October 4, 1960 FOMC Minutes

FOMC minutes

Mr. Szymczak said that in light of the uncertainties that existed and would continue to exist, he thought that monetary policy had done a good job and that the present policy should be continued. He felt that the Manager of the System Open Market Account had done an excellent job in the market and that the Committee should continue to pursue the policy it had been following. He would favor deferment of any change in margin requirements or in reserve requirements at either central reserve city or country banks. Mr. Balderston said he was comforted by the fact that at long last the money supply seemed to have responded to monetary policy and by the fact that the seasonally adjusted money supply has risen about dollars between June and the middle of September. A related one billion fact was that turnover outside the financial centers was as high as in 7.5 per cent higher than a year ago. June and some Mr. Balderston said he shared the view expressed by many today that the economy had turned downward and that it was following the If one looked at Shiskin's that was to be expected. traditional course than the series con is more broadly based cycle series, which business of Economic Research, he of the National Bureau tained in publications beginning to turn laggards were even some of the find now that would this stage of the business cycle; it down. This was to be expected at present situation. grow out of the upsurge were to unusual if any would be

Therefore, Mr. Balderston said, he concluded that the System had been correct in taking action early. However, he felt that the System should not press its luck until the effects of what had already been done could be observed. The money supply appeared to be responding, and it would seem advisable to wait and see how great the response might be. Mr. Balderston said he would suggest a target of free reserves of about $400 million, realizing that the Committee had been on this target since about the first of September and that experience had demonstrated that there is a cumulative effect in keeping the same target week after week and month after month. Chairman Martin said he thought System policy had been effective and that it was a good policy. He wished only to emphasize the point been made that the Account Manager should operate on the feel that had and not the statistics. The dead hand of statistics and tone of the market for many of the System's difficulties. had been responsible could not seek to correct that monetary policy After commenting Chairman Martin said he continued to all of the problems of the world, from a long-range standpoint, than feel more hopeful about the economy, to some of these problems, but ago. A year ago he saw no answers a year the rolling adjustments coming in the answers were today he thought courage, intelli people had the we as a made. Whether that were being However, he was another matter. to accept them gence, and capacity have that capacity. the nation did have a feeling that continued to

Chairman Martin said that the consensus today seemed clear. There should be no change in policy, in the directive, or in the discount rate. Also, it had been suggested that the Board consider certain questions that were within its jurisdiction. In reply to a question by the Chairman, Mr. Rouse said that he had no comments. The Chairman then inquired whether others had anything further that they would like to say, and no comments were heard. Thereupon, upon motion duly made and seconded, it was voted unanimously 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 allow ing 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, vith a view (a) to relating the in the market to the needs of commerce and supply of funds (b) to encouraging monetary expansion for the business, of fostering sustainable growth in economic purpose activity and employment, and (c) to the practical of the Account; provided that the aggregate administration securities held in the System Account (including amount of for the purchase or sale of securities for the commitments other than special the close of this date, Account) at purchased from certificates of indebtedness short-term for the temporary accommodation of the time to time or decreased by more than Treasury, shall not be increased $1 billion. Treasury for the direct from the (2) To purchase Reserve Bank of New York (with account of the Federal desirable, to issue cases where it seems discretion, in Banks) such more Federal Reserve to one or participations

amounts of special short-term 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. Chairman Martin noted that pursuant to the understanding at the meeting on September 13, 1960, there appeared on the agenda for this meeting further discussion of the memorandum from the Federal Reserve Bank of New York dated September 8, 1960, recommending that the Bank's Market Statistics Department be authorized to furnish to the Securities Department quarterly statistics on the trading volume of individual Government securities dealers. If there was no objection, however, he over until another meeting. Two Comittee would like to hold this topic members and one other President were absent today, and he was quite sure them, at least, would like to comment on the matter. that one of to Chairman Martin's suggestion was indicated. No objection of the Federal Open Market agreed that the next meeting It was Committee would be held in Washington on Tuesday, October 25, 1960, the Committee would be succeeding meetings of at 10:00 a.m., and that 22, 1960, and December 13, 1960. scheduled tentatively for November The meeting then adjourned. Secretary