July 28, 1959 FOMC Minutes

FOMC minutes

weeks, that would be an impossible directive. He felt that Mr. Balderston had made some good points and that the Committee members would do well to review what happened during the period of the steel strike in 1956 and also review the minutes of the Open Market Com mittee meetings during that period. It would be worthwhile to recall just what views were expressed at that time and try to fit them into one's own thinking at present. The Chairman suggested that there appeared to be a period of status quo for the moment. It was clear that the majority would not want to change the policy directive or the discount rate at this time and the difficult problem was one of degree, involving whether to resolve doubts on the side of tightness or of ease. At present, there was less need to resolve doubts on the side of ease in view of the successful Treasury refunding and to that extent he would hope the would not lean unduly on the side of ease. Account Management Account Management ought to aim at about Essentially, however, the as now prevailed. There were going to the same degree of restraint as the result of views on the steel strike be pressures in the market to Treasury financing. The situation and varying views with respect might turn the other for a time and then people might be favorable to the business situation. estimates with regard way, depending on their Mr. Mills for clarification with Chairman Martin then asked discount rate and the policy to the latter's position on the respect

directive, and Mr. Mills replied that he would not favor a change in the discount rate or amendment of the directive at this time. The Chairman then stated that in the absence of objection the Committee would approve the policy directive and no change in the discount rate at this time would be contemplated. Mr. Hayes said he had the distinct feeling that there were more at this meeting who, if doubts had to be resolved one way or the other would prefer to err a little on the side of ease rather than of re straint, and Chairman Martin replied that, although the statement might be correct, it would probably be a futile process to take a count of the Committee. That was why he had endeavored to state the consensus in the framework of a "perfect" operation. Mr. Shepardson recalled that in his remarks he had expressed agreement with Mr. Hayes. As he saw it, the Committee favored trying to hold things about where they were, with a minimum of deviation. If be any deviation, in his view it should be of a minimum there had to that was what a number of others around the table nature. He gathered thought also. Martin then stated that in the absence of objection Chairman the matter would be disposed of on that basis. Thereupon, upon motion duly made seconded, the Committee voted and unanimously to direct the Federal York until other Bank of New Reserve directed by the Committee: wise

(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 restraining inflationary credit expansion in order to foster sustain able 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 commitments for the purchase or sale of securities for the Account) at the close of this date, other than special short-term certificates of in debtedness purchased from time to time for the temporary accommodation of the Treasury, shall not be increased or decreased by more than $1 billion; direct from the Treasury for the (2) To purchase account of the Federal Reserve Bank of New York (with discretion, in cases where it seems desirable, to issue participations to one or more Federal Reserve Banks) such of special short-term certificates of indebtedness amounts be necessary from time to time for the temporary as may Treasury; provided that the total accommodation of the certificates held at any one time by the amount of such not exceed in the aggregate Reserve Banks shall Federal $500 million. that, in order to avoid the Labor Chairman Martin suggested schedule a meeting of the seem advisable to Day holiday, it would 8, 1959. If this 1 rather than September Committee for September as to whether a question would remain be agreed upon, the should 18 would be preferred. August 11 or August meeting on that the next meeting it was agreed After a brief discussion, held on Tuesday, August Committee would be Federal Open Market of the would be tentatively the next meeting a.m., that 1959, at 10:00 18,

scheduled for September 1, 1959, and that meetings thereafter would tentatively be scheduled at three-week intervals. In this connection, Mr. Johns suggested to the other Presi dents that a meeting of the Presidents' Conference be scheduled for September 21-23, 1959, and there was agreement on the part of the Presidents with this suggestion, with the understanding that an Open Market Committee meeting would be scheduled for September 22. The meeting then adjourned. Secretary