October 17, 1978 FOMC Record of Policy Actions

FOMC minutes

objective for the rate within that range, to be guided by developing conditions in domestic and international financial markets. The Chairman approved the modification of the directive on November 1, effective on that date. Votes for this action: Messrs. Miller, Volcker, Baughman, Coldwell, Eastburn, Partee, Mrs. Teeters, Messrs. Wallich, Willes, and Winn. Votes against this action: None. Absent and not voting: Messrs. Gardner and Jackson. 2. Authorization for foreign currency operations On October 31 the Committee also voted to approve a delegation of authority to Chairman Miller to negotiate increases in the System's swap arrangements with the German Federal Bank, the Bank of Japan, and the Swiss National Bank. In addition, the Committee voted to aprpove a concurrent amendment to paragraph 2 of the authorization for foreign currency operations to raise correspondingly the amounts specified there for the swap arrangements with those central banks. On November 1 the Chairman approved increases of $2 billion, $3 billion, and $2.6 billion in the System's swap arrangements with the German Federal Bank, the Bank of Japan, and the Swiss National Bank, respectively. Accordingly paragraph 2 of the authorization was amended, effective on that date, to 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: Amount of arrangement of (millions Foreign bank dollars equivalent) Austrian National Bank 250 National Bank of Belgium 1,000 Bank of Canada 2,000 National Bank of Denmark 250 Bank of England 3,000 Bank of France 2,000 6,000 German Federal Bank Bank of Italy 3,000 5,000 Bank of Japan Bank of Mexico 360 Netherlands Bank 500 Bank of Norway 250 Bank of Sweden 300 4,000 Swiss National Bank Bank for International Settlements: Dollars against Swiss francs 600 Dollars against authorized European currencies other than Swiss francs 1,250 Votes for this action: Messrs. Volcker, Baughman, Coldwell, Miller, Mrs. Teeters, Messrs. Eastburn, Partee, and Winn. Votes against Wallich, Willes, action: None. Absent and not voting: this Messrs. Gardner and Jackson.

Paragraph 1D of the Committee's authorization for foreign currency operations authorizes the Federal Reserve Bank of New York, for the System Open Market Account, to maintain an over-all open position in all foreign currencies not to exceed $1.0 billion, unless a larger position is expressly authorized by the Committee. On June 20, 1978, the Committee had authorized an over-all open position of $1.5 billion. On October 27, 1978, the Committee authorized an increase in this limit to $2 billion in view of the scale of recent and potential Federal Reserve operations in the foreign exchange markets undertaken pursuant to the Committee's foreign currency directive. Votes for this action: Messrs. Miller, Volcker, Baughman, Coldwell, Eastburn, Partee, Mrs. Teeters, Messrs. Wallich, Willes, and Winn. Votes against this action: None. Absent and not voting: Messrs. Gardner and Jackson. On October 31 the Committee voted to approve a delegation of authority to Chairman Miller to authorize an open position of $5 billion. On November 1 the Chairman authorized an open position of that amount. Votes for this action: Messrs. Miller, Volcker, Baughman, Coldwell, Eastburn, Partee, Mrs. Teeters, Messrs. Wallich, Willes, and Winn. Votes against this action: None. Absent and not voting: Messrs. Gardner and Jackson.

for domestic open market operations 3. Authorization Committee members voted to On November 3, 1978, to $5 billion the limit on changes increase from $3 billion in System Account holdings of U.S. between Committee meetings 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 November 21, 1978. Votes for this action: Messrs. Miller, Volcker, Baughman, Coldwell, Eastburn, Partee, Mrs. Teeters, Messrs. Wallich, Willes, and Winn. Votes against this action: None. Absent and not voting: Messrs. Gardner and Jackson. This action was taken on recommendation of the System Account Manager. The Manager had advised that large-scale sales of Treasury securities since the October meeting--required mainly to counter the effect on member bank reserves of a steep decline in Treasury balances at the Federal Reserve Banks and to accommodate substantial purchases of Treasury bills by foreign central bankshad reduced the leeway for further sales to $365 million. It now appeared likely that additional sales would be required as current projections indicated a need for further reserve-absorbing operations over the coming weeks.