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fomc
1,977
Well, we're at 5-3/8
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And the midpoint of the range is 5-1/2.
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The midpoint is 5-1/2, yes, but I don't think there ought to be an arbitrary move to 5-1/2. There ought to be a move based on some evidence concerning the aggregates. But the full range being available for us in contrast to the money market directive.
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But you wouldn't move right away, and there, as a practical import, you say until some aggregates evidence can then--
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Yes.
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As a practical matter, Mr. Chairman, it seems to me what I was saying, it conforms to rules 1, 2, and 3.
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Well, then our discussion has been helpful. That is, the meaning that you sought to convey, which I didn't get in the first instance, has now been clarified. That's helpful. All right, then, Mr. Jackson, please.
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Mr. Chairman, I would support the aggregates proposed for M1 and M2. I would also support the federal funds range, while normally, I think the wider range of latitude would be desirable. In view of the unknown consequences of financial shifts as a result of the wild-card expirations that we may be experiencing, of whic...
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Who would like to speak next? Mr. Gardner.
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I have no difficulty with the ranges of M1 and M2, but if you will forgive me for appending an additional comment on your comment this morning, I don't want a 6 percent federal funds rate without further deliberation. So I would support the narrower range in the federal funds rate because I think this would be a most s...
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Thank you, Mr. Gardner. Yes, Mr. Kimbrel?
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In our [Treasury] financing, if we are going to move, would we need to do this very quickly?
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This is the question--
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Treasury financing.
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I don't know what the financing schedule is, precisely.
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They will be announcing a week from tomorrow, Mr. Chairman, in terms of the quarterly refunding operation. So, from that standpoint, if there were any significant rule [unintelligible], the midpoint would probably be [unintelligible] making its presence in the market early. I don't know that these smaller rules that [u...
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How much will the Treasury be--
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They are refunding just over $3 billion, and they might add $2-1/2 billion or $3 billion before or on top of that. So it's a sizable--
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And that means that the only new information that we'll have will be Wednesday and Thursday of this week.
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That's correct, Mr. Chairman, but I ought to add that there is some thought that, because of the blackout in New York, the additional data that we get for the week ending the 20th may be subject to some more doubt than they usually are--the preliminary data. There may be some technical problems in interpreting and gett...
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When will those doubts be resolved?
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I would assume they would be resolved within a week afterward, when we get the final data for that period.
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Wait, now the final data, are you referring to the preliminary data that you normally get on the Thursday?
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Yes. I'm referring to the data for the week ending July 20, which we would normally get on a Thursday.
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Well, the data are always a bit cloudy--
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That's right; I'm told they'll be cloudier.
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This time they will be somewhat more cloudy?
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That's right, because it covers the period in which we had this power failure in New York.
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We'll get to this point a little later--that is, we'll have to clear that up. Yes, Mr. Kimbrel; no, you have spoken, that's right. Mr. Volcker.
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Well, I am at about the same place I think that Steve Gardner is. I can use the C and D aggregates projections or also go along with Mr. Coldwell, and maybe one or two others, who even went a half a point lower than that. But I agree with Governor Gardner that we should not increase the federal funds rate to 6 percent ...
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That was my question. Our normal procedure would be to move deliberately toward the midpoint, wouldn't it, unless you were given other instructions?
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I think that that would be the normal procedure, but starting from an asymmetrical midpoint there is a special question as to how fast we move. And the suggestion that I made was that we move on the basis of new information rather than move mechanically.
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The staff would create [unintelligible] good reason to move, then I would support your proposal.
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Thank you, Mr. Lilly. Who is--yes, Mr. Winn.
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I can [associate] myself with that, too.
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Thank you, Mr. Winn. Mr. Partee.
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Well, Mr. Chairman, I would have rather done it the other way around. That is, I think it is time to have a monetary aggregates directive because the special circumstances of early July are over. But I think there is some uncertainty about what the aggregates are doing and certainly about what aggregates tend to do. I ...
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Well, then, why would you want the federal funds rate to move down to 5?
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Well, that's only 3/8 from where it is now, and we would only be [moving there] in the case you were validating a 3 percent M1 for July-August. And you're going in with a 7-1/2 percent estimate for July; if that were realized, what would that mean--a minus for August.
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But a move of the federal funds rate [down] 3/8 would be regarded as a very significant easing move by the Federal Reserve
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But if we have a negative August--in a situation where the economy seemed to be flat or weakened, well, I just--I can live with what you proposed, but I would have thought that this might be a time to broaden those ranges.
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All right, thank you, Mr. Partee. Mr. Morris hasn't spoken yet.
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Mr. Chairman, I accept your proposal.
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Thank you, Mr. Morris. Mr. Roos, we haven't heard from you.
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Mr. Chairman, I would support the M1 and M2 ranges under C. I'd like to express support for a federal funds rate of 5-1/4 to 6.
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Thank you, Mr. Roos. Mr. Wallich, we haven't heard from you yet.
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I think we're in some danger of mixing the two directives. I think, if we want an aggregates directive, we ought to have a wide funds rate spread. The narrow spread is appropriate for the money market directive. So I would go for 5 to 5-3/4 with a midpoint of 5-3/8, and otherwise, the specifications of B
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All right, anyone else like to speak?
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Mr. Chairman.
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Yes, Mr. Balles, and then Mr. Baughman.
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In the interest of brevity, Mr. Chairman, I would support your proposal, assuming the asymmetrical midpoint, in view of the sensitive conditions we have right now.
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Thank you, Mr. Balles. Mr. Baughman.
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I would find your suggestions on the aggregates quite satisfactory, but on the fed funds, I'd be inclined to the 5 to 6 range.
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Thank you, Mr. Baughman. Anyone else? One thing is perfectly clear: the Committee is inclined to accept a monetary aggregates directive. And a clear majority favors a growth range for M1 of 3-1/2 to 7-1/2 and a growth range for M2 of 6-1/2 to 10-1/2. As for the federal funds rate, there is a distribution, a wider distr...
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I am in support of your proposal, Mr. Chairman.
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Well, that makes for the majority, just what I've been waiting for. Any further discussion?
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Mr. Chairman, I have no problems with your [5-]1/4 to 3/4. The only question, I think, is the asymmetrical side. You might test to see whether the Committee wants the asymmetrical or the move to the 1/2 point [midpoint].
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You mean the prompt move to the--
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Well, reasonably prompt.
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Well, all right, let me put the question as it was worded by Mr. Coldwell, and each member of the Committee will interpret that for himself. Members of the Committee who seek a reasonably prompt move from 5-3/8 to 5-1/2 will indicate that by raising their hands.
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Regardless of any information we have received?
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Well, every member of the Committee will interpret that for himself.
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Three, Mr. Chairman.
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Well, then, I would say that the move ought to be made on the basis of new information. But we don't sit on new information, we use it. That is [what] the monetary aggregates directive always means. Well, unless there is further question, let us vote on the following: A monetary aggregates directive; an M1 range of 3-1...
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I think some reference to the Treasury financing might well go into the directive for a change.
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We've haven't had that reference for a long, long time, Mr. Chairman, and we have taken account of financial market developments, which I believe might be satisfactory. I don't know that we need to make special mention.
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I think if the Committee understands that we do have to keep an eye out on the financing, that's all that's needed; nothing specific is really needed.
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Well, I think the Committee does understand that. Well, if we are ready for the vote, let's proceed.
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Chairman Burns Yes Vice Chairman Volcker Yes Governor Coldwell Yes Governor Gardner Yes President Guffey Yes Governor Jackson Yes Governor Lilly Yes President Mayo Yes President Morris Yes Governor Partee Yes President Roos Yes Governor Wallich Yes Unanimous.
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What else do we have to do, Mr. Secretary?
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Set the date for the next meeting.
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Yes, Mr. Baughman?
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[In] appendix III, page 2, in the Bluebook, [there is a] reference to the computation of the bank credit measures and [a] suggestion at the very bottom of the page that the staff could develop a monthly average series for the components of that measure as well, if desired. I assume the reference here is simply to the b...
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No, we could develop on a weekly average basis the same breakdown we had on the end-of-month series. We have the same lack of information in both cases.
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It would seem to me that it might be helpful, with the bank credit measure being brought into the picture, that we have at least some of the broad categories
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We are working toward that end, but it will be at least some while, and of course it will be some while further to seasonally adjust them.
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Mr. Baughman, I'm sorry, I haven't been attentive, but has your question been properly handled by Mr. Axilrod?
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Taken care of as far as I'm concerned.
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All right, good.
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Mr. Chairman, can I ask the Presidents to remain?
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The agenda indicates an executive session, but that session will be postponed until we have concluded our monetary policy meeting. Is there, gentlemen, a move to approve the minutes [of the July 19, 1977, meeting], if that be the inclination of the Committee?
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So moved.
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Seconded.
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The motion has been made and seconded. No objections heard. I take it the minutes are approved. We will now hear from Mr. Pardee on foreign currency operations.
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[Secretary's note: This statement was not found in Committee records.]
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Thank you very much. I take it [that], while foreign exchange markets start boiling, our rhetoric also becomes more interesting, more exciting.
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You bought $77 million--is that what it amounts to in the market? You got rid of the $35 [million].
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Yes, 35 plus 43.
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How much had you sold earlier?
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Oh, well, in the total operation, it had been somewhat over $100 million between June and July. And $88 million reported last month.
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But you haven't quite recouped your position, I suppose.
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I'm building up balances very gradually, dollar averaging as the dollar rate rises. Buying marks at times when the dollar is rising particular sharply, again on the idea of avoiding disorderly conditions.
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Any questions or comments? Yes, Mr. Wallich.
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In your report for the period, you mentioned that various currencies tried to avoid getting into the lower part of the snake [intended exchange rate band] and also, I guess, wanted to avoid being at the top, and so they intervened. Is that now the standard procedure? That they will not wait and operate in their own cur...
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Yes, I think the central banks have found that, as we did in the fixed-rate world, that the last place you want to be is at the upper limit with no flexibility whatsoever, just taking in taking in currencies or handing them out. And that to maintain the flexibility of intervention, it's better to start somewhat earlier...
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Is there any evidence they're thinking of using their own currencies within the limits? I realize that there are accounting difficulties.
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They have from time to time, but not in transactions outside the fund, the pooling arrangement. There are all kinds of bonds that are being issued, and so forth, and currencies come into their hands. We have the odd situation where the Bank of France is now operating much more in German marks, and at one stage they wer...
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Is the morning telephone call in Europe still in action? If so, how did it work out?
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Morning telephone--
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As I remember, the central banks were exchanging a morning conference call.
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