FOMC Minutes

Meeting of May 18, 1993

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 18, 1993, at 9:00 a.m.

PRESENT:

Mr. Greenspan, Chairman

Mr. Corrigan, Vice Chairman

Mr. Angell

Mr. Boehne

Mr. Keehn

Mr. Kelley

Mr. LaWare

Mr. Lindsey

Mr. McTeer

Mr. Mullins

Ms. Phillips

Mr. Stern

Messrs. Broaddus, Jordan, Forrestal, and Parry,

Alternate Members of the Federal Open Market

Committee

Messrs. Hoenig, Melzer, and Syron, Presidents

of the Federal Reserve Banks of Kansas City,

St. Louis, and Boston, respectively

Mr. Bernard, Deputy Secretary

Mr. Coyne, Assistant Secretary

Mr. Gillum, Assistant Secretary

Mr. Mattingly, General Counsel

Mr. Prell, Economist

Messrs. R. Davis, Lang, Lindsey, Promisel,

Rolnick, Rosenblum, Scheld, Siegman,

and Slifman, 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. Madigan, Associate Director, Division of Monetary

Affairs, Board of Governors

Mr. Stockton, Associate Director, Division of Research

and Statistics, Board of Governors

Mr. Hooper, Assistant Director, Division of

International Finance, Board of Governors

Mr. Small,1 Section Chief, Division of Monetary

Affairs, Board of Governors

Ms. Low, Open Market Secretariat Assistant,

Division of Monetary Affairs, Board of Governors

Messrs. T. Davis, Dewald, and Goodfriend, Senior Vice

Presidents, Federal Reserve Banks of Kansas City,

St. Louis, and Richmond, respectively

Ms. Browne, Mr. Judd, and Mses. Rosenbaum and White,

Vice Presidents, Federal Reserve Banks of Boston,

San Francisco, Atlanta, and New York, respectively

Mr. Eberts, Assistant Vice President, Federal Reserve

Bank of Cleveland

1. Attended portion of meeting relating to a report on a study entitled "Operating Procedures

and the Conduct of Monetary Policy: Conference Proceedings," edited by Marvin Goodfriend

and David Small. This two-volume study has been designated Working Studies 1, Parts 1 and 2,

of the Federal Reserve Board's Finance and Economic Discussion Series.

By unanimous vote, the minutes for the meeting of the Federal Open Market Committee held on

March 23, 1993, were approved.

The Deputy Manager for Foreign Operations reported on developments in foreign exchange markets

and on System transactions in foreign currencies during the period March 23, 1993, through May 17,

1993. By unanimous vote, the Committee ratified these transactions.

The Manager of the System Open Market Account reported on developments in domestic financial

markets and on System open market transactions in government securities and federal agency

obligations during the period March 23, 1993, through May 17, 1993. By unanimous vote, the

Committee ratified these transactions.

The Committee then turned to a discussion of the economic outlook and the implementation of

monetary policy over the intermeeting period ahead. A summary of the economic and financial

information available at the time of the meeting and of the Committee's discussion is provided below,

followed by the domestic policy directive that was approved by the Committee and issued to the

Federal Reserve Bank of New York.

The information reviewed at this meeting suggested that the pace of the economic expansion had

slowed in recent months. Business outlays for durable equipment had remained strong, but consumer

spending had been quite sluggish, reflecting limited gains in employment and real labor income and

diminished optimism about near-term economic prospects. Additionally, U.S. exports continued to be

constrained by the disappointing performance of the major foreign industrial economies. Available

data indicated relatively modest growth in payroll employment and industrial production over recent

months. Despite the considerable slack in the economy, increases in wages and prices had been

appreciably larger thus far in 1993 than in the second half of last year.

Total nonfarm payroll employment rose only slightly on balance over March and April after

registering sizable increases in the first two months of the year. Strong job gains in the services

industry, notably in business and health services, were offset in considerable measure by job losses in

manufacturing and construction in March and April. In manufacturing, reductions in payrolls were

widespread, with particularly large declines at manufacturers of transportation equipment.

Construction employment recovered only partially in April from the weather-related decline in

March. The civilian unemployment rate remained at 7.0 percent.

Industrial production, after having posted solid gains in previous months, was little changed in

March and April. Part of the recent sluggishness reflected a decline in utility output following a

weather-related runup in February, but manufacturing output also grew more slowly. In the

transportation industry, motor vehicle assemblies edged down and production of civilian aircraft

remained weak over March and April. Elsewhere, the output of consumer goods other than motor

vehicles was about unchanged, and the continuing strength in the computer industry contrasted with

sluggish production of other types of business equipment. Total utilization of industrial capacity

changed little over the two months.

Retail sales increased substantially in April, reversing the weather-related decline in March;

automotive dealers reported large sales gains in April, and expenditures at other retail outlets retraced

part of the March decrease. For the year to date, however, retail sales had been lackluster after the

strong increases of the latter part of 1992. Housing starts picked up in April; both single-family and

multifamily starts rebounded from weather-depressed March levels.

Business fixed investment advanced further during the first quarter of 1993, with another sizable rise

in outlays for equipment outweighing continued weakness in nonresidential construction. Shipments

of nondefense capital goods during the first quarter were paced by another sharp increase in

shipments of office and computing equipment. By contrast, business spending for transportation

equipment generally exhibited little strength; although sales of heavy trucks continued to trend up,

outlays for complete aircraft apparently edged down further. Recent data on orders for nondefense

capital goods other than aircraft suggested further expansion in business spending for equipment in

the near term. Nonresidential construction activity was mixed in the first quarter. Office construction

declined considerably further in response to the depressing effects of a continuing overhang of

unoccupied space. On the other hand, building activity in the public utilities sector continued to trend

up, and the construction of commercial structures other than office buildings increased for a second

consecutive quarter.

Business inventories appeared to have risen in the first quarter. Manufacturing inventories expanded

in both February and March after a series of declines that began early in the fall; much of the recent

advance occurred in the durable goods sector, where shipments were strong, and the ratio of

inventories to shipments fell for manufacturing as a whole. Wholesale inventories increased

appreciably in March. However, the inventory-to-sales ratio for the sector moved up only slightly,

and it remained near the low end of its range over the past two years. In the retail sector, available

data indicated that inventories rose appreciably over January and February but that the inventoryto-sales ratio remained in the narrow range that had prevailed over the preceding year.

The nominal U.S. merchandise trade deficit in February was unchanged from its January level,

reflecting little change in total exports and total imports. For January-February combined, however,

the trade deficit was slightly below its average level for the fourth quarter, with both exports and

imports down considerably from their fourth-quarter levels. Much of the drop in exports reflected a

reversal of an earlier, largely transitory runup in aircraft and automotive products. The decline in

imports was spread across all major trade categories; imports of aircraft and miscellaneous industrial

supplies dropped appreciably, and imports of consumer goods fell further. Recent indicators pointed

to further weakness in economic activity in continental Europe and Japan through the first quarter.

Elsewhere, the recovery in the United Kingdom appeared to be firming, and growth continued at a

modest pace in Canada.

Producer prices of finished goods rose more rapidly in March and April, partly as a result of sharp

increases in the prices of finished energy goods in March and in the prices of finished foods in April.

Excluding the food and energy components, producer prices advanced over the first four months of

1993 at a faster pace than in 1992. At the consumer level, the increase in prices of nonfood,

non-energy items over the March-April period was smaller than the outsized change over the first

two months of the year; nevertheless, averaging over the first four months of the year, the rate of

increase in consumer prices was higher than in 1992. The deceleration of labor costs also appeared to

have stalled in 1993. Average hourly earnings of production or nonsupervisory workers had grown

more rapidly thus far this year than in 1992, and total hourly compensation of private industry

workers rose at a faster pace in the first quarter of 1993 than in any quarter of last year.

At its meeting on March 23, the Committee adopted a directive that called for maintaining the

existing degree of pressure on reserve positions and that did not include a presumption about the

likely direction of any adjustments to policy during the intermeeting period. Accordingly, the

directive indicated that 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 during the intermeeting period. The reserve conditions associated with this directive were

expected to be consistent with a resumption of moderate growth in M2 and M3 over the second

quarter.

Open market operations during the intermeeting period were directed toward maintaining the

existing degree of pressure on reserve positions. Expected levels of adjustment plus seasonal

borrowing were raised during the period in anticipation of some increase in seasonal borrowing.

Adjustment plus seasonal borrowing was near or a little above expected levels, except for a surge at

the end of the first quarter, and the federal funds rate remained close to the 3 percent level that had

prevailed for an extended period.

Short-term interest rates changed little over the period since the March meeting. Long-term rates rose

considerably early in the period when a sharp increase in average hourly earnings and some upward

pressure on commodity prices sparked fears among market participants of a buildup in inflation

pressures. Subsequently, despite growing doubts about the fate of the deficit reduction program, bond

yields declined in response to a series of more favorable readings on price behavior and to

indications of a slowing of the economic expansion. Adverse news about consumer and producer

prices rekindled inflation concerns late in the period, and bond rates once again moved higher. On

balance, most long-term market rates rose somewhat over the period. Despite unexpectedly favorable

earnings reports for many firms, major indexes of stock prices were narrowly mixed over the period.

In foreign exchange markets, the trade-weighted value of the dollar in terms of the other G-10

currencies declined somewhat on balance over the intermeeting period. The dollar depreciated

considerably more against the Japanese yen than against the German mark. A variety of factors

contributed to the dollar's weakness, including indications of renewed sluggishness in U.S. economic

activity, diminished prospects for a fiscal stimulus package, and market perceptions over much of the

intermeeting period of limited official support for concerted actions to support the dollar against the

yen. After falling to a historical low against the yen in late April, the dollar tended to stabilize

following Treasury Secretary Bentsen's clarification of the Administration's exchange rate policy and

intervention purchases of dollars against yen in a coordinated operation. Later in the period, the

dollar rose somewhat against European currencies as the outlook for economic activity in Europe

became more pessimistic.

M2 contracted slightly on balance over March and April, while M3 was unchanged over the two

months; both monetary aggregates increased substantially in early May. Much of the weakness in M2

over the March-April period owed to a smaller volume of nonwithheld tax payments in April of this

year that reduced the need for a buildup in deposits to fund these payments. Abstracting from this

temporary depressant, weak underlying growth in M2 continued to reflect the relatively attractive

returns available on capital market instruments such as bond and stock mutual funds, which

experienced heavy inflows during the two-month period. Total domestic nonfinancial debt expanded

somewhat further through March.

The staff projection prepared for this meeting suggested that economic activity would grow at a

moderate pace and that such growth would foster a gradual reduction in margins of unemployed

labor and capital. The projection continued to incorporate the essential elements of the

Administration's fiscal package, excluding that portion of the short-run stimulus initiative that

seemed unlikely to be enacted by the Congress. Although the outlook for fiscal policy now seemed

somewhat more contractionary than earlier, the sizable declines in long-term interest rates that had

occurred in recent months were expected to support substantial additional gains in business and

residential investment. Moreover, the increasingly favorable financial environment associated with

expected further easing of credit supply constraints and the ongoing strengthening of balance sheets

would tend to buttress private spending on housing, consumer durables, and business equipment.

Increases in export demand would be damped in the near term by the continuing weakness in the

economies of the major industrialized countries. The persisting slack in resource utilization was

expected to be associated with a return to more subdued price increases after a spurt earlier in the

year.

In the Committee's discussion of current and prospective economic conditions, the members focused

with some concern on the evidence of a slower economic expansion and a higher rate of inflation

since late 1992. While recent indicators of economic activity were disappointing, the expansion

nonetheless appeared to have sustainable momentum and the members generally viewed moderate

growth in line with, or perhaps a bit below, their February forecasts as a reasonable expectation. At

the same time, several emphasized that the outlook was subject to substantial uncertainty stemming

to an important extent from the unsettled course of legislation aimed at reducing the federal deficit.

Members expressed particular concern about the rise in various measures of inflation over the past

several months. The increase seemed to reflect temporary factors and a worsening in inflationary

expectations rather than any significant change in economic fundamentals. Accordingly, it was

premature in the view of many members to conclude that the inflationary trend had tilted upward.

Even so, higher inflation expectations, if sustained, would be detrimental to economic performance,

and the risks of an uptrend in inflation clearly had increased.

In their review of business developments across the nation, members continued to report uneven

conditions ranging from apparently moderate gains in some parts of the country to mixed or

marginally declining activity in others. Business confidence had deteriorated in many areas and firms

were trimming or putting on hold new or expanded spending programs pending a resolution of

federal tax and spending proposals, including prospective health care reform, and the outcome of

proposed tax legislation in some states as well. Cautious business attitudes were reflected in

continuing efforts to constrain costs and to hold down or reduce employment levels, notably of

permanent workers in light of the large non-wage costs associated with full-time workers.

Accordingly, while some job growth was occurring, especially outside major firms and the defense

sector, business firms generally appeared disposed to continue to meet increases in demand through

overtime work and temporary workers, and members anticipated that such attitudes were likely to

persist in the absence of a major improvement in business confidence.

As reflected in the available data for the national economy, anecdotal reports from around the

country suggested generally lackluster retail sales over the first four months of the year. To an extent,

this development probably involved some retrenchment in consumer spending following an

unsustainable surge during the latter part of 1992. In some parts of the country, unusually severe

weather conditions also had served to hold down retail sales earlier this year and recovery from that

slowdown had tended to be limited thus far, especially outside the automotive sector. Looking ahead,

the members continued to anticipate that consumer spending would provide moderate support for a

sustained economic expansion.

Despite the cautious business attitudes about the economic outlook, spending for business equipment

had continued to help maintain the expansion. Encouraged in part by relatively low interest rates,

receptive financial markets, and the more aggressive lending policies of some depository institutions,

many firms were upgrading equipment to reduce costs and improve their product offerings.

Concurrently, however, numerous firms reported that they were holding off on making major new

investment commitments and in some cases were revising down earlier expansion plans in light of

prevailing economic uncertainties, notably those generated by the current legislative debate about

federal taxes and spending. Nonresidential construction remained uneven and on the whole relatively

subdued across the nation. The construction of new office structures was likely to stay depressed in

much of the country as overcapacity continued to be worked down, but members saw indications of

some strengthening in industrial and commercial building activity and in public works projects in

some areas.

Turning to the outlook for the nation's trade balance, some members referred to quite gloomy

assessments from business contacts and other sources regarding current economic conditions in a

number of major industrial nations and the associated prospect of little or no growth in U.S. exports

to such countries. While total U.S. exports might continue to expand, reflecting sizable gains in some

parts of the world, imports probably would grow at a somewhat faster pace, given moderate

expansion in domestic demand in line with the members' expectations. At the same time, members

expressed concern about the potential impact of growing protectionist sentiment on current trade

negotiations and on the longer-run outlook for domestic industries and parts of the country that relied

on foreign trade.

With regard to the inflation situation, members commented that it remained difficult to find a

satisfactory explanation for the faster-than-projected increases in price measures thus far this year.

Although temporary anomalies seemed to be involved, including measurement problems and special

factors boosting some prices, higher inflation expectations also might have been playing a key role.

The latter seemed to have intensified in the last month or two, perhaps as a result of growing

concerns that significant deficit-reduction legislation might not be enacted. Strong competitive

pressures in many markets, including competition from foreign producers, still appeared to be

restraining or precluding price increases by many business firms, but efforts to raise prices seemed to

be encountering somewhat less resistance recently than earlier in the economic expansion. Some

price increases appeared to be associated with the earlier surge in demand, and in the case of one key

industry higher prices had been facilitated by the implementation of import restrictions. The

downtrend in labor compensation inflation also seemed to have stalled in recent months. Against this

background, a considerable degree of uncertainty surrounded the outlook for inflation and the

members differed to some extent with regard to the most likely outcome. A number of members,

while they did not rule out the possibility of a more favorable result, stressed the risk that a faster rate

of inflation might well tend to be sustained. Others gave more emphasis to the still considerable

slack in labor and product markets and to the restrained growth in broad measures of money and

credit. In this view, an inflation rate in the quarters ahead more in line with their earlier forecasts was

still a reasonable expectation even though the average rate for the year as a whole was likely to be

higher than they had forecast at the start of the year.

In the Committee's discussion of policy for the intermeeting period ahead, many of the members

commented that recent price and wage developments were troubling but did not point persuasively at

this juncture toward an extended period of higher inflation. In light of underlying economic and

financial conditions, the upturn in inflation expectations and the somewhat quickened pace of

inflation might well prove to be temporary. The economy was expanding, but the pace had slowed in

recent months. On the other hand, the potential for a sustained increase in the rate of inflation could

not be dismissed. Waiting too long to counter any emerging uptrend in inflation or further worsening

in inflationary expectations would exacerbate inflationary pressures and require more substantial and

more disruptive policy moves later. Indeed, in one view sensitive commodity prices and other key

measures of inflation already indicated the need for a prompt move toward restraint, especially in the

context of the Committee's objective of fostering progress toward price stability. However, the other

members all supported a proposal to maintain an unchanged degree of pressure on reserve positions

at this time.

In the course of the Committee's discussion, the members took account of a staff analysis that

pointed to a considerable pickup in the growth of M2 and M3 over the months of May and June.

Such strengthening, which appeared to have emerged in early May, was associated in part with the

reversal of earlier tax-related distortions and with a surge in prepayments of mortgage-backed

securities. Monetary growth was expected to revert to a more modest pace over subsequent months,

and the members recognized that in any event the interpretation of monetary growth rates needed to

be approached with considerable caution in a period when traditional relationships of such growth to

aggregate measures of economic performance were not reliable. In present circumstances, M2 and

M3 no longer seemed to be good barometers of underlying liquidity, which appeared to be ample.

One member expressed the view that the relatively robust growth of M1 and reserves served as a

better indicator of the thrust of monetary policy than did the broader monetary aggregates.

In the view of a majority of the members, wage and price developments over recent months were

sufficiently worrisome to warrant positioning policy for a move toward restraint should signs of

intensifying inflation continue to multiply. In addition to new information on prices and costs, such

signs could include developments in markets affected by inflation psychology, such as those for

bonds, foreign exchange, and sensitive commodities, all of which would need to be monitored

carefully. These members supported a directive that incorporated a greater predilection to tighten

than to ease over the intermeeting period. Given the special nature of current inflation concerns and

attendant uncertainties, however, the Committee agreed with a proposal by the Chairman that an

intermeeting consultation would be appropriate in the event that a tightening move were to be

contemplated during this period. If a policy tightening action were not needed, an asymmetric

directive would nonetheless underscore the Committee's concern about recent inflation readings and

its judgment that a policy to encourage progress toward price stability would promote sustained

economic growth. In the event that a tightening action became necessary, such action could help to

moderate inflationary expectations, with positive implications over time for long-term interest rates

and the performance of the economy. Monetary policy would still be stimulative after a modest

tightening move in that such a move would leave short-term interest rates close to or even below

their year-ago levels in real terms, given the interim rise in inflation.

Some members preferred to retain a directive that did not incorporate a presumption about the likely

direction of a change in policy, if any, during the intermeeting period. They were concerned that

adopting a biased directive might prove to be an overreaction to temporary factors and to a

short-lived upturn in inflationary sentiment that was not warranted by underlying economic

conditions. They noted that, if called for by intermeeting developments, a move toward restraint

could be implemented from a symmetric directive. More fundamentally, they believed that the

circumstances surrounding the recent performance of the economy and the uncertainties about price

developments suggested the need for considerable caution before any policy tightening was

implemented and that such a policy move should be carried out only in the light of information that

pointed clearly to the emergence of higher inflation. Nonetheless, all but one of these members could

accept an asymmetric directive on the understanding that the Committee would have a chance to

discuss any possible policy action.

At the conclusion of the Committee's discussion, all but two of the members indicated that they

preferred or could accept a directive that called for maintaining the existing degree of pressure on

reserve positions and that included a bias toward possible firming of reserve conditions during the

intermeeting period. Accordingly, 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, the Committee decided that slightly greater reserve restraint would be

acceptable or slightly lesser reserve restraint might be acceptable during the intermeeting period. The

reserve conditions contemplated at this meeting were expected to be consistent with appreciable

growth in the broader monetary aggregates over the second quarter.

At the conclusion of the meeting, the Federal Reserve Bank of New York was authorized and

directed, until instructed otherwise 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 the economic expansion has

slowed in recent months. Total nonfarm payroll employment rose only slightly over

March and April after registering sizable increases earlier in the year, and the civilian

unemployment rate remained at 7.0 percent. Industrial production was little changed in

March and April after posting solid gains in previous months. Retail sales increased

substantially in April but were about unchanged on balance for the year to date. Housing

starts picked up in April. Incoming data on orders and shipments of nondefense capital

goods suggest a further brisk advance in outlays for business equipment, while

nonresidential construction has remained soft. The nominal U.S. merchandise trade

deficit in January-February was slightly below its average level in the fourth quarter.

Increases in wages and prices have been appreciably larger this year than in the second

half of 1992.

Short-term interest rates have changed little since the Committee meeting on March 23

while bond yields have risen somewhat. In foreign exchange markets, the tradeweighted value of the dollar in terms of the other G-10 currencies declined somewhat on

balance over the intermeeting period.

After contracting during the first quarter, M2 was unchanged in April while M3 turned

up; both aggregates increased substantially in early May. Total domestic nonfinancial

debt expanded somewhat further through March.

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 at its meeting in February established ranges for growth of

M2 and M3 of 2 to 6 percent and 1/2 to 4-1/2 percent respectively, measured from the

fourth quarter of 1992 to the fourth quarter of 1993. The Committee expects that

developments contributing to unusual velocity increases are likely to persist during the

year. The monitoring range for growth of total domestic nonfinancial debt was set at

4-1/2 to 8-1/2 percent for the year. 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 would or slightly lesser reserve restraint might be

acceptable in the intermeeting period. The contemplated reserve conditions are expected

to be consistent with appreciable growth in the broader monetary aggregates over the

second quarter.

Votes for this action: Messrs. Greenspan, Corrigan, Keehn, Kelley, LaWare, Lindsey,

McTeer, Mullins, Ms. Phillips, and Mr. Stern.

Votes against this action: Messrs. Angell and Boehne.

Mr. Angell dissented because he believed that the persisting indications of rising inflation and the

related deterioration in inflationary psychology called for a prompt move to tighten monetary policy.

In his view, low real interest rates, a very steep yield curve, a surprisingly weak exchange value of

the dollar along with the confirming price behavior of inflation-sensitive commodities such as gold

underscored the need for Committee action to signal the System's continuing commitment to the

eventual achievement of price stability. In his opinion, progress toward lower inflation was not likely

in 1993 and 1994 in the absence of a monetary policy that was sufficiently restrictive to check

inflationary expectations. He added that history demonstrated that a monetary policy focused

primarily on developments in the real economy ran the risk of waiting too long to counter a

worsening in inflationary expectations and thus requiring more substantial and possibly more

disruptive policy changes later.

Mr. Boehne supported a steady policy course, but he dissented because he objected to a directive that

was biased toward tightening. Although recent developments suggested that inflation would be

somewhat higher and real growth somewhat lower during the year than had been expected earlier, he

did not believe recent data indicated a fundamental shift in the outlook for inflation or the economy.

He was concerned that adopting a biased directive might prove to be an overreaction to temporary

factors affecting the inflation rate and inflationary sentiment. In his view, underlying economic

conditions did not point toward an extended period of higher inflation. While the pace of economic

growth conceivably could quicken, it seemed just as likely that the tempo of business and consumer

spending could diminish in the face of uncertainty about the stance of fiscal policy, particularly with

regard to potential tax increases. Given these uncertainties, he had a strong preference for keeping an

open mind about possible Committee action during the intermeeting period and, accordingly, favored

a balanced policy directive.

It was agreed that the next meeting of the Committee would be held on Tuesday-Wednesday, July

6-7, 1993.

The meeting adjourned at 1:50 p.m.

Normand Bernard

Deputy Secretary

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