December 18, 1962 FOMC Minutes

FOMC minutes

suggest turning the drafting job over to a committee during a luncheon recess, but he felt sure this would not work satisfactorily in practice, partly because of the pressure of time. Therefore, he would be willing to run whatever risk was involved in having alternative drafts prepared for the Committee in advance. Chairman Martin commented that he felt today's discussion had been distinctly worth while, If parties with a sincere interest in System affairs could have participated in the discussion and listened to the comments, he was inclined to think that many of their criticisms would have been answered. The difficult problem, however, was how to get this picture across. He shared the view that had been expressed by members of the Committee about the desirability of providing the public full information, and the Committee should continue to work on the problem of improving its communications. In his opinion, the System had not been doing the best job over the years in informing the public, particularly concerning the procedures by which policy decisions were reached. On the occasion of meetings of the Chairmen and Deputy Chairmen of the Federal Reserve Banks, there was brought home to him the amount of good will, and potential for building good will, that existed within the ranks of the System, but at the same time the System was the subject of severe criticism from academicians, based largely, he felt, on a lack of understanding of System procedures and how the System really worked. In his experience one of the best

ways of getting across to parties outside the System was to discuss the means by which those in the System sat around the table and tried to reach the proper policy decisions. The Chairman went on to say that in looking through much of the literature concerning the Federal Reserve System he was distressed by the content. It did not present a fair picture of what he regarded as one of the most interesting experiments in political science, an experiment that deserved to be fairly judged. One possibility of presenting the matter to the public might be the issuance of Committee minutes, after a suitable lapse of time, or the preparation of a digest of the minutes by two or three competent outside parties. In any event, however, the System must in some way communicate the picture of how policy decisions were arrived at, including the picture of how within the System's ranks involved honest differences of disagreements judgment on the part of persons who all held the same ultimate objectives. The average man with whom he talked had no conception of this situation; in such conversations. This placed many false impressions were reflected on the System to try to explain more effectively a real responsibility it was doing, and work should be pursued on the subject continually. what Turning to the preparation of the Committee's policy directives, the Committee should experiment Martin commented that perhaps Chairman was used for a rather brief period further with the procedure that directive was drafted during a recess in earlier this year whereby the

the Committee had arrived at a policy consensus. Committee meetings after However, he felt that the Committee had already made a lot of progress the directive. The very fact that today's discussion had been held with of a spirit of progress. Possibly it was not feasible to was evidence do certain things, but he considered it essential to continue to work toward the achievement of a better public relations posture. The twelve Federal Reserve Banks were doing a lot of work along these lines, he realized, but the job of explaining the System adequately had not yet been resolved. He would like to see material made available that qualified persons could analyze in order to make knowledgeable judgments with regard to the institutional framework of the System. This concluded the discussion of the formulation of the current economic policy directive and related matters. It was agreed that the next meeting of the Open Market Committee would be held on Tuesday, January 8, 1963, and it was understood that subsequent meetings would be scheduled tentatively for January 29, February 12, and March 5, 1963. The meeting then adjourned. Secretary

Attachment A Suggestion by Mr. Deming as to type of current economic policy directive that might have been issued at meeting of Open Market Committee on December 4, 1962 The domestic economy has shown little expansionary force recently and still is operating with a margin of underutilized resources and an absence of inflationary pressures. Bank credit has grown considerably during the past several months and the total credit supply seems to be quite adequate, with credit readily available. The liquidity level is fairly high and while the conventionally defined money supply has expanded relatively little, time deposit growth and that of near-money has been very strong. The U. S. balance of pay ments position is not satisfactory and while capital outflows have been moderate they bear continued concern. In the light of these circumstances, it is the policy of the Federal Open Market Committee to continue to pursue a moderately stimulative program, but to do so cautiously because of the potential problem of renewed large-scale capital outflows. To implement this policy, operations for the System Open two weeks shall be conducted so as Market Account during the next about the same degree of reserve availability as has pre to provide tone in the money markets, with particular vailed recently and a steady rates. Consistent with this, member attention being paid to short-term and the Federal funds rate should borrowing should be kept nominal bank at close to the discount rate. be maintained