December 4, 1962 FOMC Minutes

FOMC minutes

Mr. Mills commented that he would be more inclined to look at policy in terms of results. For instance, the decision at the November 13 meeting had been to make no change in policy. However, the results since that meeting represented a definite change, in his opinion a change for the better. Chairman Martin replied that Mr. Mills was certainly entitled to that view with respect to the results of operations since the last meeting. Others, of course, might have a different view. His only point, the Chairman said, was that he did not think the Account Manager ought to be criticized when he had proceeded in accord with what he understood to be the policy judgment of the Committee. Mr. Mills commented that it had not been the intent of his to criticize the Account Manager, who did his best previous remarks Committee and work within the terms of to carry out the intent of the there were times when market circumstances the directive. However, Manager's actions had sought to alter the results that the would achieve. remarked that he would not want to proceed The Chairman then Manager was being asked to make no on an assumption that the Account in a policy that conformed to a concept of how satisfactory change upon by the Committee had worked out. the policy previously agreed was to obtain the Committee's views What he had had in mind earlier that the Committee had to make no change in the policy on whether

agreed upon at the preceding meeting. He then proposed again that the Committee members express themselves on making no change in the policy that reflected the prevailing position of the Committee at the November 13 meeting. This would imply no change in the directive except for the elimination of the last sentence of the first paragraph. Mr. King inquired whether it was the understanding that the last sentence of the first paragraph of the directive referred specif ically to the crisis presented by the Cuban situation, as contrasted with an international balance of payments crisis, and the comments in reply brought out that this was the context within which the sentence was originally included in the directive. It was noted that the last clause of the preceding sentence called for avoiding money market conditions unduly favorable to capital outflows internationally. Chairman Martin then suggested that the members of the Committee be polled as to whether they would favor any change from the policy agreed upon at the meeting on November 13, 1962, and five members (Messrs. Hayes, Ellis, Fulton, Mills, and Shepardson) indicated that they would favor a change in position, while seven (Messrs. Martin, Balderston, Bryan, Deming, King, Mitchell, and Robertson) indicated that they would favor continuing the same policy as that approved on November 13. Mr. Mills stated that his position favoring a change represented his view that there should be a continuation of the policy of the preceding meeting as reflected by the results of open market

operations since November 13. Messrs. Hayes, Ellis, Fulton, and Shepardson stated that they favored a shift in the direction of less ease than was contemplated by the policy adopted on November 13. There followed further consideration of the directive to the Federal Reserve Bank of New York in light of the consensus that had just been established, and it was agreed that the directive should be presented for action by the Committee in a form which, aside from a technical change to recognize that there would be only a two-week (rather than a three-week) interval before the next meeting, would involve no change from the directive approved at the November 13 meeting except for the elimination of the last sentence of the first paragraph. Accordingly, 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 to execute Open Market Account in accordance with the following current economic policy directive: the recent stability of economic activity, with In view of resources and an absence of infla a margin of underutilized it is the current policy of the Federal Open tionary pressures, Market Committee to encourage moderate further increase in bank the money supply, while avoiding money market con credit and ditions unduly favorable to capital outflows internationally. this policy, operations for the System Open To implement Market Account during the next two weeks shall be conducted providing moderate reserve expansion in the with a view to 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, Robertson, and Shepardson. Vote against this action: Mr. Hayes. Mr. Hayes stated that his vote against the wording of the direc tive in the foregoing form was on the same grounds as his vote against the directive approved at the meeting on November 13, 1962, namely, he felt that the wording of the directive gave too little attention to the difficult international balance of payments situation and that it placed its main emphasis on the domestic situation. It was agreed that the next meeting of the Open Market Committee would be held on Tuesday, December 18, 1962. connection, Chairman Martin noted that it was contem In this plated that an afternoon session would be held on December 18, at which time there would be discussion of the formulation of the Committee's policy directives. He suggested that in the interim current economic of the Committee also give some thought to the problem the members involved in reaching decisions on monetary policy when the opinions on the objectives that should be sought differed in terms of degree. The meeting then adjourned. Secretary