November 12, 1957 FOMC Minutes

FOMC minutes

international situation," and that this should be replaced by a clause which called for operations with a view, among other things, "to fostering sustainable growth in the economy without inflation, by moderating the pressures on bank reserves." In response to Chairman Martin's request for comments, Mr. Rouse stated that he thought the discussion had clearly indicated the desires of the Committee and what was meant by the suggested new wording of clause (b) of the directive. Mr. Rouse also commented briefly on the outlook for bank reserves during the next few weeks. Thereupon, upon motion duly made and seconded, the Committee voted to direct the Federal Reserve Bank of New York until otherwise directed by the Committee: (1) To make such purchases, sales, or exchanges (including 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 growth in the economy without inflafostering sustainable tion, by moderating the pressures on bank reserves, and (c) to the practical administration of the account; provided that the aggregate amount of securities held in the (including commitments for the purchase or System account for the account) at the close of this sale of securities short-term certificates of indate, other than special debtedness purchased from time to time for the temporary shall not be increased or accommodation of the Treasury, decreased by more than $1 billion; from the Treasury for the (2) To purchase direct the Federal Reserve Bank of New York (with account of it seems desirable, to issue discretion, in cases where

participations 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; (3) To sell direct to the Treasury from the System 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. Votes for this action: Messrs. Martin, Chairman, Hayes, Vice Chairman, Allen, Balderston, Bryan, Leedy, Shepardson, Szymczak, and Williams. Vote against this action: Mr. Robertson. Mr. Robertson dissented from the foregoing action with regard to the insertion in paragraph (1) (b) of the clause, "by moderating the pressures on bank reserves." His action was based on the belief that the prevailing condition of the economy was not such as to call for a lessening of restraint, that inflationary potentials were still strong, and that continued restraint was essential to its containment. Mr. Johns stated that he was not clear as to what, if any conregarding action on the discount rate. sensus there had been he doubted there had been a conChairman Martin stated that of a change in the was that whenever an announcement sensus. His view of in relation to the must be carefully thought rate was made, it we should be in the He did not think Treasury financing. forthcoming

position of having the Treasury open its books on a new offering and, in the midst of that, having the System make a change in the discount rate. This was a problem that had to be worked out. Mr. Hayes said that in suggesting consideration of a change in reserve requirements at central reserve cities, he did not mean to indicate that a reduction should be made immediately. He felt that it should, however, continue to have serious consideration. Chairman Martin agreed that this was a subject that appropriately should be raised for consideration. He reiterated that each of us should feel perfectly free to present suggestions or ideas having to do with any aspect of monetary policy. This was not a matter of Board prerogative, or bank prerogative, or Committee prerogative, and these meetings should be looked upon as a clearing house for System policy discussion. In concluding the meeting, the Chairman commented that every person in the room should remember that he had a special responsibility to see that what had transpired here was not permitted to get into the press. the next meeting of the Committee should be It was agreed that for 10:00 a.m. on Tuesday, December 3, 1957, and attention scheduled that because of the holiday season it was likely was called to the fact that the following meeting of the Committee might be held on Tuesday, December 17, with the meeting after that to be held three weeks later,

on Tuesday, January 7, Thereupon the meeting adjourned.