March 1, 1947 FOMC Minutes

FOMC minutes

connection with the certificates maturing on April 1. Consideration was given to the suggestion that the Treasury retire $1.5 billion of the April 1 maturity and whether anything should be said at this time with respect to retirements in June and July. It was the consensus that because of the uncertainty regarding Treasury balances the Com mittee should recommend the retirement of only $1 billion of the April maturities and that recommendations with respect to June and July ma turities should be deferred until later when it would be apparent wheth er the high level of Treasury receipts was being maintained. At the conclusion of the discussion, upon motion duly made and seconded, and by unanimous vote, it was agreed that upon receipt of the usual request from Mr. Bartelt, the following letter should be sent to the Secretary of the Treasury: "In response to Mr. Bartelt's request, I am transmit ting to you the recommendations of the Federal Open Market Committee with respect to April financing. The Committee recommends that one billion dollars of April 1 certificates be retired, in order to continue the program of orderly debt reduction which has been so successfully followed in the recent past, and to obtain the modest interest saving in volved. "Because receipts have been and appear likely to be had been expected, it is now esti considerably higher than at the end of March will be mated that the Treasury balance the 800 million of free over 5 billion dollars, including It is also from Monetary Fund transactions. gold derived the end of April will be at that the balance at estimated of April 1 certifi assuming one billion least 3.8 billion, than 3 billion on and will not be less cates are retired, excess of expenditures during June 30 despite the expected the last quarter of the fiscal year.

"It will be possible to finance the March 15 and the proposed April 1 retirements out of the Treasury balances with the Federal Reserve Banks plus a call on war loan deposits of 500 to 800 million dollars on March 15. A call of approximately this amount at this time would be desirable to reduce the easing of the money market that will result from the March 15 payment of maturing notes." In connection with the direction issued by the Federal Open Market Committee on March 1, 1945, with respect to purchases and sales of bills by the Federal Reserve Banks, Chairman Eccles stated that it did not appear that there was any action to be taken toward changing the direction until the question of future policy with re spect to Treasury bills had been more fully determined. Upon motion duly made and seconded, and by unanimous vote, it was agreed that no action should be taken at this time to change the direction issued at the meeting of the Federal Open Market Committee on March 1, 1945, with respect to the purchase of Treasury bills by the twelve Federal Reserve Banks. be granted to the ex the authority to In connection with the System open market transactions for committee to execute ecutive somewhat reduced size that because of the account, it was suggested program for the retire connection with the operations in of Treasury of the ex limitation on the authority the public debt, the ment of amount of securi the total increase or decrease committee to ecutive instead fixed at $1,500,000,000 should be the System account ties in of $2,000,000,000.

Thereupon, upon motion duly made and seconded and by unanimous vote, the fol lowing direction to the executive committee was approved, with the understanding that the limitations contained in the direction would include commitments for purchases and sales of securities for the System open mar ket account: The executive committee be directed, until otherwise directed by the Federal Open Market Committee, to arrange for such transactions for the System open market account, either in the open market or directly with the Treasury (including purchases, sales, exchanges, replacement of maturing securities, and letting maturities run off without replacement), as may be necessary in the practical adminis tration of the account or for the purpose of maintaining an orderly market in Treasury securities and a general level of prices and yields of Government securities which will support the Treasury issuing rates of 7/8 per cent for one year certificates and 2-1/2 per cent for 27-year bonds re stricted as to ownership; provided that the aggregate amount of securities held in the account at the close of this date outright in the market on a [other than (1) bills purchased discount basis at the rate of 3/8 per cent per annum and bills redeemed at maturity and (2) special short-term cer tificates of indebtedness purchased from time to time for the temporary accommodation of the Treasury] shall not be increased or decreased by more than $1,500,000,000. That the executive committee be further directed, until otherwise directed by the Federal Open Market Committee, to for the purchase for the System open market account arrange the Treasury of such amounts of special short direct from of indebtedness as may be necessary from term certificates for the temporary accommodation of the Treasury; time to time certificates held in the ac provided that the amount of such count at any one time shall not exceed $1,500,000,000. meeting of the Federal agreed that the next It was tentatively during the week beginning June 2, Open Market Committee would be held

Thereupon the meeting adjourned. Secretary. Approved. Chairman.