October 24, 1961 FOMC Minutes

FOMC minutes

In reply to Mr. Swan, Mr. Hayes said he had not meant to infer that the consensus contemplated anything more than the resolving of doubts on the side of less ease. Turning to the matter of short-term rates, he said he thought a majority of the Committee members had expressed some interest in somewhat higher rates, and this point was confirmed by Mr. Sherman. Mr. Hayes then inquired whether there were further comments on whether the consensus had been properly expressed. Mr. Mills commented that the statement of the consensus was in understanding of it, but that he would like to have conformity with his recorded his dissent from the implementation of policy in the manner indicated by the consensus. Mr. Hayes replied that he had up to this point meant to inquire had been properly stated. He judged the Com only whether the consensus mittee agreed that it had. Therefore, he would now ask whether anyone, Mr. Mills, wished to go on record as disagreeing that the in addition to implementation embodied in the consensus should be followed. policy said he agreed that the consensus was as stated and Mr. Allen therefore be followed. However, his own views were that it should in the comments he had made earlier during the meeting. contained an opportunity to vote on noted that there was always Mr. Hayes should be implemented along the lines indicated by the whether policy consensus. He inquired of Mr. Allen whether he wished to vote against

the implementation of policy along the lines indicated by the consensus today, to which the latter responded that he was content to recognize that the consensus was as stated and to vote for its implementation. His own feelings would, of course, be recorded in the minutes. Mr. Robertson said he felt thatthe consensus had been stated accurately. It was a question, in such event, whether a Committee member felt strongly enough to want to register a formal dissent against the implementation of policy along the lines indicated by the consensus. On this occasion, he did not. Accordingly, it was understood that Committee policy would be implemented in the manner indicated by the consensus, as stated, and expressed in the statement he Mr. Mills dissented for the reasons that had made earlier during this meeting. that he understood the special authoriza Mr. Hayes then stated in longer-term securities would be renewed tion covering operations meeting of the Committee, with Messrs. Allen and until the next and there were no comments to the contrary. He Robertson dissenting, the unanimous desire of the members of the also understood that it was the existing policy directive to the Committee to renew without change York, and again there were no indications Federal Reserve Bank of New to the contrary. upon motion duly made and Thereupon, 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, 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; 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; (2) To purchase direct from the Treasury for the account of the Federal Reserve Bank of New York (with in cases where it seems desirable, to issue discretion, participation 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 aggregate $500 million. The Committee then authorized the Federal Reserve Bank of New York, between this date and the next meeting of the Com and within the terms of the directive mittee, issued at this meeting, to acquire inter mediate 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. Hayes, Balderston, Irons, King, Mills, Mitchell, Swan, and Ellis. Votes against Shepardson, this action: Messrs. Allen and Robertson.

In response to an inquiry from Mr. Haves, r. Rouse stated that he had no questions to raise concerning the directive to the Federal Reserve Bank of New York. With reference to a comment made earlier during the meeting by Mr. Mills, Mr. Rouse said it was his interpretation of the special authorization covering operations in longer-term securities that in the event of a disorderly market he would, despite the existence of that authorization, come back to the Open Market Committee for instructions. He assumed that the Account Manager did not have authority under the special authorization to act in that kind of a situation. It was agreed that the next meeting of the Federal Open Market Committee would be held on Tuesday, November 14, 1961. There followed a brief discussion regarding the dates on might be tentatively scheduled in view of which succeedirg meetings No decision was reached, however, and it was the Holiday Season. be considered further at the next understood thet the schedule would meeting of the Committee. The meeting then adjourned.