March 18, 1980 FOMC Record of Policy Actions

FOMC minutes

Votes for these actions: Messrs. Volcker, Guffey, Morris, Partee, Rice, Roos, Schultz, Mrs. Teeters, Messrs. Wallich, Winn, and Timlen. Votes against these actions: None. (Mr. Timlen voted as alternate member.) In reviewing the authorization for domestic open market operations, the Committee took special note of paragraph 3, which authorizes the Reserve Banks to engage in the lending of U.S. government securities held in the System Open Market Account under such instructions as the Committee might specify from time to time. That paragraph had been added to the authorization on October 7, 1969, on the basis of a judgment by the Committee that such lending of securities was reasonably necessary to the effective conduct of open market operations and to the implementation of open market policies, and on the understanding that the authorization would be reviewed periodically. At this meeting the Committee concurred in the judgment of the Manager for Domestic Operations that the lending activity in question remained reasonably necessary and that, accordingly, the authorization should remain in effect subject to annual review. 3. Authorization for foreign currency operations The Committee reaffirmed the authorization for foreign currency operations, with a technical modification. In paragraph 6, the title "Manager for Foreign Operations" was substituted for "Manager" the first time the latter appeared, in recognition that positions and titles relating to management of the System Open Market Account had been changed

since the Committee had last conducted its annual review of its con tinuing authorizations and directives. Votes for this action: Messrs. Volcker, Guffey, Morris, Partee, Rice, Roos, Schultz, Mrs. Teeters, Messrs. Wallich, Winn, and Timlen. Votes against this action: None. (Mr. Timlen voted as alternate member.) Pursuant to paragraph 3 of the authorization for foreign currency operations, the Committee expressly authorized the Federal Reserve Bank of Account, to enter into contracts to pur New York, for the System Open Market chase foreign exchange at specified rates that reflected market rates of late February and early March when contract discussions were initiated and simultaneously to transfer the foreign exchange so acquired directly to the Exchange Stabilization Fund (ESF) at those same rates. Votes for this action: Messrs. Volcker, Guffey, Morris, Partee, Rice, Roos, Schultz, Mrs. Teeters, Messrs. Wallich, Winn, and Timlen. Votes against this action: None. (Mr. Timlen voted as alternate member.) 4. Agreement with Treasury to warehouse foreign currencies At its meeting on January 17-18, 1977, the Committee had agreed to a suggestion by the Treasury that the Federal Reserve undertake to "warehouse" foreign currencies--that is, to make spot currencies from the ESF and simultaneously to purchases of foreign make forward sales of the same currencies at the same exchange rate to the ESF. Pursuant to that agreement, the Committee had agreed in that the Federal Reserve would be prepared to ware December 1978, Treasury or for the ESF up to $5 billion of eligible house for the

view of the 12 months. In of up to for periods foreign currencies in foreign currencies, the of issuing notes denominated U.S. program agreement to ware to reaffirm the at this meeting Committee voted to drop the 12-month currencies and billion of foreign up to $5 house warehoused, It could be such currencies on the period limitation be subject to annual agreement would that the basic was understood review. for this action: Messrs. Votes Guffey, Morris, Partee, Rice, Volcker, Mrs. Teeters, Messrs. Roos, Schultz, Winn, and Timlen. Votes Wallich, this action: None. (Mr. against Timlen voted as alternate member.) 5. Authorization for domestic open market operations On April 16, 1980, the Committee voted to increase from $3 billion to $4-1/2 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 April 22, 1980. Votes for this action: Messrs. Volcker, Guffey, Morris, Partee, Rice, Roos, Schultz, Mrs. Teeters, Messrs. Wallich, Winn, and Timlen. Votes against this action: None. Absent and not voting: Mr. Solomon. (Mr. Timlen voted as alternate for Mr. Solomon.) This action was taken on recommendation of the Manager for Domestic Operations. The Manager had advised that since the March meeting, large-scale purchases of securities had been undertaken to

counter the effects on member bank reserves of a decline in float, an increase in currency in circulation, and a rise in required reserves associated with the System actions announced on March 14. As a result, the leeway for further purchases had been reduced to less than $200 million. It appeared likely that additional purchases would be required because projections indicated a need for further reserve-providing operations in the week ahead.