FOMC Minutes

Meeting of the Federal Open Market Committee

June 30-July 1. 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, June 30, 1992, at 2:30 p.m. and was

continued on Wednesday, July 1, 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,

Siegman, and Stockton, Associate Economists

Mr. McDonough, Manager for Foreign Operations,

System Open Market Account

Mr. Slifman, Associate Director, Division of

Research and Statistics, Board of Governors

Mr. Hooper, Assistant Director, Division of

International Finance, Board of Governors

Mr. Rosine,1 Senior Economist, Division of

Research and Statistics, Board of Governors

Mr. Clouse,1 Economist, Division of Monetary Affairs,

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, spectively

Mr. McNees, Vice President, Federal Reserve Bank of

Boston

Mr. Belongia, Assistant Vice President, Federal Reserve

Bank of St. Louis

Ms. Meulendyke, Manager, Open Market Operations, Federal

Reserve Bank of New York

By unanimous vote, the minutes of actions taken at the

meeting of the Federal Open Market Committee held on May 19, 1992,

were approved.

By unanimous vote, System open market transactions in

government securities and federal agency obligations during the period

May 19, 1992, through June 29, 1992, were ratified.

Secretary's Note:

The following actions were taken on

Wednesday, July 1, 1992.

By unanimous vote, the following broad policy statement and

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

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

1991 to the fourth quarter of 1992. The Committee

anticipated that developments contributing to

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.

unusual velocity increases could persist in the

second half of the year. 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.

With Ms. Phillips and Mr. Jordan dissenting, the following

tentative ranges for growth of M2 and M3 and nonfinancial debt in 1993

were approved by the Committee:

For 1993, the Committee on a tentative basis

set the same ranges as in 1992 for growth of the

monetary aggregates and debt measured from the

fourth quarter of 1992 to the fourth quarter of

1993. 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.

With Messrs. LaWare and Melzer dissenting from the opera

tional paragraph on policy implementation in the period immediately

ahead, and Ms. Phillips and Mr. Jordan dissenting from the decision

relating to the monetary growth ranges for 1993, 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

continues to suggest that economic activity is

expanding at a moderate pace. Total nonfarm

payroll employment increased somewhat further in

May, but a surge in job seekers led to a sizable

rise in the civilian unemployment rate to 7.5

percent. Industrial production rose appreciably

further in May, partly reflecting continued

recovery in motor vehicle assemblies. Growth in

consumer spending has slackened after a sharp

advance earlier this year. Although sales of new

homes declined in May, single-family housing starts

rebounded to a level close to the first-quarter

pace. Recent data on orders and shipments of

nondefense capital goods indicate appreciable

increases in outlays for business equipment, and

the trend of building contracts points to some

slowing of the decline in nonresidential

construction. The nominal U.S. merchandise trade

deficit increased in April and was sustantially

above its average rate in the first quarter.

Incoming data on retail prices and labor costs

suggest that inflation is slowing.

Most interest rates have changed little since

the Committee meeting on May 19. In foreign

exchange markets, the trade-weighted value of the

dollar in terms of the other G-10 currencies

declined further over the intermeeting period.

M2 and M3 changed little in May and appear to

have contracted in June; both retail and large

denomination time deposits continued to run off

rapidly. Through June, expansion of the two

aggregates was somewhat 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 stability and promote sustainable growth in

output. In furtherance of these objectives, the

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

1991 to the fourth quarter of 1992. The Committee

anticipated that developments contributing to

unusual velocity increases could persist in the

second half of the year. 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 1993, the Committee on a tentative basis set

the same ranges as in 1992 for growth of the

monetary aggregates and debt measured from the

fourth quarter of 1992 to the fourth quarter of

1993. 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 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 June through September at annual rates of

about 2 and 1/2 percent, respectively.

It was agreed that the next meeting of the Committee would

be held on Tuesday, August 18, 1992.

The meeting adjourned.

Secretary