February 28, 1949 FOMC Minutes

FOMC minutes

of the Federal Reserve Banks of Boston, St. Louis, and Minneapolis, respectively Mr. Raisty, Economist, Federal Reserve Bank of Atlanta Upon motion duly made and seconded, and by unanimous vote, the minutes of the meeting of the Federal Open Market Com mittee held on November 30, 1948, were approved. Upon motion duly made and seconded, and by unanimous vote, the actions of the executive committee of the Federal Open Market Committee as set forth in the min utes of the meetings of the executive committee held on November 30, 1948, and January 4 and 26, 1949, were approved, ratified, and confirmed. Mr. Rouse then read and discussed a report of open market opera tions prepared by the Federal Reserve Bank of New York covering the November 30, 1948, to February 23, 1949, inclusive. He also period from presented a supplementary report covering commitments on February 24 reports have been placed in the files of and 25, 1949. Copies of both the Federal Open Market Comittee. Upon motion duly made and seconded, and by unanimous vote, the transactions in the System account for the period November 30, 1948, through February 27, 1949, were approved, ratified, and con firmed. for the allocation of secu Rouse referred to the procedure Mr. into effect in account, which was put in the System open market rities that the new method was work 1948, in a revised form, stating January the procedure had adverse comment regarding that no ing satisfactorily,

been received from the Federal Reserve Banks, and that he had no changes to suggest at this time. Mr. Rouse also referred to the terms upon which the New York Federal Reserve Bank, as agent for the Federal Open Market Committee, will transact business with brokers and dealers in Government secu rities for the System open market account. He reviewed briefly the complaint made by certain unqualified dealers last year, when the System was purchasing large amounts of Government securities, that un qualified dealers were in effect being excluded from the market. He also reviewed the consideration given to these complaints by the Fed eral Open Market Committee, and the reasons for the conclusion at that time that no change should be made in the statement of terms. He added that there was nothing in the present situation that would warrant a change in the terms. The reports of the economists were then called for and Mr. Thomas asked Mr. John H. Williams to make a statement with respect to the international situation and outlook. reviewed developments in economic activity in Mr. Williams war, comparing the progress with that Europe since the end of the the efforts of western other periods. He also discussed made in exports by widening trade areas countries to increase their European with respect to supplies of the world and the situation throughout imported by those countries. which had to be food and raw materials encouraging until one appeared to be very He stated that the situation

started to look ahead for the next three or four years, especially to the time when the present program of aid under the Economic Co operation Administration would come to an end in 1952, and he ex pressed the view that it would be difficult for the western European countries to maintain their balance of payments after that period, and that a readjustment of currencies in some western European countries should be expected because such currencies were overvalued in relation to the dollar. Following a discussion of Mr. Williams' remarks, Mr. Thomas made a statement on the domestic economic situation and outlook. He referred especially to recent declines in prices, stating that were probably more helpful than hurtful to the economy the declines to offer the possibility of a resump and that the outlook continued developments as well as a possibility of a tion of inflationary sharp deflationary development or a continuance of a middle-of-the further readjustments which would be helpful in road course, with in the economy. He expressed the bringing about greater stability would be the intermediate stage view that the more likely development commenting upon the bank a moderate recession. In with no more than there had been a definite Thomas stated that ing situation, Mr. last year and even more of bank credit since slackening in the growth was not ex this year that credit months of evidence in the opening panding rapidly. paper on the current talk and a Copies of Mr. Williams'

economic situation, prepared in the Board's Division of Research and Statistics, to which Mr. Thomas referred in his remarks, have been placed in the files of the Federal Open Market Committee. During a discussion of Mr. Thomas' remarks, supplementary comments were made by Messrs. Langum, Bopp, Raisty, Robb, Irons, Rief ler, and John H. Williams, as well as members of the Committee, and it was the consensus that, while there could be a marked movement either up or down, there was strong likelihood that a downward move ment would not go far and that readjustments could continue for a con siderable period of time. Thereupon the meeting adjourned. Secretary. Approved: Chairman.