FOMC Minutes

Meeting of the Federal Open Market Committee

October 6, 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, October 6, 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.

Mr.

Kohn, Secretary and Economist

Bernard, Deputy Secretary

Coyne, Assistant Secretary

Gillum, Assistant Secretary

Mattingly, General Counsel

Patrikis, Deputy General Counsel

Prell, Economist

Truman, Economist

Messrs. R. Davis, T. Davis, Ms. Munnell,

Messrs. Lindsey, Promisel, Siegman, and

Stockton, Associate Economists

Mr. McDonough, Manager of the System Open Market

Account

Ms. Greene, Deputy Manager for Foreign

Operations

Ms. Lovett, Deputy Manager for Domestic

Operations

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. Broaddus, Dewald, Lang, Rolnick, Rosenblum

Scheld, and Ms. Tschinkel, Senior Vice Presidents,

Federal Reserve Banks of Richmond, St. Louis,

Philadelphia, Minneapolis, Dallas, Chicago, and

Atlanta, respectively

Messrs. Judd and Sniderman, and Ms. White, Vice

Presidents, Federal Reserve Banks of San Francisco

Cleveland, and New York, respectively

By unanimous vote, the minutes of actions taken at the

meeting of the Federal Open Market Committee held on August 18, 1992,

were approved.

By unanimous vote, System open market transactions in foreign

currencies during the period August 18, 1992, through October 5, 1992,

were ratified.

By unanimous vote, System open market transactions in

government securities and federal agency obligations during the period

August 18, 1992, through October 5, 1992, were ratified.

With Messrs. Jordan, LaWare, Lindsey, and Melzer 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 suggests

that economic activity is expanding at a subdued pace.

Total nonfarm payroll employment declined somewhat

further in September, but the civilian unemployment

rate edged down to 7.5 percent. Industrial production

is estimated to have declined appreciably since July.

Real personal consumption expenditures appear to have

risen moderately in the third quarter. Data on housing

have been mixed, but on balance they continue to

suggest a gradual uptrend in housing expenditures.

Recent data on orders and shipments of nondefense

capital goods indicate slower growth in outlays for

business equipment, while expenditures for non

residential construction have been weak. The nominal

U.S. merchandise trade deficit widened somewhat in July

from its average rate in the second quarter. Incoming

data on wages and prices suggest that inflation is

slowing.

Short-term interest rates have declined somewhat,

while longer-term rates are about unchanged since the

Committee meeting on August 18. In foreign exchange

markets, the trade-weighted value of the dollar in

terms of the other G-10 currencies fluctuated widely

over the intermeeting period but ended the period

higher on balance.

Expansion of M2 and M3 resumed in August, though

at fairly slow rates, and limited growth appears to

have continued in September. Through September both

aggregates were estimated to have grown at rates

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 sta

bility and promote sustainable growth in output. In

furtherance of these objectives, the Committee at its

meeting on June 30-July 1 reaffirmed 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 non

financial 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 September through December at annual rates of

about 2 and 1 percent, respectively.

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It was agreed that the next meeting of the Committee would

be held on Tuesday, November 17, 1992.

The meeting adjourned.

Secretary