FOMC Minutes

Meeting of Federal Open Market Committee February 9, 1971 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, February 9, 1971, at 9:15 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Burns, Chairman Hayes, Vice Chairman Brimmer Daane Francis Heflin Maisel Mitchell Robertson 1/ Sherrill Swan Mayo, Alternate Messrs. Kimbrel and Morris, Alternate Members of the Federal Open Market Committee Messrs. Eastburn, Clay, and Coidwell, Presidents of the Federal Reserve Banks of Philadelphia, Kansas City, and Dallas, respectively Mr. Holland, Secretary Mr. Broida, Deputy Secretary Messrs. Kenyon and Molony, Assistant Secretaries Mr. Hackley, General Counsel Mr. Hexter, Assistant General Counsel Mr. Partee, Economist Messrs. Axilrod, Craven, Garvy, Gramley, Hersey, Hocter, Jones, Parthemos, Reynolds, and Solomon, Associate Economists Mr. Holmes, Manager, System Open Market Account Mr. Coombs, Special Manager, System Open Market Account 1/ Withdrew from the meeting at the point indicated. 2/9/71 Messrs. Bernard and Leonard, Assistant Secretaries, Office of the Secretary, Board of Governors Mr. Cardon, Assistant to the Board of Governors Mr. Coyne, Special Assistant to the Board of Governors Messrs. Wernick and Williams, Advisers, Division of Research and Statistics, Board of Governors Mr. Keir, Associate Adviser, Division of Research and Statistics, Board of Governors Mr. Bryant, Associate Adviser, Division of International Finance, Board of Governors Mr. Wendel, Chief, Government Finance Section, Division of Research and Statistics, Board of Governors Miss Ormsby, Special Assistant, Office of the Secretary, Board of Governors Miss Eaton, Open Market Secretariat Assistant, Office of the Secretary, Board of Governors Miss Orr, Secretary, Office of the Secretary, Board of Governors Messrs. MacDonald and Strothman, First Vice Presidents, Federal Reserve Banks of Cleveland and Minneapolis, respectively Messrs. Eisenmenger, Taylor, and Tow, Senior Vice Presidents, Federal Reserve Banks of Boston, Atlanta, and Kansas City, respectively Messrs. Scheld and Green, Vice Presidents, Federal Reserve Banks of Chicago and Dallas, respectively Messrs. Gustus and Kareken, Economic Advisers, Federal Reserve Banks of Philadelphia and Minneapolis, respectively Mr. Meek, Assistant Vice President, 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 January 12, 1971, were approved. By unanimous vote, the Committee ratified the affirmative action the members had taken on the recommendation, transmitted by wire of -3 2/9/71 January 22, 1971, to suspend a provision of paragraph 1(A) of the continuing authority directive (the provision limiting exchanges with the Treasury of securities held in System Account to maturing issues) to the extent of enabling the Account Management to prerefund $4 billion of System Account holdings of the 7-3/4 per cent note of November 1971 in the current Treasury financing. By unanimous vote, the System open market transactions in foreign currencies during the period January 12 through February 8, 1971, were approved, ratified, and confirmed. By unanimous vote, the open market transactions in Government securities, agency obligations, and bankers' acceptances during the period January 12 through February 8, 1971, were approved, ratified, and confirmed. Mr. Robertson withdrew from the meeting prior to the action reported below. With Mr. Francis dissenting, New York was authorized and directed, the Federal Reserve Bank of until otherwise directed by the Committee, to execute transactions in the System Account in accordance with the following current economic policy directive: The information reviewed at this meeting suggests that real output of goods and services, which declined in the fourth quarter of 1970, is rising in the current quarter primarily because of the resumption of higher automobile production. The unemployment rate remained high in January. Wage rates in most sectors are con tinuing to rise at a rapid pace, and recent increases in some major price measures have been relatively large. Interest rates have fallen considerably further in recent 2/9/71 weeks despite continued heavy demands for funds in capital markets, and differentials between interest rates in the United States and those in major foreign countries have widened further. Federal Reserve discount rates were reduced by an additional one-quarter of a percentage point to 5 per cent. Bank credit increased considerably further in January, as business loan demands strengthened somewhat and banks made substantial further additions to their holdings of securities. The money stock narrowly defined grew modestly in January following a stronger December rise, but money more broadly defined expanded sharply further as a result of continued rapid growth in consumer-type time and savings deposits. The over-all balance of payments deficit in the fourth quarter was about as large as in the third quarter on the liquidity basis; on the official settlements basis the deficit increased further from the very high third quarter level as banks continued to repay Euro-dollar liabilities. More recently,the issuance of a special Export-Import Bank security to foreign branches of U.S. banks helped to moderate the flow of dollars to foreign central banks. In light of the foregoing devel opments, it is the policy of the Federal Open Market Committee to foster financial conditions conducive to the resumption of sustainable economic growth, while encouraging an orderly reduction in the rate of infla tion and the attainment of reasonable equilibrium in the country's balance of payments. To implement this policy, System open market operations until the next meeting of the Committee shall be conducted with a view to maintaining prevailing money market conditions while accommodating additional downward movements in long-term rates; provided that money market conditions shall promptly be eased somewhat further if it appears that the monetary aggregates are falling short of the growth path desired. It was agreed that the next meeting of the Federal Open Market Committee would be held on Tuesday, March 9, 1971, The meeting adjourned. Secretary at 9:30 a.m.

Federal Reserve (1971, February 8). FOMC Minutes. Fomc Minutes, Federal Reserve. https://whenthefedspeaks.com/doc/fomc_minutes_19710209

@misc{wtfs_fomc_minutes_19710209,
  author = {Federal Reserve},
  title = {FOMC Minutes},
  year = {1971},
  month = {Feb},
  howpublished = {Fomc Minutes, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/fomc_minutes_19710209},
  note = {Retrieved via When the Fed Speaks corpus}
}