FOMC Minutes

Meeting of the Federal Open Market Committee November 7, 1984 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 Wednesday, November 7, 1984, at 9:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Mrs Mr. Mr. Mr. Ms. Mr. Volcker, Chairman Solomon, Vice Chairman Boehne Boykin Corrigan Gramley Horn Martin Partee Rice Seger Wallich Messrs. Balles,1/ Black, Forrestal, and Keehn, Alternate Members of the Federal Open Market Committee Messrs. Guffey, Morris, and Roberts, Presidents of the Federal Reserve Banks of Kansas City, Boston, and St. Louis, respectively Mr. Axilrod, Staff Director and Secretary Mr. Bernard, Assistant Secretary Mrs. Steele, Deputy Assistant Secretary Mr. Bradfield, General Counsel Mr. Oltman, Deputy General Counsel Mr. Kichline, Economist Mr. Truman, Economist (International) Messrs. Burns, J. Davis, Kohn, Lang, Lindsey, Siegman, and Stern, Associate Economists Mr. Sternlight, Manager for Domestic Operations, System Open Market Account Mr. Cross, Manager for Foreign Operations, System Open Market Account 1/ Left meeting before action to adopt domestic policy directive. -2- 11/7/84 Mr. Coyne, Assistant to the Board of Governors Mr. Roberts, Assistant to the Chairman, Board of Governors Mr. Gemmill, Staff Adviser, Division of International Finance, Board of Governors Mrs. Low, Open Market Secretariat Assistant, Board of Governors Mr. Fousek, Executive Vice President, Federal Reserve Bank of New York Mr. Balbach, Ms. Munnell, Messrs. Parthemos, Scheld, and Ms. Tschinkel, Senior Vice Presidents, Federal Reserve Banks of St. Louis, Boston, Richmond, Chicago, and Atlanta, respectively Messrs. Cacy, Bisignano, and Judd, Vice Presidents, Federal Reserve Banks of Kansas City, San Francisco, and San Francisco, respectively Ms. Lovett, Assistant Vice President, 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 October 2, 1984, were approved. By unanimous vote, System open market transactions in foreign currencies during the period October 2 through November 6, 1984, were ratified. By unanimous vote, the Committee authorized the Manager to negotiate the renewal for further periods of up to one year of the reciprocal currency ("swap") arrangements having the indicated amounts and maturity dates as shown below. 11/7/84 Foreign bank Amount of arrangement (millions of $ equivalent) Austrian National Bank National Bank of Belgium Bank of Canada National Bank of Denmark Bank of England Bank of France German Federal Bank Bank of Italy Bank of Japan Bank of Mexico Netherlands Bank Bank of Norway Bank of Sweden Swiss National Bank Bank for International SettlementsSwiss francs Other authorized European currencies $ 250.0 1,000.0 2,000.0 250.0 3,000.0 2,000.0 6,000.0 3,000.0 5,000.0 700.0 500.0 250.0 300.0 4,000.0 600.0 1,250.0 Term (months) Maturity date 12 mos. "12/17/84 " "12/28/84 " "12/28/84 "12/28/84 " " "12/ " " "12/ " 12/ 3/84 12/28/84 12/ 3/84 12/28/84 12/ 3/84 3/84 12/28/84 12/ 3/84 3/84 12/ 3/84 "12/ " 3/84 12/ 3/84 By unanimous vote, System open market transactions in Government securities and agency obligations during the period October 2 through November 6, 1984, were ratified. With Mr. Gramley dissenting, 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 indicates a mixed pattern of developments but on balance suggests that economic activity is continuing to expand, though at a considerably more moderate pace than earlier in the year. Nonfarm payroll employment rose substantially outside of manufacturing in October, following a moderate increase in September, and the civilian unemployment 11/7/84 rate was unchanged at 7.4 percent. Industrial pro duction fell in September, partly because of strikes, and available information suggests little increase in October. Retail sales and housing starts rebounded in September after two months of decline. Information on outlays and spending plans suggests slower ex pansion in business fixed investment, following exceptionally rapid growth earlier, and inventory investment, having risen relative to sales in recent months, also appears to be slowing. Since the beginning of the year, broad measures of prices generally have continued to rise at rates close to, or somewhat above, those recorded in 1983, and the index of average hourly earnings has risen somewhat more slowly. Growth of the monetary aggregates strengthened in September, but data available for October indicated that M1 declined during the month, growth of M2 slowed somewhat, and expansion of M3 picked up further. From the fourth quarter of 1983 through October, M1 grew at a rate in the lower half of the Committee's range for 1984, M2 at a rate somewhat below the midpoint of its longer-run range, and M3 at a rate a bit above the upper limit of its range. Growth in total domestic nonfinancial debt appears to be continuing above the Committee's monitoring range for the year, reflecting large government borrowing; private credit growth, though relatively strong, has moderated in recent months. Interest rates have fallen substantially further since the meeting of the Committee on October 2. Over the past month, the foreign exchange value of the dollar against a trade-weighted average of major foreign currencies has continued to fluctuate widely, rising to a new high in mid-October but subsequently declining to somewhat below its level at the time of the previous meeting. The merchandise trade deficit in the third quarter was substantially above the first-half rate as a sharp rise in non-oil imports exceeded some further growth in exports. The Federal Open Market Committee seeks to foster monetary and financial conditions that will help to reduce inflation further, promote growth in output on a sustainable basis, and contribute to an improved pattern of international transactions. 11/7/84 -5 In furtherance of these objectives the Committee agreed at the July meeting to reaffirm the ranges for monetary growth that it had established in January: 4 to 8 percent for M1 and 6 to 9 percent for both M2 and M3 for the period from the fourth quarter of 1983 to the fourth quarter of 1984. The associated range for total domestic non financial debt was also reaffirmed at 8 to 11 percent for the year 1984. It was anticipated that M3 and nonfinancial debt might increase at rates somewhat above the upper limits of their 1984 ranges, given developments in the first half of the year, but the Committee felt that higher target ranges would provide inappropriate bench marks for evaluating longer-term trends in M3 and credit growth. For 1985 the Committee agreed on tentative ranges of monetary growth, measured from the fourth quarter of 1984 to the fourth quarter of 1985, of 4 to 7 percent for M1, 6 to 8-1/2 percent for M2, and 6 to 9 percent for M3. The associated range for nonfinancial debt was set at 8 to 11 percent. The Committee understood that policy implementation would require continuing appraisal of the relationships not only among the various measures of money and credit but also between those aggregates and nominal GNP, including evaluations of conditions in domestic credit and foreign exchange markets. In the implementation of policy in the short run, the Committee seeks to reduce somewhat existing pressures on reserve positions. This action is expected to be consistent with growth of M2 and M3 at annual rates of around 7-1/2 and 9 percent during the period from September to December. M1 is expected to grow over the period at an annual rate of around 3 percent, less than anticipated earlier in view of the decline in October. In light of that decline, more rapid growth of M1 would be acceptable. Lesser restraint on reserve positions would be sought in the event of significantly slower growth in the monetary aggregates, evaluated in relation to the strength of the business expansion and inflationary pressures, domestic and international financial market conditions, and the rate of credit growth. Conversely, greater restraint might be accept able in the event of substantially more rapid monetary -6- 11/7/84 growth and indications of significant strengthening of economic activity and inflationary pressures. The Chairman may call for Committee consultation if it appears to the Manager for Domestic Operations that pursuit of the monetary objectives and related reserve paths during the period before the next meeting is likely to be associated with a federal funds rate persistently outside a range of 7 to 11 percent. It was agreed that the next meeting of the Committee would be held on Tuesday, December 18, 1984. The meeting adjourned. Secretary's note: Subsequent to this meeting, the Committee unanimously approved temporary increases in the limit on changes between Committee meetings in System Account holdings of U.S. government and federal agency securities specified in paragraph 1(a) of the authorization for domestic open market operations. The first action, increasing the limit from $4 billion to $6 billion was effective November 21, 1984; the second increase, from $6 billion to $8 billion, was effective on December 5, 1984. Both increases applied to the intermeeting period ending with the close of business on December 18, 1984. Secretary

Federal Reserve (1984, November 6). FOMC Minutes. Fomc Minutes, Federal Reserve. https://whenthefedspeaks.com/doc/fomc_minutes_19841107

@misc{wtfs_fomc_minutes_19841107,
  author = {Federal Reserve},
  title = {FOMC Minutes},
  year = {1984},
  month = {Nov},
  howpublished = {Fomc Minutes, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/fomc_minutes_19841107},
  note = {Retrieved via When the Fed Speaks corpus}
}