FOMC Minutes

4/18/78 Meeting of Federal Open Market Committee April 18, 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, April 18, 1978, at 9:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Miller, Chairman Volcker, Vice Chairman Baughman Coldwell Eastburn Gardner 1/ Jackson Partee Wallich Willes Winn Messrs. Black, Kimbrel, and Mayo, Alternate Members of the Federal Open Market Committee Messrs. Guffey, Morris, and Roos, Presidents of the Federal Reserve Banks of Kansas City, Boston, and St. Louis, respectively Broida, Secretary Altmann, Deputy Secretary Bernard, Assistant Secretary O'Connell, General Counsel Axilrod, Economist Messrs, Burns, J. Davis, R. Davis, Ettin, Kaminow, Keir, Kichline, Paulus, Truman, and Zeisel, Associate Economists 1/ Entered meeting at the point indicated. 4/18/78 - 2 Mr. Pardee, Deputy Manager for Foreign Operations Mr. Sternlight, Deputy Manager for Domestic Operations Mr. Coyne, Assistant to the Board of Governors Mr. Gemmill, Associate Director, Division of Inter national Finance, Board of Governors Mr. Kalchbrenner, Associate Director, Division of Research and Statistics, Board of Governors Ms. Farar, Economist, Open Market Secretariat, Board of Governors Mrs. Deck, Staff Assistant, Open Market Secretariat, Board of Governors Mr. Williams, First Vice President, Federal Reserve Bank of San Francisco Messrs. Balbach, Parthemos, and Scheld, Senior Vice Presidents, Federal Reserve Banks of St. Louis, Richmond, and Chicago, respectively Messrs. Brandt, T. Davis, and Keran, Vice Presidents, Federal Reserve Banks of Atlanta, Kansas City, and San Francisco, respectively Mr. McNees, Assistant Vice President, Federal Reserve Bank of Boston Mr. Ozog, Manager, Securities Department, 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 March 21, 1978, were approved. By unanimous vote, System open market transactions in foreign currencies during the period March 21 through April 17, 1978, were ratified. 4/18/78 - 3 - Renewal for further periods of 3 months of System drawings on the German Federal Bank and the Swiss National Bank maturing in the period May 2-22, 1978, was noted without objection. Prior to the following action Mr. Gardner entered the meeting. By unanimous vote, the Committee adopted the following ranges for rates of growth in monetary aggregates for the period from the first quarter of 1978 to the first quarter of 1979: 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. The associated range for bank credit is 7-1/2 to 10-1/2 per cent. By unanimous vote, System open market transactions in Govern ment securities, agency obligations, and bankers' acceptances during the period March 21 through April 17, 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: The information reviewed at this meeting suggests that growth in real output of goods and services was small in the first quarter, owing in part to the unusually severe weather and the lengthy strike in coal mining, but that economic activity was rebounding in the latter part of the period. In March industrial production and non farm payroll employment increased sharply further. The unemployment rate edged up from 6.1 to 6.2 per cent, as the civilian labor force expanded substantially. Retail sales recovered much more in February than had been reported earlier, and sales rose considerably further in March. 4/18/78 - 4 - The pace of the rise in wholesale prices remained rapid, reflecting further large increases in farm products and processed foods. The index of average hourly earnings accelerated in the first quarter, largely because of the increase in minimum wages at the beginning of the year. The trade-weighted value of the dollar against major foreign currencies declined sharply after the March 31 announcement of a very large increase in the U. S. foreign trade deficit for February. But over the past week the dollar has recovered to about its level of 4 weeks ago. M-1, which had declined in February, rose moderately in March. Inflows to banks of time and savings deposits other than negotiable CD's and inflows to nonbank thrift Most market interest rates, institutions remained slow. especially longer-term rates, have increased somewhat on balance 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 resist inflationary pressures while encouraging continued moderate economic expansion and contributing to a sus tainable pattern of international transactions. Growth of M-1, 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 first quarter of 1978 to the first quarter of 1979 appears to be consistent with these objectives. The associated range for bank credit is 7-1/2 to 10-1/2 per cent. These ranges are subject to recon sideration 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 reasonably consistent with the longer-run ranges for monetary aggre gates cited in the preceding paragraph. Specifically, at present, it expects the annual growth rates over the April-May period to be within ranges of 4 to 8-1/2 per cent for M-1 and 5-1/2 to 9-1/2 per cent for M-2. In the judg ment of the Committee such growth rates are likely to be associated with a weekly-average Federal funds rate slightly above the current level. If, giving approximately equal weight to M-1 and M-2, it appears that growth rates over - 5 4/18/78 the 2-month period will deviate significantly from the midpoints of the indicated ranges, the operational objec tive for the Federal funds rate shall be modified in an orderly fashion within a range of 6-3/4 to 7-1/2 per cent. In the conduct of day-to-day operations, 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 supple mentary instructions from the Committee. It was agreed that the next meeting of the Committee would be held on Tuesday, May 16, 1978, beginning at 9:30 a.m. The meeting adjourned. Secretary

Federal Reserve (1978, April 17). FOMC Minutes. Fomc Minutes, Federal Reserve. https://whenthefedspeaks.com/doc/fomc_minutes_19780418

@misc{wtfs_fomc_minutes_19780418,
  author = {Federal Reserve},
  title = {FOMC Minutes},
  year = {1978},
  month = {Apr},
  howpublished = {Fomc Minutes, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/fomc_minutes_19780418},
  note = {Retrieved via When the Fed Speaks corpus}
}