on April 19, 1977, by

increasing the upper limit from 5-1/4 to 5-1/2 per cent.

It was agreed that the next meeting of the

Committee would be held on Tuesday, May

17, 1977, beginning

at 9:30 a.m.

The meeting adjourned.

Secretary