November 24, 1959 FOMC Minutes

FOMC minutes

quo. He doubted whether the Committee could do anything much different than that. As he understood it, Chairman Martin said, the majority of the Committee favored no change in the discount rate or in the policy directive at this time. Mr. Mills, he noted, had suggested a change in the directive and presumably would want to have this suggestion recorded in the minutes along with his vote on the directive. Mr. Mills replied in the affirmative. The Chairman then inquired whether there were any other comments and, none being heard, he said that the directive would be approved in its present form with the record showing Mr. Mills' dissent, Thereupon, upon motion duly made and seconded, the Committee voted, with Mr. Mills voting "no", 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 restraining inflationary credit expansion in order to foster sustainable economic growth and expanding employ opportunities, and (c) to the practical administration ment

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 pur chased 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 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 amounts of special short-term certificates of indebted ness 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. Martin then referred to the next item on the agenda Chairman contemplated further discussion of procedure for this meeting, which with the collection of statistics from Government in connection this item be tabled. If dealers. He suggested that securities Mr. Young would be willing to to the Committee, he said, agreeable something that could be and try to work out undertake to go forward next meeting of the at the in the form of a recommendation presented Committee. to this suggestion. was indicated No objection Federal Open Market meeting of the that the next It was agreed at 10 a.m. 15, 1959, Tuesday, December be held on Committee would to Mr. after listening to him, it occurred Hayes said Mr. of open market up a problem comments pointed that the latter's Johns, in effect, Johns had suggested, it, Mr. As he understood techniques.

that policy be allowed to develop within the three-week period, depending on how credit demand might develop. He (Mr. Hayes) had sympathy with this aim, but the problem was one of how to accomplish it within a three-week period. It seemed to imply a greater ability than the Desk now possessed to measure what was happening to the credit supply and in credit demands within such a short period. The Account Manager had to rely largely on such things as the feel of the market, interest rates, and discount window activity as rough indicators of what was happening to credit demand in any three-week period. The question raised by Mr. Johns presented a challenge but at this juncture he found it somewhat frustrating. The meeting then adjourned. Secretary's Note: Immediately following this meet ing, Chairman Martin called a meeting of the members of the Board and the Presidents who had attended the Open Market meeting at which Messrs. Riefler, Sherman, and Rouse also were present. He referred to consideration that the Board had been giving to the possibility of implementing the legislation passed during 1959 relating to member bank reserve requirements, by means of per mitting the counting of a portion of vault cash as part of required reserves. Chairman Martin emphasized that the Board had not acted on this question and that he did not know whether the Board would decide that such action should be taken in the near future. He inquired, however, as to any comments the Presidents might have, whether any of them envisaged a disturb specifically, ing impact in the money market that would accentuate the open market operations if some such move difficulty of year end. A number of the were made prior to the that they would favor some move Presidents indicated small part of vault cash to be toward permitting a

counted as required reserves, while one or two others commented that, on balance, they would concur in such a move, but without enthusiasm. Chairman Martin re iterated that no decision had been made in this con nection and that he did not know what, if any, action the Board would take. Secretary