FOMC Minutes

Meeting of the Federal Open Market Committee

July 2-3, 1991

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, July 2, 1991, at 2:30 p.m. and was

continued on Wednesday, July 3, 1991, at 9:00 a.m.

PRESENT:

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Greenspan, Chairman

Corrigan, Vice Chairman

Angell

Black

Forrestal

Keehn

Kelley

LaWare

Mullins

Parry

Messrs. Guffey, Hoskins, Melzer, and Syron, Alternate

Members of the Federal Open Market Committee

Messrs. Boehne, McTeer, and Stern, Presidents of the

Federal Reserve Banks of Philadelphia, Dallas,

and Minneapolis, respectively

Mr. Kohn, Secretary and Economist

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Bernard, Deputy Secretary

Coyne, Assistant Secretary

Gillum, Assistant Secretary

Mattingly, General Counsel

Prell, Economist

Truman, Economist

Messrs. Beebe, Broaddus, R. Davis, Lindsey,

Promisel, Scheld, Siegman, Slifman, and

Ms. Tschinkel, Associate Economists

Mr. Cross, Manager for Foreign Operations,

System Open Market Account

Mr. Ettin, Deputy Director, Division of Research and

Statistics, Board of Governors

Chiefs, Division of

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Ms. Danker and Mr. Brady, Section

Monetary Affairs, Board of Governors

Mr. Oliner, Senior Economist, Division of Research and

Statistics, Board of Governors

Ms. Low, Open Market Secretariat Assistant, Division

of Monetary Affairs, Board of Governors

Messrs. J. Davis, T. Davis, Ms. Lovett, Messrs. Lang,

Rolnick, and Rosenblum, Senior Vice Presidents,

Federal Reserve Banks of Cleveland, Kansas City,

New York, Philadelphia, Minneapolis, and Dallas,

respectively

Mr. McNees, Vice President, Federal Reserve Bank of

Boston

Messrs. Guentner and Thornton, Assistant Vice Presidents,

Federal Reserve Banks of New York and St. Louis

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

the Federal Open Market Committee held on May 14, 1991, were approved.

By unanimous vote, System open market transactions in foreign

currencies during the period May 14, 1991, through July 2, 1991, were

ratified.

By unanimous vote, System open market transactions in government

securities and federal agency obligations during the period May 14, 1991,

through July 2, 1991, were ratified.

Secretary's Note:

The following actions were taken on

Wednesday, July 3, 1991.

By unanimous vote, the following broad policy statement and the

ranges for growth of M2 and M3 and nonfinancial debt in 1991 were approved

by the Committee:

The Federal Open Market Committee seeks

monetary and financial conditions that will foster

price stability and promote sustainable growth in

output. In furtherance of these objectives, the

1.

Attended portion of meeting relating to the Committee's discussion

of the economic outlook and its longer-run objectives for monetary

and debt aggregates.

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Committee reaffirmed at this meeting the ranges it

had established in February for growth of M2 and

M3 of 2-1/2 to 6-1/2 percent and 1 to 5 percent,

respectively, measured from the fourth quarter of

1990 to the fourth quarter of 1991. The monitor

ing range for growth of total domestic non

financial debt also was maintained at 4-1/2 to

8-1/2 percent for the year.

With Messrs. Angell and Black dissenting, the following

tentative ranges for growth of M2 and M3 and nonfinancial debt in 1992

were approved by the Committee:

For 1992, on a tentative basis, the Committee

agreed to use the same ranges as in 1991 for

growth in each of the monetary aggregates and

debt, measured from the fourth quarter of 1991 to

the fourth quarter of 1992. With regard to M3,

the Committee anticipated that the ongoing

restructuring of thrift depository institutions

would continue to depress the growth of this

aggregate relative to spending and total credit.

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.

By unanimous vote, except for the dissents by Messrs. Angell

and Black from the decision relating to the monetary growth ranges for

1992, 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 economic activity has begun to recover from the

recent recession. The unemployment rate rose to 6.9

percent in May, but total nonfarm payroll employment

edged up and the average workweek posted a sizable

gain. Manufacturing output has risen in recent months,

led by appreciable increases in assemblies of motor

vehicles. Consumer spending has been bolstered in part

by an upturn in personal income. An increase in orders

points to a firming in demand for business equipment,

but nonresidential construction remains weak. Housing

starts rose over April and May. The nominal U.S.

merchandise trade deficit in April was somewhat below

the average rate in the first quarter. Increases in

consumer prices have been small in recent months.

Most interest rates have risen slightly since the

Committee meeting on May 14. The trade-weighted value

of the dollar in terms of the other G-10 currencies

increased substantially on balance over the inter

meeting period.

M2 grew at a moderate pace over May and June,

while M3 changed little. For the year thus far, ex

pansion of M2 and M3 has been in the middle portion of

the Committee's ranges.

The Federal Open Market Committee seeks monetary

and financial conditions that will foster price sta

bility and promote sustainable growth in output. In

furtherance of these objectives, the Committee re

affirmed at this meeting the ranges it had established

in February for growth of M2 and M3 of 2-1/2 to 6-1/2

percent and 1 to 5 percent, respectively, measured from

the fourth quarter of 1990 to the fourth quarter of

1991. The monitoring range for growth of total

domestic nonfinancial debt also was maintained at 4-1/2

to 8-1/2 percent for the year. For 1992, on a tenta

tive basis, the Committee agreed to use the same ranges

as in 1991 for growth in each of the monetary aggre

gates and debt, measured from the fourth quarter of

1991 to the fourth quarter of 1992. With regard to M3,

the Committee anticipated that the ongoing restruc

turing of thrift depository institutions would continue

to depress the growth of this aggregate relative to

spending and total credit. 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 maintain the existing

degree of pressure on reserve positions. Depending

upon progress toward price stability, trends in

economic activity, the behavior of the monetary

aggregates, and developments in foreign exchange and

domestic financial markets, somewhat greater reserve

restraint or somewhat lesser reserve restraint might be

acceptable in the intermeeting period. The contem

plated reserve conditions are expected to be consistent

with growth of M2 and M3 over the period from June

through September at annual rates of about 5-1/2 and 3

percent, respectively.

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

held on Tuesday, August 20, 1991.

The meeting adjourned.

Secretary