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      -  Authorization for Domestic Open Market Operations 
      -  Domestic Policy Directive  
      -  Authorization for Foreign Currency Operations 
      -  Foreign Currency Directive 
      -  Procedural Instructions with Respect to Foreign Currency Operations 
      -  Meeting Minutes 

# Minutes of Federal Open Market Committee Meetings 

The policy actions of the Federal Open Market  Committee, contained in the minutes of its meetings, are presented in  the Annual Report of the Board of Governors pursuant to  the requirements of section 10 of the Federal Reserve Act. That  section provides that the Board shall keep a complete record of the  actions taken by the Board and by the Federal Open Market Committee on  all questions of policy relating to open market operations, that it  shall record therein the votes taken in connection with the  determination of open market policies and the reasons underlying each  policy action, and that it shall include in its annual report to  Congress a full account of such actions.

The minutes of the meetings contain the votes on the  policy decisions made at those meetings as well as a summary of the  information and discussions that led to the decisions. The descriptions  of economic and financial conditions are based solely on the  information that was available to the Committee at the time of the  meetings.

Members of the Committee voting for a particular action  may differ among themselves as to the reasons for their votes; in such  cases, the range of their views is noted in the minutes. When members  dissent from a decision, they are identified in the minutes and a  summary of the reasons for their dissent is provided.

Policy directives of the Federal Open Market Committee are issued  to the Federal Reserve Bank of New York as the Bank selected by  the Committee to execute transactions for the System Open  Market Account. In the area of domestic open market operations, the  Federal Reserve Bank of New York operates under instructions from  the Federal Open Market Committee that take the form of an  Authorization for Domestic Open Market Operations and a Domestic Policy  Directive. (A new Domestic Policy Directive is adopted at each  regularly scheduled meeting.) In the foreign currency area, the Federal  Reserve Bank of New York operates under an Authorization for  Foreign Currency Operations, a Foreign Currency Directive, and  Procedural Instructions with Respect to Foreign Currency  Operations. These policy instruments are shown below in the form in  which they were in effect at the beginning of 2006. Changes in the  instruments during the year are reported in the minutes for the  individual meetings.

##   Authorization for Domestic Open Market  Operations    In Effect January 1, 2006 

      - The Federal Open Market Committee authorizes and    directs the Federal Reserve Bank of New York, to the extent necessary to carry out the most recent domestic policy directive adopted at    a meeting of the Committee:             -  To buy or sell U.S. Government securities, including        securities of the Federal Financing Bank, and securities that are        direct obligations of, or fully guaranteed as to principal and        interest by, any agency of the United States in the open market, from        or to securities dealers and foreign and international        accounts maintained at the Federal Reserve Bank of New York,        on a cash, regular, or deferred delivery basis, for the System Open        Market Account at market prices, and, for such Account, to        exchange maturing U.S. Government and Federal agency securities with        the Treasury or the individual agencies or to allow them to mature        without replacement. 
        -  To buy U.S. Government securities, obligations that        are direct obligations of, or fully guaranteed as to principal and        interest by, any agency of the United States, from dealers for the        account of the Federal Reserve Bank of New York under agreements for        repurchase of such securities or obligations in 65 business days or        less, at rates that, unless otherwise expressly authorized by the        Committee, shall be determined by competitive bidding, after applying        reasonable limitations on the volume of agreements with individual        dealers; provided that in the event Government securities or agency        issues covered by any such agreement are not repurchased by the dealer        pursuant to the agreement or a renewal thereof, they shall be sold in        the market or transferred to the System Open Market Account. 
        - To sell U.S. Government securities and obligations        that are direct obligations of, or fully guaranteed as to principal and        interest by, any agency of the United States to dealers for System Open        Market Account under agreements for the resale by dealers of such        securities or obligations in 65 business days or less, at rates that,        unless otherwise expressly authorized by the Committee, shall be        determined by competitive bidding, after applying reasonable        limitations on the volume of agreements with individual dealers. 
      - In order to ensure the effective conduct    of open market operations, the Federal Open Market Committee    authorizes the Federal Reserve Bank of New York to lend on an overnight    basis U.S. Government securities held in the System Open Market Account    to dealers at rates that shall be determined by competitive bidding.    The Federal Reserve Bank of New York shall set a minimum lending fee    consistent with the objectives of the program and apply reasonable    limitations on the total amount of a specific issue that may be    auctioned and on the amount of securities that each dealer may borrow.    The Federal Reserve Bank of New York may reject bids which could    facilitate a dealer's ability to control a single issue as    determined solely by the Federal Reserve Bank of New York. 
      - In order to ensure the effective conduct of open    market operations, while assisting in the provision of short-term    investments for foreign and international accounts maintained at the    Federal Reserve Bank of New York and accounts maintained at the Federal    Reserve Bank of New York as fiscal agent of the United States    pursuant to Section 15 of the Federal Reserve Act, the Federal    Open Market Committee authorizes and directs the Federal Reserve Bank    of New York (a) for System Open Market Account, to sell U.S.    Government securities to such accounts on the bases set forth in    paragraph 1(a) under agreements providing for the resale by such    accounts of those securities in 65 business days or less on terms    comparable to those available on such transactions in the market; and    (b) for New York Bank account, when appropriate, to undertake    with dealers, subject to the conditions imposed on purchases and sales    of securities in paragraph 1(b), repurchase agreements in U.S.    Government and agency securities, and to arrange corresponding sale and    repurchase agreements between its own account and such foreign,    international, and fiscal agency accounts maintained at the Bank.    Transactions undertaken with such accounts under the provisions of this    paragraph may provide for a service fee when appropriate. 
      - In the execution of the Committee's decision    regarding policy during any intermeeting period, the Committee    authorizes and directs the Federal Reserve Bank of New York, upon    the instruction of the Chairman of the Committee, to adjust somewhat in    exceptional circumstances the degree of pressure on reserve positions    and hence the intended federal funds rate. Any such adjustment shall be    made in the context of the Committee's discussion and decision at its    most recent meeting and the Committee's long-run objectives for price    stability and sustainable economic growth, and shall be based on    economic, financial, and monetary developments during the    intermeeting period. Consistent with Committee practice, the    Chairman, if feasible, will consult with the Committee before making    any adjustment.

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##   Domestic Policy Directive 

### In Effect January 1, 2006  1

The Federal Open Market Committee seeks monetary and  financial conditions that will foster price stability and promote  sustainable growth in output. To further its long-run objectives, the  Committee in the immediate future seeks conditions in reserve  markets consistent with increasing the federal funds rate to an  average of around 4-1/4 percent.

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##   Authorization for Foreign Currency Operations 

### In Effect January 1, 2006 

      - The Federal Open Market Committee authorizes and  directs the Federal Reserve Bank of New York, for System Open Market  Account, to the extent necessary to carry out the Committee's foreign  currency directive and express authorizations by the Committee  pursuant thereto, and in conformity with such procedural instructions  as the Committee may issue from time to time:           -  To purchase and sell the following foreign currencies in  the form of cable transfers through spot or forward transactions on the  open market at home and abroad, including transactions with the U.S.  Treasury, with the U.S. Exchange Stabilization Fund established by  Section 10 of the Gold Reserve Act of 1934, with foreign monetary  authorities, with the Bank for International Settlements, and with  other international financial institutions:   Canadian dollarsMexican pesos Danish kronerNorwegian kronerEuroSwedish kronor Pounds sterlingSwiss francsJapanese yen  
        -  To hold balances of, and to have outstanding  forward contracts to receive or to deliver, the foreign currencies  listed in paragraph A above. 
        -  To draw foreign currencies and to permit foreign banks to  draw dollars under the reciprocal currency arrangements listed in  paragraph 2 below, provided that drawings by either party to any  such arrangement shall be fully liquidated within 12 months after  any amount outstanding at that time was first drawn, unless the  Committee, because of exceptional circumstances, specifically  authorizes a delay. 
        -  To maintain an overall open position in all foreign  currencies not exceeding $25.0 billion. For this purpose, the  overall open position in all foreign currencies is defined as the sum  (disregarding signs) of net positions in individual currencies. The net  position in a single foreign currency is defined as holdings of  balances in that currency, plus outstanding contracts for future  receipt, minus outstanding contracts for future delivery of that  currency, i.e., as the sum of these elements with due regard to  sign.
      - 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:     Foreign bankAmount               of arrangement               (millions of               dollars equivalent)Bank of Canada2,000Bank of Mexico3,000 	        Any changes in the terms of existing swap    arrangements, and the proposed terms of any new arrangements that may    be authorized, shall be referred for review and approval to the    Committee. 
      - All transactions in foreign currencies    undertaken under paragraph 1.A. above shall, unless otherwise    expressly authorized by the Committee, be at prevailing market rates.    For the purpose of providing an investment return on System holdings of    foreign currencies or for the purpose of adjusting interest rates paid    or received in connection with swap drawings, transactions with foreign    central banks may be undertaken at non-market exchange rates. 
      - It shall be the normal practice to arrange with    foreign central banks for the coordination of foreign currency    transactions. In making operating arrangements with foreign central    banks on System holdings of foreign currencies, the Federal Reserve    Bank of New York shall not commit itself to maintain any specific    balance, unless authorized by the Federal Open Market Committee. Any    agreements or understandings concerning the administration of the    accounts maintained by the Federal Reserve Bank of New York with the    foreign banks designated by the Board of Governors under    Section 214.5 of Regulation N shall be referred for    review and approval to the Committee. 
      - Foreign currency holdings shall be invested to    ensure that adequate liquidity is maintained to meet anticipated needs    and so that each currency portfolio shall generally have an average    duration of no more than 18 months (calculated as Macaulay    duration). When appropriate in connection with arrangements to provide    investment facilities for foreign currency holdings, U.S. Government    securities may be purchased from foreign central banks under agreements    for repurchase of such securities within 30 calendar days. 
      - All operations undertaken pursuant to    the preceding paragraphs shall be reported promptly to the    Foreign Currency Subcommittee and the Committee. The Foreign    Currency Subcommittee consists of the Chairman and Vice Chairman of the    Committee, the Vice Chairman of the Board of Governors, and such other    member of the Board as the Chairman may designate (or in the absence of    members of the Board serving on the Subcommittee, other Board members    designated by the Chairman as alternates, and in the absence of the    Vice Chairman of the Committee, his alternate). Meetings of the    Subcommittee shall be called at the request of any member, or at    the request of the Manager, System Open Market Account ("Manager"),    for the purposes of reviewing recent or contemplated operations and    of consulting with the Manager on other matters relating to his    responsibilities. At the request of any member of the Subcommittee,    questions arising from such reviews and consultations shall be referred    for determination to the Federal Open Market Committee. 
      - The Chairman is authorized:             - With the approval of the Committee, to enter into any        needed agreement or understanding with the Secretary of the Treasury        about the division of responsibility for foreign currency operations        between the System and the Treasury; 
        - To keep the Secretary of the Treasury fully advised        concerning System foreign currency operations, and to consult with the        Secretary on policy matters relating to foreign currency        operations; 
        - From time to time, to transmit appropriate reports and        information to the National Advisory Council on International Monetary        and Financial Policies. 
      - Staff officers of the Committee are authorized to    transmit pertinent information on System foreign currency operations to    appropriate officials of the Treasury Department. 
      - All Federal Reserve Banks shall participate in the    foreign currency operations for System Account in accordance with    paragraph 3G(1) of the Board of Governors' Statement of Procedure with    Respect to Foreign Relationships of Federal Reserve Banks dated January    1, 1944.

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##   Foreign Currency Directive 

### In Effect January 1, 2006 

      - System operations in foreign currencies shall    generally be directed at countering disorderly market conditions,    provided that market exchange rates for the U.S. dollar reflect actions    and behavior consistent with IMF Article IV, Section 1. 
      - To achieve this end the System shall:             - Undertake spot and forward purchases and sales of foreign        exchange.        
        - Maintain reciprocal currency ("swap")            arrangements with selected foreign central banks. 
        -  Cooperate in other respects with central banks of other        countries and with international monetary institutions.
      - Transactions may also be undertaken:             - To adjust System balances in light of probable future        needs for currencies. 
        - To provide means for meeting System and Treasury        commitments in particular currencies, and to facilitate operations of        the Exchange Stabilization Fund. 
        - For such other purposes as may be expressly authorized by        the Committee.
      - System foreign currency operations shall be    conducted:              - In close and continuous consultation and cooperation with        the United States Treasury; 
        -  In cooperation, as appropriate, with foreign monetary        authorities; and   
        - In a manner consistent with the obligations of the United        States in the International Monetary Fund regarding exchange        arrangements under IMF Article IV.

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##   Procedural Instructions with Respect to Foreign  Currency Operations 

### In Effect January 1, 2006 

In conducting operations pursuant to the  authorization and direction of the Federal Open Market Committee as set  forth in the Authorization for Foreign Currency Operations and the  Foreign Currency Directive, the Federal Reserve Bank of New York,  through the Manager, System Open Market Account ("Manager"), shall  be guided by the following procedural understandings with respect to  consultations and clearances with the Committee, the Foreign Currency  Subcommittee, and the Chairman of the Committee. All operations  undertaken pursuant to such clearances shall be reported promptly  to the Committee. 
      - The Manager shall clear with the Subcommittee (or    with the Chairman, if the Chairman believes that consultation with the    Subcommittee is not feasible in the time available):             - Any operation that would result in a change in the        System's overall open position in foreign currencies exceeding        $300 million on any day or $600 million since the most recent        regular meeting of the Committee.   
        - Any operation that would result in a change on any day in        the System's net position in a single foreign currency exceeding        $150 million, or $300 million when the operation is        associated with repayment of swap drawings.   
        - Any operation that might generate a substantial volume of        trading in a particular currency by the System, even though the change        in the System's net position in that currency might be less than the        limits specified in 1.B.   
        - Any swap drawing proposed by a foreign bank not exceeding        the larger of (i) $200 million or (ii) 15 percent of the size of        the swap arrangement. 
      - The Manager shall clear with the Committee (or with    the Subcommittee, if the Subcommittee believes that consultation with    the full Committee is not feasible in the time available, or with the    Chairman, if the Chairman believes that consultation with the    Subcommittee is not feasible in the time available):            - Any operation that would result in a change in the        System's overall open position in foreign currencies exceeding        $1.5 billion since the most recent regular meeting of the        Committee.   
        - Any swap drawing proposed by a foreign bank        exceeding the larger of (i) $200 million or (ii) 15 percent        of the size of the swap arrangement. 
      - The Manager shall also consult with the Subcommittee    or the Chairman about proposed swap drawings by the System and about    any operations that are not of a routine character.

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## Meeting Held on January 31, 2006

## Meeting Held on March 27-28, 2006

## Meeting Held on May 10, 2006

## Meeting Held on June 28-29, 2006

## Meeting Held on August 8, 2006

## Meeting Held on September 20, 2006

## Meeting Held on October 24-25, 2006

## Meeting Held on December 12, 2006

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    1. Adopted by the Committee at its meeting on December 13, 2005.         Return to text

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