June 18–19, 1973 FOMC Record of Policy Actions

FOMC minutes

6/18-19/73 -10 Votes for this action: Messrs. Burns, Brimmer, Bucher, Daane, Francis, Holland, Mayo, Mitchell, Morris, Sheehan, Clay, and Debs. Votes against this action: None. Absent and not voting: Messrs. Balles and Hayes. (Messrs. Clay and Debs voted as alternates for Messrs. Balles and Hayes, respectively.) Subsequent to the meeting it appeared that in the June-July period the annual rate of growth in RPD's would be above 11.5 per cent and that growth in the monetary aggregates would exceed an acceptable range, even though money market conditions had continued to tighten. On July 6, 1973, a majority of the members concurred in a recommendation by the Chairman that money market conditions should be permitted to tighten still further if necessary to limit growth in RPD's. 2. Authorization for domestic open market operations On July 6, 1973, Committee members voted to increase from $2 billion to $3 billion 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, effective immediately, for the period ending with the close of business on July 17, 1973. Votes for this action: Messrs. Burns, Balles, Brimmer, Francis, Holland, Mitchell, Sheehan, Debs, and Winn. Votes against this action: None. Absent and not voting: Messrs. Bucher, Daane, Hayes, Mayo, and Morris. (Messrs. Debs and Winn voted as alternates for Messrs. Hayes and Mayo, respectively.)

6/18-19/73 This action was taken on recommendation of the System that a substantial volume The Manager had advised Account Manager. had been required in the market purchases of securities of open on June 19 in order to offset since the Committee's meeting period the reserve absorption caused by a rise in Treasury balances at Federal Reserve Banks, an increase in currency in circulation, and a decline in Federal Reserve float, and he further advised that a temporary increase in the leeway for System purchases appeared desirable in light of the prospective near-term needs to supply reserves. 3. Authorization for foreign currency operations Effective July 10, 1973, the table contained in paragraph 2 of the authorization for foreign currency operations was amended to reflect increases in most of the System's swap arrangements. With these changes, paragraph 2 read as follows: The Federal Open Market Committee directs the Federal Reserve Bank of New York to maintain reciprocal currency arrangements ("swap" arrangements) for the System Open Market Account for periods up to a maximum of 12 months with the following foreign banks, which are among those designated by the Board of Governors of the Federal Reserve System under Section 214.5 of Regulation N, Relations with Foreign Banks and Bankers, and with the approval of the Committee to renew such arrangements on maturity:

6/18-19/73 Amount of arrangement (millions of Foreign bank dollars equivalent) Austrian National Bank National Bank of Belgium 1,000 Bank of Canada 2,000 National Bank of Denmark Bank of England 2,000 Bank of France 2,000 German Federal Bank 2,000 Bank of Italy 2,000 Bank of Japan 2,000 Bank of Mexico Netherlands Bank Bank of Norway Bank of Sweden Swiss National Bank 1,400 Bank for International Settlements: Dollars against Swiss francs 600 Dollars against other European currencies 1,250 The increases--ranging in size from $250 million to $1 billionin the swap arrangements with the Bank for International Settlements and with the central banks of Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, and Switzerland were made pursuant to an action the Committee had taken by unanimous vote at its meeting on March 20, 1973. In that action, the Special Manager was authorized to undertake negotiations looking toward increases in System swap lines not exceeding $6 billion in the aggregate, on the understanding that increases in individual lines, and the corresponding amendments to the foreign currency authorization, would become effective upon approval by Chairman Burns, after consultation with the U.S. Treasury.

6/18-19/73 -13- The remaining increases--of $50 million each--in the swap arrangements with the central banks of Austria, Denmark, Mexico, Norway, and Sweden were authorized by unanimous vote of the Committee at its meeting on June 19, 1973, on the understanding that they would become effective on the same date as the swap line increases for which negotiations had been authorized on March 20. This expansion of the System's swap network was carried out in conformity with the policy that had been agreed to at the meeting of Finance Ministers and central bank governors in Paris on March 16,