FOMC Minutes

Meeting of the Federal Open Market Committee

November 13, 1990

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, November 13, 1990, at 1:30 p.m.

PRESENT:

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Ms.

Mr.

Greenspan, Chairman

Corrigan, Vice Chairman

Angell

Boehne

Boykin

Hoskins

Kelley

LaWare

Mullins

Seger

Stern

Messrs. Black, Forrestal, Keehn, and Parry, Alternate

Members of the Federal Open Market Committee

Messrs. Guffey, Melzer, and Syron, Presidents of the

Federal Reserve Banks of Kansas City, St. Louis,

and Boston, respectively

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Kohn, Secretary and Economist

Bernard, Assistant Secretary

Gillum, Deputy Assistant Secretary

Mattingly, General Counsel

Patrikis, Deputy General Counsel

Prell, Economist

Truman, Economist

Messrs. J. Davis, R. Davis, Promisel, Rolnick,

Rosenblum, Siegman, Simpson, and

Stockton, Associate Economists

Mr. Sternlight, Manager for Domestic Operations,

System Open Market Account

Mr. Cross, Manager for Foreign Operations,

System Open Market Account

-2

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

Mr. Ettin, Deputy Director, Division of Research and

Statistics, Board of Governors

Mr. Slifman, Associate Director, Division of Research

and Statistics, Board of Governors

Mr. Madigan, Assistant Director, Division of Monetary

Affairs, Board of Governors

Ms. Low, Open Market Secretariat Assistant, Division of

Monetary Affairs, Board of Governors

Mr. Guynn, First Vice President, Federal Reserve Bank of

Atlanta

Messrs. Balbach, Beebe, Broaddus, T. Davis, Ms. Munnell,

and Mr. Scheld, Senior Vice Presidents, Federal Reserve

Banks of St. Louis, San Francisco, Richmond,

Kansas City, Boston, and Chicago, respectively

Ms. Lovett and Mr. Meyer, Vice Presidents, Federal

Reserve Banks of New York and Philadelphia,

respectively

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

the Federal Open Market Committee held on October 2, 1990, were approved.

By unanimous vote, System open market transactions in government

securities and federal agency obligations during the period October 2,

1990, through November 12, 1990, were ratified.

By unanimous vote, the Committee authorized the renewal for

further periods of one year of the System's reciprocal currency ("swap")

arrangements having the amounts and maturity dates indicated below:

Foreign Bank

Austrian National Bank

Bank of England

Bank of Japan

Bank of Mexico

Bank of Norway

Bank of Sweden

Swiss National Bank

Bank for International

SettlementsSwiss francs

Other authorized

European currencies

National Bank of Belgium

Bank of Canada

National Bank of Denmark

Bank of France

Amount of

arrangement

(millions of

$ equivalent)

$ 250.0

3,000.0

5,000.0

700.0

250.0

300.0

4,000.0

Maturity

Term

date

(months)

12/04/90

12 mos.

12/04/90

"

12/04/90

"

12/04/90

"

"12/04/90

"12/04/90

12/04/90

"

600.0

"12/04/90

1,250.0

1,000.0

2,000.0

250.0

2,000.0

"12/04/90

"12/18/90

"

"

"

12/28/90

12/28/90

12/28/90

German Federal Bank

6,000.0

"

12/28/90

Bank of Italy

Netherlands Bank

3,000.0

500.0

"12/28/90

"12/28/90

By unanimous vote, the Committee authorized the removal of the

reference to the intermeeting federal funds range in the operational

paragraph of the domestic policy directive.

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

a weakening in economic activity. Total nonfarm

payroll employment declined further in October,

reflecting sizable job losses in manufacturing and

construction; the civilian unemployment rate held

steady at 5.7 percent. Industrial production declined

sharply in October after rising moderately during the

summer. Consumer spending is estimated to have

flattened out in real terms over August and September

when a surge in energy prices caused a substantial

drop in real disposable income. Advance indicators of

business capital spending point to considerable

softening in investment in coming months. Residential

construction weakened further in the third quarter.

The nominal U.S. merchandise trade deficit widened

substantially in July-August from its average rate in

the second quarter as imports strengthened. Markedly

higher oil prices have boosted consumer and producer

prices in recent months. The latest data on labor

costs suggest some slight improvement from earlier

trends.

Most interest rates have fallen somewhat since

the Committee meeting on October 2. In foreign

exchange markets, the trade-weighted value of the

dollar in terms of the other G-10 currencies has

declined considerably further over the intermeeting

period.

In October, M2 grew only slightly after two

months of relatively rapid expansion, while M3 was

about unchanged. Through October, expansion of M2 was

estimated to be somewhat below the middle of the

Committee's range for the year and growth of M3 near

the lower end of its range. Expansion of total

domestic nonfinancial debt appears to have been near

the midpoint of its monitoring range.

The Federal Open Market Committee seeks monetary

and financial conditions that will foster price

stability, promote growth in output on a sustainable

basis, and contribute to an improved pattern of

international transactions. In furtherance of these

objectives, the Committee at its meeting in July

reaffirmed the range it had established in February

for M2 growth of 3 to 7 percent, measured from the

fourth quarter of 1989 to the fourth quarter of 1990.

The Committee in July also retained the monitoring

range of 5 to 9 percent for the year that it had set

for growth of total domestic nonfinancial debt. With

regard to M3, the Committee recognized that the on

going restructuring of thrift depository institutions

had depressed its growth relative to spending and

total credit more than anticipated. Taking account of

the unexpectedly strong M3 velocity, the Committee

decided in July to reduce the 1990 range to 1 to 5

percent. For 1991, the Committee agreed on pro

visional ranges for monetary growth, measured from the

fourth quarter of 1990 to the fourth quarter of 1991,

of 2-1/2 to 6-1/2 percent for M2 and 1 to 5 percent

for M3. The Committee tentatively set the associated

monitoring range for growth of total domestic non

financial debt at 4-1/2 to 8-1/2 percent for 1991.

The behavior of the monetary aggregates will continue

to be evaluated in the light of progress toward price

level stability, movements in their velocities, and

developments in the economy and financial markets.

In the implementation of policy for the immediate

future, the Committee seeks to decrease slightly the

existing degree of pressure on reserve positions.

Taking account of progress toward price stability, the

strength of the business expansion, the behavior of

the monetary aggregates, and developments in foreign

exchange and domestic financial markets, slightly

greater reserve restraint might or somewhat lesser

reserve restraint would be acceptable in the inter

meeting period. The contemplated reserve conditions

are expected to be consistent with growth of both M2

and M3 over the period from September through December

at annual rates of about 1 to 2 percent.

It was agreed that the next meeting of the Committee would be

held on Tuesday, December 18, 1990.

The meeting adjourned.

Secretary