June 14, 1960 FOMC Minutes

FOMC minutes

reserves on the payment date. Then there would be the need for currency over the July 4 week end. The Treasury was due to pay out a lot of money on June 22; about one-half of the $4 billion of tax anticipation bills presumably would be used to pay taxes and the balance would be paid out in cash. Therefore, there would be a need for investors to reinvest these funds, which probably would have some impact on the bill rate. Mr. Rouse also made a supplemental report on the advance refunding of the 2-1/2s of 1961, to which he had referred earlier in the meeting. Based on reports from New York this morning and subscriptions reported by other Reserve Banks through yesterday, it appeared that subscriptions for the 3-3/4 per cent notes of 1964 amounted to about $2.6 billion, and might billion. On the other hand, New York subscriptions for even reach $3-1/2 the 3-7/8 per cent bonds of 1968 totaled only $126 million and subscriptions to $73 million through yesterday afternoon, at other Reserve Banks amounted a total of only about $200 million. making that this report was more encouraging Chairman Martin commented the prospect last week. than if there was no objection the policy The Chairman then stated that would stand as change and the consensus would be renewed without directive he had indicated earlier. a footnote on the would like to add commented that he Mr. Hayes to short-term not refer specifically he said, did The Chairman, consensus. the table, he (Mr. Hayes) to the discussion around interest rates. Listening

noted that a large number of those who spoke had expressed concern about the rapid decline in market rates and about forcing them down any further. Chairman Martin said that this comment was quite appropriate. He added that he did not know, however, whether anything could be done about the matter, and Mr. Hayes said that he did not know either. Mr. Rouse commented on the 1-1/4 per cent rate differential in favor of United Kingdom bills, after forward exchange cover, that existed before the auction yesterday and said that money was beginning to move to that market. Thereupon, upon motion duly made and seconded, the Committee voted unanimously to direct the Federal Reserve Bank of New York until otherwise directed by the Com mittee: (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 fostering sustainable growth in and employment by providing reserves needed for economic activity credit expansion, and (c) to the practical adminis moderate bank that the aggregate amount of tration of the Account; provided securities held in the System Account (including commitments for of securities for the Account) at the close the purchase or sale than special short-term certificates of of this date, other to time for the temporary accom indebtedness purchased from time modation of the Treasury, shall not be increased or decreased by more than $1 billion; direct from the Treasury for the account (2) To purchase Bank of New York (with discretion, in of the Federal Reserve issue participations to one it seems desirable, to cases where of special short-term Banks) such amounts or more Federal Reserve

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. There had been distributed to the Committee copies of a memorandum from Mr. Rouse dated June 10, 1960, transmitting a memorandum of the same date from Mr. Larkin, Assistant Vice President of the Federal Reserve Bank of New York, concerning System Open Market Account transactions in one-year Treasury bills of July 15, 1960, under the authorization given by the Committee on April 12, 1960, and renewed at the two subsequent Committee meetings, to acquire up to $150 million of such bills either by outright purchase or by swapping other bills. Mr. Larkin's memorandum showed that $6.4 million of these bills had been acquired since the meeting on May 24, a total of $97.9 million acquired under all by outright purchase, making and total System holdings of $111.3 million. the Committee authorization suggestions in the light of Mr. There being no comments or the authorization be renewed Martin suggested that Larkin's report, Chairman at which time the matter the next Committee meeting, until the date of would be discussed further. it was agreed to renew Thereupon, until 12, 1960, authorization the April meeting of the Committee, Mr. the next "no" insofar as the Robertson voting related to "swap" trans authorization actions.

After discussion, it was agreed that the next meeting of the Federal Open Market Committee would be held on Wednesday, July 6, 1960, rather than on Tuesday, July 5. The meeting then adjourned. Secretary