November 13, 1962 FOMC Minutes

FOMC minutes

With respect to the discount rate and the balance of payments problem, the Chairman said he believed interest rates to be the controlling force in the movements of funds. This might not appear to be so at any given time, but it was his belief that in the longer run the rates were a controlling force. This morning the Committee was between the "easy money" view and the "easier money" view. He saw no way of resolving the weight of these views other than to call for a vote on the general question. He then suggested that a vote be taken Ln which the members of the Committee whether they would vote for or against a change in the degree would indicate of ease called for by existing policy. On this question a total of five members of the Committee indicated that they would vote for no change (Messrs. Martin, Bryan, Deming, Ellis, and King), while six indicated that they would prefer to some change in the present policy (Messrs. Balderston, Fulton, make Hayes, Mills, Mitchell, and Robertson). Chairman Martin then suggested that to approach a closer under of the views he would present the question whether the Committee's standing this meeting to provide for a lesser degree policy should be changed at of ease. members voted "aye", while seven voted On this question four a change to a policy of less ease. (Messrs. Martin, Balderston, against Bryan, Deming, Ellis, King, Hayes voted "yes", while Messrs. Fulton, and a change to a policy of less and Robertson voted against Mills, Mitchell, ease.)

Chairman Martin next put the question of a change in policy to provide for a greater degree of ease, and on this question seven members voted against such a policy, with three in favor and one abstaining. Those voting against a change to a greater degree of ease were Messrs. Martin, Hayes, Balderston, Deming, Ellis, Fulton, and King; those voting for a greater degree of ease were Messrs. Mills, Mitchell, and Robertson; and Mr. Bryan did not vote. In the discussion that followed, Mr. Robertson stated that, while his basic inclination was toward a policy of somewhat greater ease, he would he strongly in favor of holding policy unchanged if the only practicable alternatives were a policy of no change or a policy of less ease. Accordingly, he was prepared to change his vote on the first question put to the Committee from a vote against no change to a vote in favor of no change in the present policy. Chairman Martin then called for any further comments with respect to the indications of views. In the absence of comment, he declared should record the Committee's policy vote on the that the Secretary be a change in the present degree question of whether there should six members voting for no change (Messrs. Martin, of ease as showing and Robertson), and five voting for a Bryan, Deming, Ellis, King, change (Messrs. Balderston, Fulton, Hayes, Mills, and Mitchell). Of these five, Messrs. Balderston, Hayes, and Fulton would favor a lesser Mills and Mitchell would favor a greater degree of ease, while Messrs. degree of ease.

With respect to his own position, the Chairman stated that, as he had indicated at the outset, he favored no change in the degree of ease. However, if it had been necessary to vote for a change to greater or lesser ease, he would have favored slightly less ease than at present. The Chairman then took up the question of the current economic policy directive to be issued to the Federal Reserve Bank of New York, noting that some suggestions had been made that reference to the Treasury and to Cuba should be deleted from the directive issued at the financing meeting on October 23. The Chairman stated that he felt the present directive, with a deletion of the reference to the Treasury financing, could be used. Mr. Hayes had suggested a change which would move in the less ease but, in view of the vote of the Committee against direction of such a change, such wording would not be appropriate. the ensuing discussion several suggestions of wording During were presented. Thereupon, upon motion duly made and seconded, the Federal Reserve Bank of New York was authorized and directed, until otherwise directed by the Committee, transactions in the System Open to execute in accordance with the follow Market Account current economic policy directive: ing of the recent stability of economic activity, with In view resources and an absence of inflationary a margin of underutilized policy of the Federal Open Market pressures, it is the current to encourage moderate further increase in bank credit Committee supply, while avoiding money market conditions unduly and the money It is also the to capital outflows internationally. favorable such unsettlement in money markets Committee's policy to cushion developments of an emergency or as may stem from international near emergency character.

To implement this policy, operations for the System Open Market Account during the next three weeks shall be conducted with a view to providing moderate reserve expansion in the banking system and to fostering a steady tone in money markets. Votes for this action: Messrs. Martin, Balderston, Bryan, Deming, Ellis, Fulton, King, Mills, Mitchell, and Robertson. Vote against this action: Mr. Hayes. Mr. Hayes stated that his vote against the wording of the directive in the foregoing form was based on his feeling that the wording gave too little attention to the difficult international balance of payments situation and that it placed its main emphasis on the domestic situation. Chairman Martin noted that the next meeting of the Committee had been tentatively scheduled for December 4, 1962. Thereupon the meeting adjourned. Secretary