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.
  

