FOMC Minutes

2/28/78 Meeting of Federal Open Market Committee February 28, 1978 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 28, 1978, at 9:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Burns, Chairman Volcker, Vice Chairman Coldwell Guffey Jackson Mayo Morris Partee Roos Wallich Messrs. Balles, Baughman, Eastburn, and Winn, Alternate Members of the Federal Open Market Committee Messrs. Black, Kimbrel, and Willes, Presidents of the Federal Reserve Banks of Richmond, Atlanta, and Minneapolis, respectively Mr. Mr. Mr. Mr. Broida, Secretary Altmann, Deputy Secretary Bernard, Assistant Secretary Axilrod, Economist Messrs. Balbach, R. Davis, T. Davis, Eisenmenger, Kichline, Scheld, Truman, and Zeisel, Associate Economists - 2 - 2/28/78 Mr. Holmes, Manager, System Open Market Account Mr. Pardee, Deputy Manager for Foreign Operations Mr. Sternlight, Deputy Manager for Domestic Operations Messrs. Coyne and Keir, Assistants to the Board of Governors Mr. Wallace 1/, Staff Director for Federal Reserve Bank Activities, Board of Governors Mrs. Farar, Economist, Open Market Secretariat, Board of Governors Mrs. Deck, Staff Assistant, Open Market Secretariat, Board of Governors Messrs. Boehne, J. Davis, and Parthemos, Senior Vice Presidents, Federal Reserve Banks of Philadelphia, Cleveland, and Richmond, respectively Mr. Brandt, Vice President, Federal Reserve Bank of Atlanta Mr. Kareken, Economic Adviser, Federal Reserve Bank of Minneapolis Mr. Meek, Monetary Adviser, 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 17, 1978, were approved. The report of examination of the System Open Market Account, made by the Board's Office of Staff Director for Federal Reserve Bank Activities as of the close of business October 28, 1977, was accepted. 1/ Left the meeting at the point indicated. - 3 - 2/28/78 Following the preceding actions, Mr. Wallace left the meeting. By unanimous vote, System open market transactions in foreign currencies during the period January 17 through February 27, 1978, were ratified. Pursuant to paragraph 1D of the Authorization for Foreign Currency Operations, the Committee, by unanimous vote, expressly authorized an over-all open position in foreign currencies of $2.0 billion, effective immediately. Renewal for further periods of 3 months of System drawings on the German Federal Bank maturing in the period March 5-31, 1978, was noted without objection. By unanimous vote, the Committee adopted the following ranges for rates of growth in monetary aggregates for the period from the fourth quarter of 1977 to the fourth quarter of 1978: M-1, 4 to 6-1/2 per cent; M-2, 6-1/2 to 9 per cent; and M-3, 7-1/2 to 10 per cent. By unanimous vote, System open market transactions in Government securities, agency obligations, and bankers' acceptances during the peroiod January 17 through February 27, 1978, were ratified. 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 domestic policy directive: 2/28/78 - 4 The information reviewed at this meeting suggests that retail sales, industrial pro duction, and housing starts were adversely affected in January by unusually severe It appears, however, that there weather. has been little change in the underlying economic situation. Employment increased further in January and the unemployment rate edged down from 6.4 to 6.3 per cent. Both the consumer price index and the wholesale price index rose substantially. The index of average hourly earnings advanced sharply, as higher minimum wages became effective at the beginning of the year. After a period of calm, the dollar came under renewed downward pressure around mid February, and its trade-weighted value against major foreign currencies has declined about 1-1/2 per cent. The Swiss franc and the German mark have registered the most pronounced appreciations against the dollar. M-1 expanded appreciably in January but declined somewhat in early February. Growth in M-2 picked up in January, reflecting some strengthening in inflows to banks of time and savings deposits other than negotiable CD's. Inflows to nonbank thrift institutions con tinued to slow. Market interest rates have changed little in recent weeks. 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 con tinued economic expansion and help resist inflationary pressures, while contributing to a sustainable pattern of international trans actions. Growth of M-l, M-2, and M-3 within ranges of 4 to 6-1/2 per cent, 6-1/2 to 9 per cent, and 7-1/2 to 10 per cent, respectively, from the fourth quarter of 1977 to the fourth quarter of 1978 appears to be consistent with these objectives. These ranges are subject to reconsideration at any time as conditions warrant. 2/28/78 - 5 At this time, the Committee seeks to main tain about the prevailing money market conditions during the period immediately ahead, provided that monetary aggregates appear to be growing at approximately the rates currently expected, which are believed to be on a path reasonably consistent with the longer-run ranges for monetary aggregates cited in the preceding paragraph. Specifically, the Committee seeks to maintain the weekly-average Federal funds rate at about the current level, so long as M-1 and M-2 appear to be growing over the February March period at annual rates within ranges of 1 to 6 per cent and 4-1/2 to 8-1/2 per cent, If, giving approximately equal respectively. weight to M-1 and M-2, it appears that growth rates over the 2-month period are approaching or moving beyond the limits of the indicated ranges, the operational objective for the weekly average Federal funds rate shall be modified in an orderly fashion within a range of 6-1/2 to 7 In the conduct of day-to-day opera per cent. tions, account shall be taken of emerging financial market conditions, including the conditions in foreign exchange markets. 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. It was agreed that the next meeting of the Committee would be held on Tuesday, March 21, 1978, beginning at 9:30 a.m. The meeting adjourned. Secretary

Federal Reserve (1978, February 27). FOMC Minutes. Fomc Minutes, Federal Reserve. https://whenthefedspeaks.com/doc/fomc_minutes_19780228

@misc{wtfs_fomc_minutes_19780228,
  author = {Federal Reserve},
  title = {FOMC Minutes},
  year = {1978},
  month = {Feb},
  howpublished = {Fomc Minutes, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/fomc_minutes_19780228},
  note = {Retrieved via When the Fed Speaks corpus}
}