FEBRUARY FOMC VOTES UNCHANGED MONETARY POLICY
The Federal Open Market Committee at
its February 10-11 meeting voted nine to one to maintain the
then-existing degree of reserve restraint, minutes showed.
    The FOMC issued an asymmetric inter-meeting policy
directive which gave greater possibility to firmer rather than
easier policy. The Committee set a six to seven pct January
through March annualized growth target for M-2 and M-3 and no
M-1 goal. At the prior meeting in mid-December, the FOMC set a
seven pct target for M-2 and M-3 for November through March.
    The February FOMC kept the four to eight pct Federal funds
rate "reference" range for policy, as in other recent meetings.
    At a telephone conference on February 23, committee members
discussed the possible implications of the decisions reached in
Paris for U.S. intervention in foreign exchange markets. No
conclusions were contained in the minutes.
    In its inter-meeting policy directive, the February FOMC
said that "somewhat greater reserve restraint would, or
slightly lesser reserve restraint might, be acceptable
depending on the behavior of the aggregates, taking into
account the strength of the business expansion, developments in
foreign exchange markets, progress against inflation, and
conditions in domestic and international credit markets."
    The February FOMC voted nine to one for an unchanged
policy. Thomas Melzer, St Louis Federal Reserve Bank president
favored some tightening of reserve conditions.
    He noted the strong growth in bank loans in November
through January and the firm federal funds rate that had
prevailed despite the extraordinary pace of reserve growth. He
also cited the recent declines in the dollar's value.
    Finally, looking ahead, Melzer pointed out the potential
for a further rise in inflationary expectations. He believed
that prompt restraints might avert the need for more
substantial tightening later.
    Regarding inter-meeting policy adjustments, the FOMC
minutes showed, "the members generally felt that policy
implementation should be especially alert to the potential need
for some firming of reserve conditions."
    In this view, the FOMC said somewhat greater reserve
restraint would be warranted if monetary growth did not slow in
line with current expectations and there were concurrent
indications of intensifying inflationary pressures against the
background of stronger economic data.
    One indication of potential price pressure might be a
further tendency for the dollar to weaken.
    The minutes showed that one member, presumably Melzer,
preferred a directive that did not contemplate any easing
during the weeks ahead. However, "most of the members did not
want to rule out the possibility of some slight easing during
the inter-meeting period, although they did not view the
conditions for such a move as likely to emerge."
    The FOMC members assumed that future fluctuations in the
dollar's value would not be of sufficient magnitude to have any
significant effect on the Fed's economic projections. In
addition, they anticipated that considerable progress would be
made in reducing the federal budget deficit.
 Reuter
