May 26, 1959 FOMC Minutes

FOMC minutes

After some discussion in the light of Mr. Allen's comments, Mr. Thomas referred to the technical problems involved in getting current statistics and also in regard to the reserve period that should be used. He noted that the System Research Advisory Com mittee was meeting this afternoon and said that if the Open Market Committee so desired it would be possible to prepare a memorandum setting forth the problem and perhaps making some suggestions. It was agreed that it would be desirable for the System Committee to discuss the subject at its meeting Research Advisory this afternoon, and Chairman Martin asked that recommendations be Governors with a view to considering how presented to the Board of further to proceed. the current study of the Government In connection with stated that one of the task groups securities market, Mr. Young to certain factual material contained would like to have access procedures which with present operating in the report on experience by the Federal Open the staff committee appointed was submitted by noted that the reports May 23, 1956. He Market Committee on study would come securities market from the Government resulting well as the Treasury. Committee, as to the Open Market back that the it was understood being no objection, There to the task group would be made available material in question referred to by Mr. Young.

With reference to the record of policy actions of the Federal Open Market Committee for 1958, a draft of which had been distributed for comment to the members of the Committee and the Presidents not presently serving on the Committee, Mr. Robertson said it concerned him that the record seemed to indicate almost complete unanimity of views around the table at the respective Committee meetings. Also, he felt that one reading the policy record might wonder what sort of directions were given to the Manager of the System Account. He suggested, therefore, that it might be desirable to have a prefatory note to the policy record which would indicate that there were differing views all through the period covered by the record. Such a preface might also bring that the Manager of the Account sits with the Open Market out Committee and has the benefit of discussion around the table, for it is not essential to pinpoint specific instructions which reason to the Manager. were certain dangers in a Szymczak commented that there Mr. suggested and that it might be procedure such as Mr. Robertson had of prefatory note and staff to prepare a draft desirable for the submit it to the Committee. that he was interested merely Mr. Robertson agreed, adding meetings was a out of the respective that what came in indicating which there might have been varying general agreement, underlying viewpoints.

The Chairman then stated that the staff would prepare a draft of prefatory note along the lines Mr. Robertson had suggested and distribute it for comment. At this point Chairman Martin inquired of Mr. Mills whether he wished to be recorded as opposed to the issuance of a policy directive to the New York Bank in the form he (Chairman Martin) had mentioned earlier during this meeting. Mr. Mills responded in terms that he took as strong a view as Mr. Robertson regarding the policy record. The policy record showed for every meeting a record vote on the directive to the New York Bank, whereas his view was that instructions given for open market operations reflected a consensus. Chairman Martin commented that Mr. Mills had raised a real point. He went on to say that whenever any member of the Committee wished to have his views recorded, that should certainly be done. Mr. Hayes then stated that this discussion suggested the desirability of preparing the policy record entries on a more current basis, and there was general agreement with this comment. Thereupon, upon motion duly made and seconded, and with Mr. Mills voting it was voted to direct the Federal "no", Reserve Bank of New York until otherwise directed by the Committee: sales, or exchanges (1) To make such purchases, (including replacement of maturing securities, and to run off without replacement) for allowing maturities

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 credit expansion in order to foster sustainable economic growth and expanding employment opportunities, and (c) to the practical administration of the Account; provided that the aggregate amount of securities held in the System Account (including com mitments for the purchase or sale of securities for the Account) at the close of this date, other than special short-term certificates of indebtedness from time to time for the temporary accom purchased Treasury, shall not be increased or modation of the decreased by more than $1 billion; the Treasury for the purchase direct from (2) To Reserve Bank of New York (with account of the Federal it seems desirable, to issue discretion, in cases where one or more Federal Reserve Banks) participations to short-term certificates of such amounts of special be necessary from time to time for indebtedness as may of the Treasury; provided the temporary accommodation total amount of such certificates held at any that the Banks shall not exceed time by the Federal Reserve one in the aggregate $500 million. of the Federal Open Market agreed that the next meeting It was June 16, 1959, at 10:00 a.m. would be held on Tuesday, Committee The meeting then adjourned. Secretary