FOMC Minutes

Meeting of the Federal Open Market Committee

November 5, 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.,

PRESENT:

on Tuesday, November 5, 1991, at 9:00 a.m.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Greenspan, Chairman

Corrigan, Vice Chairman

Angell

Black

Forrestal

Keehn

Kelley

LaWare

Mullins

Parry

Messrs. Hoenig, 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.

Mr.

Mr.

Mr.

Mr.

Mr.

Bernard, Deputy Secretary

Coyne, Assistant Secretary

Gillum, Assistant Secretary

Mattingly, General Counsel

Prell, Economist

Truman, Economist

Messrs. Broaddus, R. Davis, Lindsey, Promisel,

Scheld, Siegman, Simpson, Slifman, and

Ms. Tschinkel, Associate Economists

Mr. Sternlight, Manager for Domestic Operations,

System Open Market Account

Mr. Ettin, Deputy 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

Messrs. Hendricks and Salvaggio, First Vice Presidents,

Federal Reserve Banks of Cleveland and Dallas,

respectively

Messrs. Balbach, J. Davis, T. Davis, Ms. Greene,

Mr. Lang, Ms. Munnell, and Mr. Rolnick,

Senior Vice Presidents, Federal Reserve Banks

of St. Louis, Cleveland, Kansas City, New York,

Philadelphia, Boston, and Minneapolis,

respectively

Mr. Judd and Ms. White, Vice Presidents, Federal

Reserve Banks of San Francisco and New York,

respectively

By unanimous vote, the minutes of actions taken at the

meeting of the Federal Open Market Committee held on October 1, 1991,

were approved.

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

Amount of

arrangement

(millions of

$ equivalent)

$

250.0

Term

(months)

12 mos.

3,000.0

5,000.0

700.0

250.0

300.0

4,000.0

Maturity

date

12/04/91

12/04/91

12/04/91

12/04/91

12/04/91

12/04/91

12/04/91

Settlements-

Swiss francs

Other authorized

European currencies

National Bank of Belgium

Bank of Canada

National Bank of Denmark

Bank of France

German Federal Bank

Bank of Italy

Netherlands Bank

600.0

1,250.0

1,000.0

2,000.0

250.0

2,000.0

6,000.0

3,000.0

500.0

"

"

"

"

"

12/04/91

12/04/91

12/18/91

12/28/91

12/28/91

12/28/91

12/28/91

12/28/91

12/28/91

By unanimous vote, System open market transactions in government

securities and federal agency obligations during the period October 1,

1991, through November 4, 1991, were ratified.

By unanimous vote, paragraph l.A of the Authorization for Domestic

Open Market Operations was amended to raise from $8 billion to $10 billion

the dollar limit on intermeeting changes in System Account holdings of U.S.

government and federal agency securities for the intermeeting period

through December 17, 1991.

With Messrs. Angell and Kelley 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:

The information reviewed at this meeting portrays

a sluggish economy and a marked deterioration in

business and consumer confidence. Total nonfarm pay

roll employment was unchanged in October after rising

slightly over the third quarter, and the civilian

unemployment rate edged back up to 6.8 percent.

Industrial production has been flat in recent months.

Consumer spending increased considerably through the

summer, in part because of a sizable rise in expendi

tures on motor vehicles; sales of motor vehicles slowed

in October, however. Real outlays for business

equipment--especially for computers--have been rising,

but nonresidential construction has continued to

decline. Housing starts and home sales have weakened

recently. The nominal U.S. merchandise trade deficit

in July-August was significantly above its average rate

in the second quarter. Wage and price increases have

continued to trend downward.

Short-term interest rates have declined somewhat

further since the Committee meeting on October 1, while

bond yields are about unchanged to slightly higher on

balance. The trade-weighted value of the dollar in

terms of the other G-10 currencies declined on balance

over the intermeeting period.

Expansion in M2 and M3 resumed in October, albeit

at a slow pace. For the year through October, expan

sion of both M2 and M3 is estimated to have been at the

lower ends 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 at its

meeting in July reaffirmed the ranges it had estab

lished 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

tentative basis, the Committee agreed in July 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.

In the implementation of policy for the immediate

future, the Committee seeks to decrease somewhat 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, slightly greater reserve

restraint might or slightly lesser reserve restraint

would be acceptable in the intermeeting period. The

contemplated reserve conditions are expected to be

consistent with growth of M2 and M3 over the period

from September through December at annual rates of

about 3 and 1 percent, respectively.

It was agreed that the next meeting of the Committee would

be held on Tuesday, December 17, 1991.

The meeting adjourned.

Secretary