March 5, 1957 FOMC Minutes

FOMC minutes

Mr. Hayes had suggested today and that of the previous meeting to warrant any great concern, although he was inclined to go along with Mr. Hayes' suggestion. He also would go along with the suggestion that each member of the Committee review the directive along the lines discussed at this meeting. Mr. Robertson pointed out that a problem that should be borne in mind in considering the wording of the directive was not only the Committee's interpretation of its meaning, but the interpretation that others would place on the actions of the Committee as those actions were revealed in published reports from time to time. Mr. Vardaman said that this was one of the reasons why he hesi tated to have wording in a directive that indicated the Committee felt that a downturn was taking place in the economy. Chairman Martin said that he would like to comment on the points mentioned by Messrs. Robertson and Vardaman, and he recalled that earlier this year Senator Fulbright, Chairman of the Senate Banking and Currency Committee, had discussed with him whether the Committee should issue statements from time to time as to its policy directives without waiting for their publication in the annual report. The Committee should be aware of the fact a well-informed member of the Senate who was in a position to reflect the views of other Senators felt that a report of policy actions once a year was not sufficient, Chairman Martin said. If a change were now to be made so that there was nothing in the record of policy actions except a pro forma statement, that might cause members

of the Senate to wonder where the present record of policy actions was going. The Chairman emphasized that there was a very real problem in explaining why monetary and credit policy should be determined in the atmosphere of secrecy that has existed. Mr. Leach said that his recollection and understanding was that we had gotten into the habit of making some changes from time to time in the wording of the Committee's directive for the purpose of showing in the policy record that the Committee had recognized that actual or prospective changes in economic or financial conditions from time to time called for corresponding changes in emphasis even though insufficient to warrant changes in the direction of over-all policy. Chairman Martin said that it had been very helpful to him upon a number of occasions to have changes in the Committee's views as to operations and policy reflected in shifts in wording in the directive. He repeated that there was a very real problem, in that there was a very strong body of opinion not only in the press but among many others who continued to wonder why in the world the Open Market Committee did not come out periodically with statements regard ing its policy. At present, the only time such statements (other than in the annual reports) were made was when the the statements included Chairman of the Committee or some other member of the Committee ap Chairman Martin stated that peared before a Committee of Congress. would have in mind that this hoped all members of the Committee he

presented a continuing problem. Thereupon, upon motion duly made and seconded, the Committee voted unanimously to direct the Federal Re serve Bank of New York until otherwise directed by the Committee: (1) To make such purchases, sales, or exchanges (in cluding replacement of maturing securities, and allowing maturities to run off without replacement) for the System open market account in the open market or, in the case of maturing securities, by direct exchange with the Treasury, as may be necessary in the light of current and prospective economic conditions and the general credit situation of the country, with a view (a) to relating the supply of funds in the market to the needs of commerce and business, (b) to restraining inflationary developments in the interest of sustainable economic growth while recognizing uncertainties in the business outlook, the financial markets, and the international situation, and (c) to the practical administra tion of the account; provided that the aggregate amount of securities held in the System account (including commitments for the purchase or sale of securities for the account) at the close of this date, other than special short-term certificates of indebtedness purchased from time to time for the temporary accommodation of the Treasury, shall not be increased or decreased by more than $1 billion; (2) To purchase direct from the Treasury for the ac count of the Federal Reserve Bank of New York (with discre tion, in cases where it seems desirable, to issue participa tions to one or more Federal Reserve Banks) such amounts of special short-term certificates of indebtedness as may be necessary from time to time for the temporary accommodation of the Treasury; provided that the total amount of such certificates held at any one time by the Federal Reserve Banks shall not exceed in the aggregate $500 million; sell direct to the Treasury from the System (3) To account for gold certificates such amounts of Treasury securities maturing within one year as may be necessary from time to time for the accommodation of the Treasury; provided that the total amount of such securities so sold shall not exceed in the aggregate $500 million face amount, and such sales shall be made as nearly as may be practicable at the prices currently quoted in the open market. that the next meeting of the Committee would be It was agreed a.m. on Tuesday, March 26, 1957. held at 10:00

Mr. Leedy stated that as a matter of information the Conference of Presidents contemplated having a short meeting on the afternoon of the day on which the next meeting of the Federal Open Market Committee was held, i.e., March 26, 1957, although it was not anticipated that this would result in presenting to the Board a written memorandum of topics for discussion at a joint meeting. Thereupon the meeting adjourned. Secretary