FOMC Minutes

Meeting of the Federal Open Market Committee

December 22. 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, December 22, 1992, at 8:00 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. Broaddus, 1/ 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, 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

1/

President-elect.

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, Dewald, Lang, Rolnick, Scheld, and

Ms. Tschinkel, Senior Vice Presidents, Federal

Reserve Banks of San Francisco, St. Louis,

Philadelphia, Minneapolis, Chicago, and

Atlanta, respectively

Messrs. Goodfriend, McNees, and O'Driscoll, Vice

Presidents, Federal Reserve Banks of Richmond,

Boston, and Dallas, respectively

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 November 17,

1992, were approved.

By unanimous vote, System open market transactions in

government securities and federal agency obligations during the period

November 17, 1992, through December 21, 1992, were ratified.

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

that economic activity has been rising appreciably in

the current quarter. Total nonfarm payroll employment

has increased slightly since September, and the average

workweek has moved higher. The civilian unemployment

rate fell further in November to 7.2 percent. Indus

trial production posted solid gains in October and

November. Retail sales increased.sharply in October

and rose further in November. Residential construction

activity appears to have increased from the third

quarter pace. Indicators of business fixed investment

have been mixed recently, but on balance they suggest

further growth. The nominal U.S. merchandise trade

deficit narrowed somewhat in October from its average

rate in the third quarter. Recent data on wages and

prices suggest on balance a possible slowing in the

trend toward lower inflation.

Changes in short-term interest rates have been

mixed since the Committee meeting on November 17 while

bond yields have edged lower. In foreign exchange

markets, the trade-weighted value of the dollar in

terms of the other G-10 currencies was essentially

unchanged on balance over the intermeeting period.

Over the course of recent months, M2 has expanded

at a moderate pace, while M3 has continued to expand at

a very slow rate. More recently, both aggregates have

weakened somewhat. Both appear to have grown at rates

a little 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 or slightly lesser reserve restraint would be

acceptable in the intermeeting period. The contem

plated reserve conditions are expected to be consistent

with M2 growing at a rate of around 1-1/2 percent and

M3 about unchanged in the period from November through

March.

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It was agreed that the next meeting of the Committee would

be held on Tuesday-Wednesday, February 2-3, 1993.

The meeting adjourned.

Secretary