December 13, 1960 FOMC Minutes

FOMC minutes

too precise since there was always the danger that a floor would become an objective. When reference was made previously to a rate of 2 per cent, he had thought of that rate as representing an outside limit. He would like to see the bill rate stay somewhere in its present general range, Mr. Erickson said he would favor continuing the degree of ease that had been maintained, and Mr. Irons commented to the same effect, adding that he would not favor a further increase. Mr. Mangels recalled that he had mentioned a range of free reserves from $500 to $750 million. He pointed out that free reserves had averaged around $500 million during November and almost $700 million in the first week of December. He hoped that the bill rate would not fall too much below 2.15 per cent. Mr. Allen stated that he would continue the present degree of it, and Mr. Leedy said that he was satisfied ease, without increasing Mr. Leach said that he would with the degree of ease that prevailed. of ease. He added that the same degree favor maintaining approximately of things, including interest the market involves a lot the feel of might be paid to little more attention that he felt a rates, but them before the was given to time than at the present interest rates was in the picture. problem balance-of-payments from the move back moderately that he would Mr. Mills stated a somewhat tighter position, the past few weeks to degree of ease of

while Mr. Robertson stated that he would favor moderately greater ease and that he would not be fearful if the bill rate went as low as 2 per cent. Mr. Shepardson said that he would recommend no greater ease and that he hoped that the bill rate would not vary significantly from its present level, following which Mr. King said that he would not favor greater ease. Mr. Fulton indicated that he would like to see the bill rate between 2 per cent and where it now stood, which would suggest a little greater ease, and Mr. Bopp indicated that he would favor slightly greater ease, Mr. Bryan commented that he did not know what slightly greater ease meant. He felt that the System ought to supply seasonal requirements for reserves plus some additional amount of reserves as a kind of Mr. Johns said that he wished to associate contracyclical measure. himself with the point of view expressed by Mr. Robertson. stated he would favor continuing the existing Mr. Szymczak that he was concerned agreed, but added of ease. Mr. Balderston degree rate might cause a situation turn of the year the bill that after the would be quite different. that most significant thing about suggested that the Mr. Shepardson demand for supply to the of that was the relationship the money supply occur without condition could a sloppy When demand slackened, money. any increase in the money supply.

Chairman Martin remarked that he had commented several times on the contrast between 1957-58 and the present situation, the international situation being the principal difference. The Chairman then stated that the results of the poll indicated that the majority was clearly in favor of continuing the present degree of ease, with the feel of the market constituting the guiding factor. A clear majority would like to have the bill rate stay as high as possible. There being no further comments, the Chairman noted that the minutes would record the varying shades of opinion that had been expressed. 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: To make such purchases, sales, or exchanges (1) replacement of maturing securities and allow (including off without replacement) for the ing maturities to run Account in the open market or, in the System Open Market by direct exchange with the case of maturing securities, as may be necessary in the light of current Treasury, conditions and the general credit and prospective economic a view (a) to relating the situation of the country, with the needs of commerce in the market to supply of funds monetary expansion for business, (b) to encouraging and growth in economic purpose of fostering sustainable the while taking into consideration activity and employment, and (c) to the international developments, current Account; provided that administration of the practical held in the System amount of securities the aggregate purchase or sale for the (including commitments Account

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; (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 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 $500 million. aggregate of the Federal Open Market was agreed that the next meeting It 10, 1961, and that the held on Tuesday, January Committee would be would be tentatively scheduled for January 31, ensuing meetings and March 7, 1961. February 14, The meeting then adjourned. Secretary