October 3, 1961 FOMC Minutes

FOMC minutes

higher. He was not prepared to seek a lower free reserve level or to accept aterially higher bill rates. There should be no overt action indicating a change in Committee policy, no change in discount rate, and he would continue the special authorization with respect to Government securities' purchases. Mr. Balderston stated that the consensus appeared to call for no change in the Committee's directive and for continuation of the degree of ease that had prevailed during recent weeks. Most Committee members would make no change in the disount rate, and the special authorization for transactions in securities outside the short-term maturity range would be renewed with Messrs. Allen and Robertson dissenting. He inquired whether there were dissents from the policy indicated by the consensus other than those of Messrs. Allen and Robertson on the special authortzation. Mr Mills said that he wished his dissent from the policy indicated by the consensus. to have recorded that he had indicated earlier, he believed that policy should For reasons move more positively to a degree of less ease. He still would contemplate a reserve base ample or more than ample to support the credit needs of the economy, but in his judgment there were more than enough reserves a base for satisfying such credit requirements and in now to provide fearful that the amount of shrinkage he had indicated would fact he was at too high a level. He recognized, however, that still leave reserves

in moving back from the present degree of ease the Committee must move cautiously and experimentally. Mr. Mills also said that, while he dissented from the consensus as to policy, he would approve the wording of the existing directive to the Federal Reserve Bank of New York. Mr. Balderston asked whether there were other dissents, and Mr. King raised the question whether the consensus included any statement as to resolving doubts on the side of restraint. After Mr. Balderston stated that no such provision was in the consensus that he had presented, there was a general discussion of its wording. During this discussion, Mr. Shepardson and several others indicated that they would prefer that doubts be resolved on the side of less ease, but the Chairman pointed out that less than a majority of the members of the Committee had so expressed themselves. Therefore, the consensus that he had presented included nothing on resolving doubts either way. He then inquired of Mr. Rouse whether he had any questions as to the the consensus as stated, and the latter responded in interpretation of the negative. Mr. Balderston indicated that the consensus as he had stated it would be approved, Mr. Mills dissenting, and the directive to the Federal Reserve Bank of New York would be renewed without change. Thereupon, upon motion duly made and seconded, it was voted unanimously to direct the Federal Reserve Bank of New York otherwise directed by the Committee: until

(1) To make such purchases, sales, or exchanges (includ ing 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 credit expansion so as to promote fuller utilization of resources, while giving consideration to international factors, and (c) to the practical administration of the Account; pro vided that the aggregate amount of securities held in the System commitments for the purchase or sale of Account (including 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 not be increased or decreased by more than 41 Treasury, shall 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 of indebtedness as may be necessary from term certificates to time for the temporary accommodation of the Treasury; time the total amount of such certificates held at any provided that the Federal Reserve Banks shall not exceed in the one time by aggregate $500 million. noted that Messrs. Allen and Robertson had indicated Mr. Balderston that they would dissent from action to renew the special authorization Government securities for the System regarding purchases of longer-term Open Market Account and this was confirmed. The Committee then authorized the Federal Reserve Bank of New York, between October 3, 1961, 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 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. Balderston, Irons, King, Mills, Mitchell, Shepardson, Swan, Wayne, and Treiber. Votes against this action: Messrs. Allen and Robertson. that the next meeting of the Federal Open Market It was agreed Committee would be held on Tuesday, October 24, 1961. The meeting then adjourned. Secretary