April 14, 1959 FOMC Minutes

FOMC minutes

with which he was quite unhappy, was that present policy should be continued during the next three weeks, with the hope that after the Treasury financing the System might be able to apply more restraint. Mr. Hayes said that the consensus in terms of policy for the next three weeks seemed clear and called for maintenance of about the same degree of restraint as had existed during the past three weeks. In reaching this conclusion, however, it was also clear that the views of those who had spoken covered a wide spectrum of opinion. While all were concerned about the Treasury's problem, there was a wide variation in views. There were those who felt that the Treasury problem was an additional reason for moving cautiously and that a certain degree of caution might in any case be warranted by the lack of definite inflationary threats at the present time. There were also those who concluded with only the greatest reluctance that the System should refrain from further tightening because of the Treasury. Between those extremes, many seemed to believe that perhaps the System might be moving soon in the direction of further restraint, although obviously the Treasury's situation precluded such action for the end of the spectrum were a few who would time being. At the other now in spite of the Treasury's position. even do a little probing clear that maintenance of the present degree of restraint It seemed of the feel of the market rather was defined pretty much in terms than any specific net borrowed reserve figure, for specific figures

had been mentioned only by a small number of those present. Mr. Hayes said he took it that it was the intention of the Committee to rely fairly heavily on the discretion of the Manager of the Account in maintaining the tone of the market about as it had been. Mr. Hayes commented that some interesting points had been brought out in the discussion. On the one hand, there was the dilemma the Committee now faced, with the obvious possibility of serious inflationary difficulties in the future. Much had been said concerning the better than expected progress of business, the rather ample money supply, and the degree of liquidity outside the money supply. If tightening should become clearly desirable, possibly this might make such action a little more difficult. On some had expressed the view that there was danger the other hand, inflation at a time when all of the evidence was in moving against was also a view that recent statistics perhaps not yet in. There the Reserve Banks might not reserves and borrowings at on borrowed under which the a picture of the pressures have given as adequate as one might wish to have. had been operating recently banking system spectrum, seemed to him to while covering a wide These comments, maintaining the status in favor of quite clearly a consensus indicate the directive might be changed heard no suggestion that quo. He had change in the discount be given to any or that near-term consideration rate. inquired whether there were any differing Mr. Hayes then

views with respect to his summation of the policy views at this meeting, and none were heard. 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/ (1) To make such purchases, sales, or exchanges (including replacement of maturing securities, and allow ing 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 fostering conditions in the money market conducive to sustainable economic growth and stability, and (c) to the practical administration 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, short-term certificates of indebtedness other than special from time to time for the temporary accommodation purchased of the Treasury, shall not be increased or decreased by more than $1 billion; Treasury for the direct from the (2) To purchase of the Federal Reserve Bank of New York (with account where it seems desirable, to issue discretion, in cases or more Federal Reserve Banks) such participations to one short-term certificates of indebtedness amounts of special to time for the temporary be necessary from time as may Treasury; provided that the total accommodation of the held at any one time by the amount of such certificates shall not exceed in the aggregate Federal Reserve Banks $500 million. the Federal Open Market the next meeting of It was agreed that at 10:00 a.m. May 5, 1959, be held on Tuesday, Committee would had stated Mr. King these minutes, 2 of on page As set forth 1/ coming before on matters from voting to refrain he wished that did not participate meeting. He at this for action the Committee vote on the directive. in the

The meeting then adjourned. Secretary