FOMC Minutes

Meeting of Federal Open Market Committee June 8, 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., PRESENT: on Tuesday, June 8, 1971, at 9:30 a.m. Mr. Burns, Chairman Mr. Brimmer Mr. Clay Mr. Daane Mr. Kimbrel Mr. Maisel Mr. Mayo Mt. Mitchell Mr. Morris Mr. Robertson Mr. Sherrill Mr. Treiber, Alternate for Mr. Hayes 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. Hexter, Assistant General Counsel Mr. Partee, Economist Messrs. Axilrod, Eisenmenger, Hersey, Scheld, Solomon, Taylor, and Tow, Associate Economists Mr. Holmes, Manager, System Open Market Account Mr. Coombs, Special Manager, System Open Market Account -2 6/8/71 Mr. Leonard, Assistant Secretary, Office of the Secretary, Board of Governors Mr. Coyne, Special Assistant to the Board of Governors Mr. Wernick, Adviser, 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 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, respec tively Messrs. Link, Parthemos, and Craven, Senior Vice Presidents, Federal Reserve Banks of New York, Richmond, and San Francisco, respectively Messrs. Willes, Hocter, Andersen, and Green, Vice Presidents, Federal Reserve Banks of Philadelphia, Cleve land, St. Louis, and Dallas, respec tively Mr. Meek, Assistant Vice President, Federal Reserve Bank of New York Mr. Duprey, Senior Economist, Federal Reserve Bank of Minneapolis By unanimous vote, the minutes of actions taken at the meeting of the Federal Open Market Committee held on May 11, 1971, were approved. -3 6/8/71 The memorandum of discussion for the meeting of the Federal Open Market Committee held on May 11, 1971, was accepted. By unanimous vote, the System open market transactions in foreign currencies during the period May 11 through June 7, 1971, were approved, ratified, and confirmed. By unanimous vote, a delay in the liquidation of out standing System drawings on the National Bank of Belgium beyond June 30, 1971, was authorized. By unanimous vote, renewal for a further period of three months of the System drawing on the National Bank of Belgium maturing on July 7, 1971, By unanimous vote, Government securities, was authorized. the open market transactions in agency obligations, and bankers' accep tances during the period May 11 through June 7, 1971, were approved, ratified, and confirmed. By unanimous vote, the dollar limit specified in para graph 2 of the continuing authority directive, on Federal Reserve Bank holdings of short-term certificates of indebtedness purchased directly from the Treasury, was increased from $1 bil lion to $2 billion. As amended, paragraph 2 read as follows: The Federal Open Market Committee authorizes and directs the Federal Reserve Bank of New York, or, if the New York Reserve Bank is closed, any other Federal Reserve Bank, to purchase directly from the Treasury for its own account (with discretion, in cases where it seems desirable, to issue participations to one or 6/8/71 more Federal Reserve Banks) such amounts of special short-term certificates of indebtedness as may be nec sary from time to time for the temporary accommodation of the Treasury; provided that the rate charged on such certificates shall be a rate 1/4 of 1 per cent below the discount rate of the Federal Reserve Bank of New York at the time of such purchases, and provided further that the total amount of such certificates held at any one time by the Federal Reserve Banks shall not exceed $2 billion. 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 is expanding moderately in the current quarter, following the first quarter surge that primarily reflected the resumption of higher automobile production. The unemployment rate remained high in May. Wage rates in most sectors are continuing to rise at a rapid pace. in the first four months of 1971 the consumer price index increased at a slower pace than earlier, in considerable part because of a decline in mortgage interest rates; the rate of advance in wholesale prices of industrial com modities, which had moderated in the first quarter, stepped up again in April and May. The money stock both narrowly and broadly defined expanded even more rapidly in May than in April but growth in the bank credit proxy remained moderate. Interest rates on most types of market securities rose sharply further during much of May, reflecting continuing uncertain ties about domestic and international financial prospects; more recently rates on long-term securities have declined on balance, but mortgage rates have risen. The U.S. merchandise trade balance, which was in small surplus in the first quarter, worsened in April. The deficit in the over-all balance of payments has diminished since early May, when capital outflows were swollen by expectations of changes in foreign exchange 6/8/71 rates, but it remains large. Differentials between short-term interest rates in the United States and in major foreign countries narrowed on balance in April and May, but differentials between rates in the United States and in the Euro-dollar market recently have widened as rates in that market moved up sharply in early May. In light of the foregoing developments, it is the policy of the Federal Open Market Committee to foster financial conditions conducive to the resump tion of sustainable economic growth, while encouraging an orderly reduction in the rate of inflation, modera tion of short-term capital outflows, and attainment of reasonable equilibrium in the country's balance of payments. To implement this policy, the Committee seeks to moderate growth in monetary aggregates over the months ahead, taking account of developments in capital mar kets. System open market operations until the next meeting of the Committee shall be conducted with a view to achieving bank reserve and money market con ditions consistent with those objectives. It was agreed that the next meeting of the Federal Open Market Committee would be held in Washington, D.C., on Tuesday, June 29, 1971, at 9:30 a.m. The meeting adjourned. Secretary

Federal Reserve (1971, June 7). FOMC Minutes. Fomc Minutes, Federal Reserve. https://whenthefedspeaks.com/doc/fomc_minutes_19710608

@misc{wtfs_fomc_minutes_19710608,
  author = {Federal Reserve},
  title = {FOMC Minutes},
  year = {1971},
  month = {Jun},
  howpublished = {Fomc Minutes, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/fomc_minutes_19710608},
  note = {Retrieved via When the Fed Speaks corpus}
}