FOMC Minutes

8/16/77 Meeting of Federal Open Market Committee August 16, 1977 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: Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. on Tuesday, August 16, 1977, beginning at 9:00 a.m. Burns, Chairman Volcker, Vice Chairman Coldwell Gardner Guffey Jackson Lilly Mayo Morris Partee Roos Wallich Messrs. Balles, Baughman, Eastburn, and Winn, Alternate Members of the Federal Open Market Committee Mr. Kimbrel, President of the Federal Reserve Bank of Atlanta Mr. Altmann, Deputy Secretary Mr. Bernard, Assistant Secretary Mr. O'Connell, General Counsel Mr. Axilrod, Economist Messrs. R. Davis, T. Davis, Eisenmenger, Kichline, Reynolds, Scheld, Truman, and Zeisel, Associate Economists Mr. Mr. Pardee, Deputy Manager for Foreign Operations Sternlight, Deputy Manager for Domestic Operations Hudson, Assistant to the Chairman, Board of Governors Messrs. Coyne and Keir, Assistants to the Board of Governors Mrs. Farar, Economist Open Market Secretariat, Board of Governors Miss Klaput, Open Market Secretariat, Board of Governors Mr. Messrs. Rankin and Van Nice, First Vice Presidents, Federal Reserve Banks of Richmond and Minneapolis, respectively Mr. J. Davis, Senior Vice President, Federal Reserve Bank of Cleveland Messrs. Brandt, Broaddus, Burns, Hoskins, Keran, and Karnosky, Vice Presidents, Federal Reserve Banks of Atlanta, Richmond, Dallas, Philadelphia, San Francisco, and St. Louis, respectively Mr. Kareken, Economic Adviser, Federal Reserve Bank of Minneapolis Mr. John Hill, Senior Economist, 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 July 19, Secretary's Note: Messrs. Volcker, On August 5, were approved. 1977, by unanimous vote (with Balles and Timlen voting as alternates respectively, and Messrs. 1977, Coldwell, for Messrs. Gardner, Guffey and and Lilly absent), the Committee modified the inter-meeting range for the Federal funds rate specified in the next-to-last paragraph of the domestic policy directive issued on July 19, 5-3/4 to 6 per cent. 1977, by increasing the upper limit from By unanimous vote, System open market transactions in foreign currencies during the period July 19 through August 15, 1977, were approved, and confirmed. ratified, By unanimous vote, ment securities, System open market transactions in agency obligations, the period July 19 through August 15, Govern and banker's acceptances during 1977, were approved, ratified, and confirmed. By unanimous vote, the Federal Reserve Bank of New York was authorized and directed, execute transactions in until otherwise directed by the Committee, the System Account in accordance with the following policy directive: The information reviewed at this meeting suggests that real output of goods and services is growing less rapidly in the current quarter than in the second quarter. In July industrial output rose a little less than in June. The rise in payroll employment in non According to the farm establishments was substantial. household survey data, total nonagricultural employment was unchanged and the unemployment rate edged down to The dollar value of 6.9 per cent, the same as in May. total retail sales rose somewhat, after 2 months of commodities decline. The wholesale price index for all was about unchanged in July; average prices of farm products and foods declined sharply further, and average prices of industrial commodities continued to rise at a more moderate pace than in the early months of 1977. The index of average hourly earnings has continued to advance at about the same pace that it had on the average during 1976. The weighted average exchange rate for the dollar against leading foreign currencies has recovered more than 1 per cent from the low point reached in late July. In June the U.S. foreign trade deficit rose sharply, and the deficit was larger for the second quarter as a whole than for the first. to The increase in M-1 was exceptionally large in July. Inflows to banks of the time and savings deposits included in the broader monetary aggregates strengthened, and growth in M-2 and M-3 also accelerated sharply. Busi ness short-term borrowing moderated from the rapid pace in June. Interest rates on short- and intermediate-term market instruments have risen appreciably in recent weeks, while yields on longer-term bonds have changed little. In light of the foregoing developments, it is the policy of the Federal Open Market Committee to foster bank reserve and other financial conditions that will encourage continued economic expansion and help resist inflationary pressures, while contributing to a sustain able pattern of international transactions. At its meeting on July 19, 1977, the Committee agreed that growth of M-1, M-2, and M-3 within ranges of 4 to 6-1/2 per cent, 7 to 9-1/2 per.cent, and 8-1/2 to 11 per cent, respectively, from the second quarter of 1977 to the second quarter of 1978 appears to be consistent with these objectives. These ranges are subject to reconsideration at any time as conditions warrant. The Committee seeks to encourage near-term rates of growth in M-1 and M-2 on a path believed to be rea sonably consistent with the longer-run ranges for monetary aggregates cited in the preceding paragraph. Specifically, at present, it expects the annual growth rates .over the August-September period to be within the ranges of 0 to 5 per cent for M-1 and 3 to 8 per cent for M-2. In the judgment of the Committee such growth rates are likely to be associated with a weekly-average Federal funds rate of about 6 per cent. If, giving approximately equal weight to M-1 and M-2, it appears that growth rates over the 2-month period will deviate significantly from the mid points of the indicated ranges, the operational objective for the Federal funds rate shall be modified in an orderly fashion within a range of 5-3/4 to 6-1/4 per cent. If it appears during the period before the next meeting that the operating constraints specified above are proving to be significantly inconsistent, the Manager is promptly to notify the Chairman who will then decide whether the situation calls for supplementary instructions from the Committee. -5 It.was agreed that the next meeting of the Committee would be held on Tuesday, September 20, 1977, beginning at 9:30 a.m. The meeting adjourned. Deputy Secretary

Federal Reserve (1977, August 15). FOMC Minutes. Fomc Minutes, Federal Reserve. https://whenthefedspeaks.com/doc/fomc_minutes_19770816

@misc{wtfs_fomc_minutes_19770816,
  author = {Federal Reserve},
  title = {FOMC Minutes},
  year = {1977},
  month = {Aug},
  howpublished = {Fomc Minutes, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/fomc_minutes_19770816},
  note = {Retrieved via When the Fed Speaks corpus}
}