August 22, 1961 FOMC Minutes

FOMC minutes

Personally, he felt that it would be a mistake to remove from the Desk the discretion it now had under the current authorization. He leaned toward the position that it was not necessary under present conditions that the bill rate be maintained at present levels at all costs. He saw no reason why the bill rate could not fall to 2-3/8 or even 2-1/4 per cent, if need be, provided the Account could obtain bills without seriously upsetting the market. However, he saw no reason at this point for the Committee to get itself back in the box, in which it had been for so long, of being inflexible to the extent of taking a position that it would not deal across the board even though the deals, when available across the board, were in reasonable relation to the market. Everyone, he noted, could take the currently available data and read it differently. Mr. Robertson, for example, had interpreted the information in the memoranda from the New York Bank a little differently than he would have interpreted it, but he (Chairman Martin) may not have read the memorandum correctly. In any event, he felt that everyone should study and evaluate data of this kind very carefully. to a number of people in the market, and there were He had been talking evidently some difficulties in the special operation, but he had not he would want to make a judgment. Instead, he reached the point where keep an open mind. He felt, certainly, that the would prefer to Committee ought to renew the special authorization at the present time

and continue the discretion placed in the Manager of the Account. At the same time, the Manager should understand that the intent was not just to engage in operations in longer-term securities for the sake of holding the bill rate up to any preconceived level. That, he thought, was essentially where the majority of the Committee stood this morning. In response to a question from the Chairman, Mr. King clarified that his position, as stated earlier during , e meeting, had not been to terminate the special authorization, but rather to disengage from operations under it for the time being. Chairman Martin then inquired whether it was agreed that the Committee would renew the special authorization, with Messrs. Allen and Robertson dissenting. and there were no comments to the contrary. Accordingly, the Committee authorized the Federal Reserve Bank of New York, between this date and the next meeting of the Committee, within the terms and limitations of the directive issued at this meeting, to acquire intermediate and/or longer-term U. S. Government securities of any maturity, or to change the holdings of such securities, in an amount not to exceed $500 million. Votes for this action: Messrs. Martin, Balderston, Irons, King, Mills, Swan, Wayne, Votes against this action: and Treiber. Messrs. Allen and Robertson. It was agreed that the next meeting of the Committee would be held on Tuesday, September 12, 1961.

Chairman Martin commented that he would be leaving shortly after the date of the next meeting to attend the Fund and Bank meetings in Vienna, and in those circumstances, particularly, he thought it might be useful to put on the agenda for general discussion at the September 12 meeting the subject of Federal Reserve holdings of foreign currencies. He noted that there had been distributed to the members of the Committee and the Presidents not currently serving on the Committee copies of a memorandum from Mr. Young dated June 16, 1961 (as corrected June 26), along with a memorandum dated June 16 from Mr. Furth of the Board's staff, and that there would also be distributed a letter dated July 21, 1961, from the Federal Reserve Bank copies of of New York commenting on Mr. Young's memorandum. The meeting then adjourned. Secretary.

TOTAL RESERVES AVAILABLE TO SUPPORT PRIVATE DEPOSIT EXPANSION, SEASONALLY ADJUSTED ACTUAL VS. 5 PER CENT AND 3 PER CENT ANNUAL GROWTH RATES, MARCH I -AUGUST 16, 1961 BILLIONS OF DOLLARS 5 PER CENT _____ ANNUAL GROWTH RATE ,19. SINCE MARCH 1 ACTUAL-- "19.3 3 PER CENT --- ANNUAL GROWTH RATE----- ------------ 90. is 9 JUNE JULY AUG. SEPT. MAR. APR. MAY