FOMC Minutes

Meeting of Federal Open Market Committee

October 6, 1979

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 Saturday, October 6,

1979, beginning at 10:10 a.m.

PRESENT:

Mr. Volcker, Chairman

Mr. Balles

Mr. Black

Mr. Coldwell

Mr. Kimbrel

Mr. Mayo

Mr. Partee

Mr. Rice

Mr. Schultz

Mrs. Teeters

Mr. Wallich

Messrs. Guffey, Morris, Roos, Timlen, and Winn,

Alternate Members of the Federal Open Market

Committee

Messrs. Baughman and Eastburn, Presidents of

the Federal Reserve Banks of Dallas and

Philadelphia, respectively

Mr.

Mr.

Mr.

Mr.

Mr.

Altmann, Secretary

Bernard, Assistant Secretary

Petersen, General Counsel

Axilrod, Economist

Holmes, Adviser for Market Operations

Messrs. Ettin, Kichline,and Truman, Associate

Economists

Mr. Sternlight, Manager

Operations, System

Mr. Pardee, Manager for

System Open Market

for Domestic

Open Market Account

Foreign Operations,

Account

Mr. Allison, Secretary of the Board of

Governors

10/6/79

- 2 Mr. Coyne, Assistant to the Board of

Governors

Mr. Beck, Senior Economist, Banking

Section, Division of Research and

Statistics, Board of Governors

Ms. Farar, Economist, Open Market Secre

tariat, Board of Governors

Mr. Corrigan, Vice President, Federal

Reserve Bank of New York

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:

Taking account of past and prospective develop

ments in employment, unemployment, production, in

vestment, real income, productivity, international

trade and payments, and prices, the Federal Open

Market Committee seeks to foster monetary and

financial conditions that will resist inflationary

pressures while encouraging moderate economic

expansion and contributing to a sustainable pattern

of international transactions. At its meeting on.

July 11, 1979, the Committee agreed that these

objectives would be furthered by growth of M-1,

M-2, and M-3 from the fourth quarter of 1978 to

the fourth quarter of 1979 within ranges of 1-1/2

to 4-1/2 percent, 5 to 8 percent, and 6 to 9 per

cent respectively, the same ranges that had been

established in February. The range for M-1 had

been established on the basis of an assumption that

expansion of ATS and NOW accounts would dampen growth

by about 3 percentage points over the year.

It now

appears that expansion of such accounts will dampen

growth by about 1-1/2 percentage points over the year;

thus, the equivalent range for M-1 is now 3 to 6

percent. The associated range for bank credit is

7-1/2 to 10-1/2 percent. The Committee anticipates

that for the period from the fourth quarter of 1979

to the fourth quarter of 1980, growth may be within

the same ranges, depending upon emerging economic

conditions and appropriate adjustments that may be

required by legislation or judicial developments

affecting interest-bearing transactions accounts.

These ranges will be reconsidered at any time as

conditions warrant.

10/6/79

- 3 -

In the short run, the Committee seeks to restrain

expansion of reserve aggregates to a pace consistent

with deceleration in growth of M-1, M-2, and M-3 in

the fourth quarter of 1979 to rates that would hold

growth of these monetary aggregates over the whole

period from the fourth quarter of 1978 to the fourth

quarter of 1979 within the Committee's longer-run

ranges, provided that in the period before the next

regular meeting the weekly average federal funds rate

remains within a range of 11-1/2 to 15-1/2 percent.

The Committee will consider the need for supplementary

instructions if it appears that operations to restrain

expansion of reserve aggregates would maintain the

federal funds rate near the upper limit of its range.

The meeting adjourned.

Secretary