FOMC Minutes

Meeting of the Federal Open Market Committee

January 5, 1988

Minutes of Actions

A meeting of the Federal Open Market Committee was held on

Tuesday, January 5, 1988, at 4:00 p.m.

This was a telephone conference

meeting and each individual was in Washington, D. C., except as otherwise

indicated in parentheses in the following list of those participating.

PRESENT:

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Ms.

Mr.

Greenspan, Chairman

Corrigan, Vice Chairman

Angell

Boehne

Boykin

Heller

Johnson

Keehn

Kelley

Seger

Stern

(New York)

(Philadelphia)

(Dallas)

(Chicago)

(Minneapolis)

Messrs. Black (Richmond), Forrestal (Atlanta), Hoskins (Cleveland),

and Parry (San Francisco), Alternate Members of the Federal

Open Market Committee

Messrs. Melzer (St. Louis) and Morris (Boston), Presidents of the

Federal Reserve Banks of St. Louis and Boston, respectively

Mr. Bernard, Assistant Secretary

Mr. Bradfield, General Counsel

Mr. Truman, Economist (International)

Messrs. Lindsey and Prell, Associate Economists

Mr. Sternlight (New York), Manager for Domestic Operations,

System Open Market Account

Mr. Cross (New York), Manager for Foreign Operations,

System Open Market Account

1/5/88

Mr. Coyne, Assistant to the Board, Board of Governors

Ms. Low, Open Market Secretariat Assistant, Division of Monetary

Affairs, Board of Governors

Mr. Czerwinski (Kansas City), First Vice President, Federal

Reserve Bank of Kansas City

With Ms. Seger dissenting, the Committee changed the operational

paragraph of the directive issued at its meeting on December 15-16, 1987

to the Federal Reserve Bank of New York to read as follows:

In the implementation of policy for the immediate

future, the Committee seeks to maintain the existing

degree of pressure on reserve positions. The Committee

agrees that the passing of time and the year-end should

permit further progress toward restoring a normal

approach to open market operations, although still

sensitive conditions in financial markets and uncer

tainties in the economic outlook may continue to call

for some flexibility in operations. Taking account of

conditions in financial markets, somewhat lesser reserve

restraint or somewhat greater reserve restraint would

be acceptable depending on the strength of the business

expansion, indications of inflationary pressures,

developments in foreign exchange markets, as well as

the behavior of the monetary aggregates. The contem

plated reserve conditions are expected to be consistent

with growth in M2 and M3 over the period from November

through March at annual rates of about 5 percent and 6

percent, respectively. Over the same period, growth

in M1 is expected to remain relatively limited. The

Chairman may call for Committee consultation if it

appears to the Manager for Domestic Operations that

reserve conditions during the period before the next

meeting are likely to be associated with a federal

funds rate persistently outside a range of 4 to 8 percent.

The meeting adjourned.

Secretary