FOMC Minutes

Meeting of Federal Open Market Committee May 11, 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, May 11, 1971, at 9:30 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Burns, Chairman Hayes, Vice Chairman Brimmer Clay Daane Kimbrel Maisel Mayo Mitchell Morris Mr. Mr. Mr. Mr. Mr. Mr. Robertson Mr. Sherrill Messrs. Coldwell, Eastburn, and Swan, Alternate Members of the Federal Open Market Committee Messrs. Heflin and Francis, Presidents of the Federal Reserve Banks of Richmond and St. Louis, respectively Mr. Holland, Secretary Mr. Broida, Deputy Secretary Messrs. Bernard and Molony, Assistant Secretaries Mr. Hackley, General Counsel Mr. Partee, Economist Messrs. Axilrod, Eisenmenger, Gramley, Hersey, Reynolds, Scheld, Taylor, and Tow, Associate Economists Account. Mr. Holmes, Manager, System Open Market Mr. Coombs, Special Manager, System Open Market Account 5/11/71 Mr. Leonard, Assistant Secretary, Office of the Secretary, Board of Governors Mr. Cardon, Assistant to the Board of Governors Mr. O'Brien, 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 Messrs. Bryant and Gemmill, Associate Advisers, Division of International Finance, Board of Governors Mr. Wendel, Chief, Government Finance Section, Division of Research and Statistics, 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. Link and Craven, Senior Vice Presi dents, Federal Reserve Banks of New York and San Francisco, respectively Messrs. Hocter, Snellings, Andersen, and Green, Vice Presidents, Federal Reserve Banks of Cleveland, Richmond, St. Louis, and Dallas, respectively Messrs. Gustus and Kareken, Economic Advisers, Federal Reserve Banks of Philadelphia and Minneapolis, respectively Mr. Sandberg, Securities Trading Officer, Federal Reserve Bank of New York By unanimous vote, the minutes of actions taken at the meet ing of the Federal Open Market Committee held on April 6, 1971, were approved. The memorandum of discussion for the meeting of the Federal Open Market Committee held on April 6, 1971, was accepted. 5/11/71 -3 By unanimous vote, the System open market transactions in foreign currencies during the period April 6 through May 10, 1971, were approved, ratified, and confirmed. It was agreed that a subcommittee consisting of the Chairman and Vice Chairman of the Committee and the Vice Chairman of the Board of Governors, or designated alternates, should be authorized to act on behalf of the Committee with respect to any response that might be made to central banks in the System's swap network raising questions similar to that raised recently by one such central bank concerning the appropriate interpretation of certain language in the swap con tracts. By unanimous vote, the open market transactions in Government securities, agency obligations, and bankers' acceptances during th. period April 6 through May 10, 1971, were approved, ratified, and confirmed. 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 current economic policy directive: The information reviewed at this meeting suggests that real output of goods and services rose substan tially in the first quarter primarily because of the resumption of higher automobile production, and more moderate growth appears to be in prospect for the cur rent quarter. The unemployment rate remained high in 5/11/71 April. Wage rates in most sectors are continuing to rise at a rapid pace. The rate of advance in consumer prices and in wholesale prices of industrial commodi ties moderated in the first quarter, but the rise in industrial prices stepped up again in April. The money stock both narrowly and broadly defined expanded sub stantially further in April but growth in bank credit slowed. Inflows of consumer-type time and savings funds to banks moderated, partly as a result of reduc tions in the interest rates offered by banks, but flows to nonbank thrift institutions continued heavy. Inter est rates on most types of short- and long-term market securities rose sharply in April and early May, reflect ing uncertainties about domestic, and more recently international, financial prospects. The over-all bal ance of payments deficit in the first four months of 1971 was exceptionally large, in great part reflecting short-term capital outflows. Recently, after further large international flows of funds, several European central banks suspended sales of their currencies for dollars; subsequently, announcements were made that the German mark and Dutch guilder would be permitted to float for the time being, and that the Swiss franc and Austrian schilling were being revalued. In light of the foregoing developments, 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 inflation, moderation of short-term capital outflows, and attainment of reasonable equi librium in the country's balance of payments. To implement this policy, the Committee seeks to moderate growth in monetary and credit aggregates over the months ahead, taking account of the current Treasury financing, developments in capital markets, and uncer System open tainties in foreign exchange markets. market operations until the next meeting of the Commit tee shall be aimed initially at maintaining currently prevailing money market conditions, and thereafter conducted with a view to maintaining bank reserves and money market conditions consistent with the above-cited objectives. 5/11/71 -5 It was agreed that the next meeting of the Federal Open Market Committee would be held on Tuesday, June 8, 1971, at 9:30 a.m. The meeting adjourned. Secretary

Federal Reserve (1971, May 10). FOMC Minutes. Fomc Minutes, Federal Reserve. https://whenthefedspeaks.com/doc/fomc_minutes_19710511

@misc{wtfs_fomc_minutes_19710511,
  author = {Federal Reserve},
  title = {FOMC Minutes},
  year = {1971},
  month = {May},
  howpublished = {Fomc Minutes, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/fomc_minutes_19710511},
  note = {Retrieved via When the Fed Speaks corpus}
}