FOMC Minutes

Meeting of the Federal Open Market Committee

May 19. 1992

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, May 19, 1992, at 9:00 a.m.

PRESENT:

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Ms.

Mr.

Greenspan, Chairman

Corrigan, Vice Chairman

Angell

Hoenig

Jordan

Kelley

LaWare

Lindsey

Melzer

Mullins

Phillips

Syron

Messrs. Boehne, Keehn, McTeer, and Stern, Alternate

Members of the Federal Open Market Committee

Messrs. Black, Forrestal, and Parry, Presidents of

the Federal Reserve Banks of.Richmond,

Atlanta, and San Francisco, respectively

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Kohn, Secretary and Economist

Bernard, Deputy Secretary

Coyne, Assistant Secretary

Gillum, Assistant Secretary

Mattingly, General Counsel

Prell, Economist

Truman, Economist

Messrs. J. Davis, R. Davis, T. Davis, Lindsey,

Promisel, Siegman, Simpson, and Stockton,

Associate Economists

Mr. Sternlight, Manager for Domestic Operations,

System Open Market Account

Mr. McDonough, Manager for Foreign Operations,

System Open Market Account

-2

Mr. Ettin, Deputy Director, Division of Research

and Statistics, Board of Governors

Mr. Slifman, Associate Director, Division of

Research and Statistics, Board of Governors

Ms. Low, Open Market Secretariat Assistant,

Division of Monetary Affairs, Board of

Governors

Messrs. Beebe, Broaddus, Lang, Ms. Lovett, Messrs.

Rolnick, Rosenblum, Scheld, and Ms. Tschinkel,

Senior Vice Presidents, Federal Reserve Banks of

San Francisco, Richmond, Philadelphia, New York,

Minneapolis, Dallas, Chicago, and Atlanta,

respectively

Mr. McNees, Vice President, Federal Reserve Bank of

Boston

Mr. Thornton, Assistant Vice President, Federal Reserve

Bank of St. Louis

By unanimous vote, the minutes of actions taken at the

meeting of the Federal Open Market Committee held on March 31,

1992, were approved.

By unanimous vote, System open market transactions in

government securities and federal agency obligations during the period

March 31, 1992, through May 18, 1992, 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 July 1, 1992.

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

on balance that economic activity is expanding at a

moderate pace. Total nonfarm payroll employment

increased somewhat in April, and the civilian unemploy

ment rate edged down to 7.2 percent. Industrial

production rose appreciably further in April partly

reflecting some further recovery in motor vehicle

assemblies. A rebound in retail sales in April about

offset the decline in March. Single-family housing

starts fell considerably for a second month in April.

Recent data on orders and shipments of nondefense

capital goods indicate appreciable increases in outlays

for business equipment, and building contracts point to

some slowing of the decline in nonresidential

construction. The nominal U.S. merchandise trade

deficit in January-February was somewhat below its

Incoming data on

average rate in the fourth quarter.

prices and labor costs suggest little change from

recent trends.

Most interest rates have fallen since the

In foreign exchange

Committee meeting on March 31.

markets, the trade-weighted value of the dollar in

terms of the other G-10 currencies declined on balance

over the intermeeting period.

M2 and M3 contracted in March and April; and

expansion in transactions balances, which had accounted

for much of the growth in the broader aggregates over

previous months, slowed markedly. Through April,

expansion of M2 was slightly above and that of M3 was

slightly below the lower ends of the ranges established

by the Committee for the year.

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 February established ranges 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 1991

to the fourth quarter of 1992.

The monitoring range

for growth of total domestic nonfinancial debt was set

at 4-1/2 to 8-1/2 percent for the year. With regard to

M3, the Committee anticipated that the ongoing

restructuring of 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. In the

context of the Committee's long-run objectives for

price stability and sustainable economic growth, and

giving careful consideration to economic, financial,

and monetary developments, slightly greater reserve

restraint or slightly 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 April

through June at annual rates of about 2-1/2 and 1-1/2

percent, respectively.

It was agreed that the next meeting of the Committee would

be held on Tuesday-Wednesday, June 30-July 1, 1992.

The meeting adjourned.

Secretary