August 16, 1960 FOMC Minutes

FOMC minutes

Thereupon, upon motion duly made and seconded, it was voted, with Messrs. King, Shepardson, Szymczak, and Allen 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 encouraging monetary expansion for the purpose of fostering sustainable growth in economic activity and employment, and (c) to the practical adminis tration 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 indebtedness purchased from time to time for the temporary accommodation of the Treasury, shall not be increased or decreased by more than $1 billion; To purchase direct from the Treasury for the account (2) 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 indebtedness as may be necessary from time for the temporary accommodation of the Treasury; time to the total amount of such certificates held at provided that the Federal Reserve Banks shall not exceed in any one time by the aggregate $500 million. were any comments on inquired whether there Mr. Balderston then forthcoming period as during the for open market operations the consensus stated by him earlier during the meeting. the question whether point, Mr. King raised In discussion of this it had been following in continue the policy that the Committee could the policy directive. agreed upon in view of the change

Mr. Robertson said he sensed that many of those at the meeting felt that the Desk should not endeavor to offset the whole amount of reserves that would be released through the action of the Board relating to vault cash and reserve requirements. Then, after noting that the record of the July 26 meeting indicated that the Committee was aiming at a given figure of free reserves, he asked whether the consensus today did not mean that the Desk would look more to the total picture. The figure of free reserves might rise, but this still might not represent any further easing. Mr. Rouse noted that the figure might rise or that it might go down. Mr. Balderston said he gathered from listening to the discussion the Committee desired to carry over the goals discussed at today that the July 26 meeting. The same goals would be carried over, but in view the Committee desired to give the Account of the shifting situation Manager more freedom. Mr. Robertson suggested that the goals today included a quali make errors on the side of ease. fication that the Desk would of resolving doubts on the stated the matter in terms Mr. Rouse Robertson expressed agreement. a revision with which Mr. side of ease, it, the goal was also said that, as he understood Mr. Shepardson growth in the money supply. to provide for some moderate for although, as Mr. this was to be hoped Mr. Rouse stated that to figure on. Mr. it was a little difficult had pointed out, Noyes

Balderston commented that this was particularly true in view of the Treasury tax and loan account balance at the moment being larger than customary, to which Mr. Rouse added that the Desk should have an assist in that respect in view of the prospective payments by the Treasury. Mr. Balderston then inquired of Mr. Rouse whether the general instruction was what he thought he needed for the next few weeks, to which Mr. Rouse replied that it sounded like a vote of confidence but that he was still a little fearful. He then stated that he had no questions. It was agreed that the next meeting of the Federal Open Market Committee would be held in Washington on Tuesday, September 13, 1960. Mr. Johns, speaking as Chairman of the Presidents' Conference, said he had been interested in the indication that material might be coming out to the Presidents at some point with respect to the study of the classification of reserve cities. In view of the fact that the would be meting on September 12, he inquired Presidents' Conference could do to prepare for dis there was anything the Presidents whether of the Board and the Presidents the Board at the joint meeting cussion with have discussion at that it was intended to following day, if in fact the to be helpful to have time it was frequently found time. He noted that study such a matter the Conference to Subcommittee of a Committee or for to the Presidents. and present suggstions

It was indicated that material on the subject probably would be distributed to the Presidents within a week. Mr. Balderston commented in this connection that the material to be sent represented tentative sug gestions based on tentative assumptions. The Board did not wish to send out just a blank piece of paper, and it would therefore send what was available with a request for criticism and ideas. commented that the Board had taken no position and Mr. Szymczak to be sent out was in the nature of a collection of that the material working papers. it might be appropriate to refer the Mr. Johns suggested that the Subcommittee on Committee, and that perhaps material to a Conference off in the latter part of pick up where it had left Legislation might last year. would be one the matter of procedure replied that Mr. Balderston to decide. In and the other Presidents of the Conference for the Chairman it could get. all of the help Board would appreciate however, the any event, then adjourned. The meeting Secretary