February 17–18, 1976 FOMC Record of Policy Actions

FOMC minutes

2/17-18/76 rates within ranges of tolerance of 5 to 9 per cent and 9 to 13 per cent, respectively, would be acceptable. Mainly because the outstanding volume of large-denomination CD's was projected to decline substantially over the 2-month period, it was expected that these growth rates for the monetary aggregates would be associated with an annual rate of decline in reserves available to support private nonbank deposits (RPD's) between 1/2 and 4-1/2 per cent. The members agreed that, should the aggregates appear to be deviating significantly from the midpoints of their specified ranges, the weekly-average funds rate might be expected to vary in an orderly fashion within a range of 4-1/4 to 5-1/4 per cent. The Committee decided that, in assessing the behavior of the aggregates, approximately equal weight should be given to M1 and M . The following domestic policy directive was issued to the Federal Reserve Bank of New York: The information reviewed at this meeting sug gests that output of goods and services is con tinuing to expand at a moderate rate in the cur quarter. In January retail sales remained rent at an advanced level and recovery in industrial production continued. Gains in nonfarm employ ment were large and widespread and the unemploy ment rate dropped from 8.3 per cent to 7.8 per cent. Average wholesale prices of industrial commodities increased somewhat less than in the

2/17-18/76 preceding 2 months, and average prices of farm products and foods declined appreciably further. The index of average wage rates advanced sub stantially in January, but a significant part of the rise reflected an increase in the minimum wage on the first of the month. The trade-weighted value of the dollar has changed little over the past 4 weeks. There have disturbances in foreign exchange markets been affecting primarily European currencies, and rates for several currencies have moved considerably. In December the foreign trade surplus was sub stantial, although not as large as in other recent months, and bank-reported private capital movements shifted to a net outflow. M1 , which had declined in December, increased only a little in January, but M and M rose con siderably. At commercial banks and nonbank thrift institutions, inflows of time and savings deposits other than large-denomination CD's expanded sub stantially. Inflows into savings accounts were especially large in January, as short-term market interest rates continued to decline early in the month and fell below Regulation Q ceiling rates accounts. In recent weeks, interest rates on such on both short- and long-term securities have changed little, while mortgage interest rates have declined somewhat. In light of the foregoing developments, it is the policy of the Federal Open Market Committee to foster financial conditions that will encourage continued ecoromic recovery, while resisting infla tionary pressures and contributing to a sustainable pattern of international transactions. To implement this policy, while taking account of developments in domestic and international financial markets, the Committee seeks to maintain prevailing bank reserve and money market conditions over the period immediately ahead, provided that monetary appear to be growing at about the rates aggregates currently expected.

2/17-18/76 Votes for this action: Messrs. Burns. Volcker, Baughman, Coldwell, Eastburn, Holland, Jackson, MacLaury, Mayo, Partee, and Wallich. Votes against this action: None. Absent and not voting: Mr. Gardner. 2. Amendment to authorization for foreign currency operations At this meeting the Committee amended paragraph 6 of the authorization for foreign currency operations in order to create a new Foreign Currency Subcommittee, to which the Committee would delegate special duties in the foreign currency area. Previously, the Committee had delegated such duties to a standing Subcommittee, designated in the Committee's rules of procedure, consisting of the Chairman and Vice Chairman of the Committee and the Vice Chairman of the Board of Governors. The amendment creating the new Subcommittee provided for the same membership, with the addition of such other member of the Board as the Chairman might designate. It was contemplated that the Chairman would designate the member of the Board having particular responsibilities for international matters. With this amendment, paragraph 6 read as follows: 6. The Foreign Currency Subcommittee is authorized to act on behalf of the Committee when it is necessary to enable the Federal Reserve Bank of New York to engage in foreign currency operations before the Com mittee can be consulted. The Foreign Currency Sub committee consists of the Chairman and Vice Chairman

2/17-18/76 -11 of the Committee, the Vice Chairman of the Board of Governors, and such other member of the Board as the Chairman may designate (or in the absence of members of the Board serving on the Subcommittee, other Board Members designated by the Chairman as alternates, and in the absence of the Vice Chairman of the Committee, his alternate). All actions taken by the Foreign Currency Subcommittee under this paragraph shall be reported promptly to the Committee. Votes for this action: Messrs. Burns, Volcker, Baughman, Coldwell, Eastburn, Holland, Jackson, MacLaury, Mayo, Partee, and Wallich. Votes against this action: None. Absent and not voting: Mr. Gardner.