FOMC Minutes

Meeting of the Federal Open Market Committee

April 22, 1980

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 22, 1980, at 9:30 a.m.

PRESENT:

Mr. Volcker, Chairman

Mr. Guffey

Mr. Morris

Mr. Partee

Mr. Rice

Mr. Roos

Mr. Schultz

Mr. Solomon

Mrs. Teeters

Mr. Wallich

Mr. Winn

Messrs. Baughman, Eastburn, Mayo, and Willes,

Alternative Members of the Federal Open

Market Committee

Messrs. Balles and Black, Presidents of the

Federal Reserve Banks of San Francisco

and Richmond, respectively

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Altmann, Secretary

Bernard, Assistant Secretary

Petersen, General Counsel

Oltman, Deputy General Counsel

Mannion, Assistant General Counsel

Axilrod, Economist

Messrs. Balbach, J. Davis, R. Davis, T.Davis,

Eisenmenger, Ettin, Henry, Keir, Kichline,

Truman, and Zeisel, Associate Economists

Mr. Sternlight, Manager for Domestic Operations,

System Open Market Account

Mr. Pardee, Manager for Foreign Operations,

System Open Market Account

4/22/80

Mr. Coyne, Assistant to the Board of Governors

Mr. Prell, Associate Director, Division of

Research and Statistics, Board of Governors

Mr. Gemmill, Associate Director, Division of

International Finance, Board of Governors

Mr. Beck, Senior Economist, Banking Section,

Division of Research and Statistics,

Board of Governors

Ms. Farar, Economist, Open Market Secretariat,

Board of Governors

Mrs. Deck, Staff Assistant, Open Market

Secretariat, Board of Governors

Messrs. Boehne, Brandt, Burns, Corrigan, Keran,

and Scheld, Senior Vice Presidents, Federal

Reserve Banks of Philadelphia, Atlanta,

Dallas, New York, San Francisco, and Chicago,

respectively

Messrs. Broaddus and Danforth, Vice Presidents,

Federal Reserve Banks of Richmond and

Minneapolis, respectively

Mr. Ozog, Manager, Securities Department,

Federal Reserve Bank of New York

By unanimous vote, the minutes of actions take at the meeting

of the Federal Open Market Committee held on March 18, 1980, were approved.

By unanimous vote, System open market transactions in foreign

currencies during the period March 18 through April 21, 1980, were ratified.

By unanimous vote, System open market transactions in Government

securities, agency obligations, and bankers acceptances during the period

March 18 through April 21, 1980, were ratified.

With Mr. Wallich dissenting, 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:

4/22/80

-3-

The information reviewed at this meeting suggests

that economic activity turned down in the latter part

of the first quarter of 1980, although for the quarter

as a whole real GNP expanded somewhat further and the

rise in prices accelerated. Retail sales in real terms

declined sharply in February and March, after having

increased in January. In March industrial production

and nonfarm payroll employment declined, and the un

employment rate edged up to 6.2 percent. Private

housing starts declined throughout the first quarter,

to a rate in March about two-fifths below that in the

third quarter of last year. The rise in producer

prices of finished goods and in consumer prices was

considerably more rapid during the first three months

of 1980 than in 1979. Over the first quarter, the

rise in the index of average hourly earnings was

somewhat above the rapid pace recorded in 1979.

The strong demand for the dollar in exchange

markets that began in mid-February persisted through

early April. Some selling pressure developed in the

second week of April as market participants reacted

to indications that U.S. interest rates might have

peaked, but the trade-weighted value of the dollar

against major foreign currencies remained well above

its level of early February. The U.S. foreign trade

deficit rose further in February.

M-1A and M-1B, which had expanded sharply in

February, contracted in March and early April; M-2

increased relatively little in March. From December

to March, M-1A and M-1B grew at annual rates of about

4 percent and 4-1/2 percent respectively, and M-2

grew at a rate of 7 percent. Expansion of commercial

bank credit slowed substantially in March from the

accelerated pace earlier in the year. Since mid

March, most market interest rates on balance have

declined considerably.

Taking account of past and prospective economic

developments, the Federal Open Market Committee seeks

to foster monetary and financial conditions that will

resist inflationary pressures while encouraging moder

ate economic expansion and contributing to a sustain

able pattern of international transactions. At its

4/22/80

meeting on February 4-5, 1980, the Committee agreed

that these objectives would be furthered by growth

of M-1A, M-1B, M-2, and M-3 from the fourth quarter

of 1979 to the fourth quarter of 1980 within ranges

of 3-1/2 to 6, 4 to 6-1/2, 6 to 9, and 6-1/2 to 9-1/2

percent respectively. The associated range for bank

credit was 6 to 9 percent.

In the short run, the Committee seeks expansion

of reserve aggregates consistent with growth over

the first half of 1980 at an annual rate of 4-1/2

percent for M-1A and 5 percent for M-1B, or somewhat

less, provided that in the period before the next

regular meeting the weekly average federal funds

rate remains within a range of 13 to 19 percent.

The Committee believes that, to be consistent with

this short-run policy, M-2 should grow at an annual

rate of about 6-3/4 percent over the first half and

that bank credit should grow in the months ahead at

a pace compatible with growth over the year as a

whole within the range agreed upon.

If it appears during the period before the next

meeting that the constraint on the federal funds rate

is inconsistent with the objective for the expansion

of reserves, the Manager for Domestic Operations is

promptly to notify the Chairman who will then decide

whether the situation calls for supplementary instruc

tions from the Committee.

It was agreed that the next meeting of the Committee would

be held on Tuesday, May 20, 1980, beginning at 9:30 a.m.

The meeting adjourned.

Secretary