January 29, 1963 FOMC Minutes

FOMC minutes

wanted a change in policy at this time. In his opinion, it would be possible to operate satisfactorily during the coming two weeks under the directive as it now stood, without any change at all. On the other hand, he would have no objection to making minor changes. He did feel, however, that the focus ought to be on whether any change in policy was indicated. Mr. Young then read the draft of proposed directive, with comments on the changes from the present directive. In discussion of the draft directive, Mr. Mitchell raisea the question whether so many minor changes in wording were necessary or desirable when the consensus was clearly for no change in policy. changes and stated why he felt they would Mr. Young then reviewed the be appropriate, after which Chairman Martin called for comments by other members of the Committee. Mr. Hayes indicated that personally he favored changing the directives in minor respects from meeting to meeting, thus preserving the idea that the directive was reasonably rigid. Although the consensus for this meeting was for flexible, not no change in policy, he thought it appropriate to recognize factual changes in the directive. It was true, for example, that the balance of payments position had deteriorated recently. As the discussion proceeded, Mr. Mitchell referred to the language of the second paragraph of the directive that called for providing for moderate reserve expansion. It was his thought that this kind of language needed some reference point. On the other hand,

the view was expressed that any significant amendment to the second paragraph of the directive might be taken to indicate some change in policy, whereas no change was sought by the Committee for the next two weeks. As an alternative, it was suggested that the first sentence of the first paragraph be modified to make clear that the Committee's current policy was to accommodate growth in bank credit and money supply, though more moderate than in recent months. It was also suggested that, consistent with maintenance of the status quo, the last sentence of the second paragraph might call for providing for "continued" moderate reserve expansion. Mr. Deming expressed the view that if there was no change in Committee should make only minimal changes in the directive, policy the He would regard the changes Mr. Young had suggested as factual or corrections with the exception that he thought the wording technical part of the directive might be interpreted to reflect of the first policy. In line with the views he had expressed at the some shift in two previous Committee meetings, Mr. Deming said his basic point, see the directive set forth, as was that he did not like to however, an accommodation of growth in the a current policy of the Committee, money supply. in the draft directive were Certain additional minor changes which Mr. Young read the directive in a form then suggested, following the several changes that had been tentatively intended to reflect agreed upon during the discussion.

Thereupon, upon motion duly made and seconded, the Federal Reserve Bank of New York was authorized and directed, until otherwise directed by the Committee, to execute transactions in the System Open Market Account in accordance with the fol lowing current economic policy directive: It is the Committee's current policy to accommodate growth in bank credit and the money supply more moderate than in recent months, while aiming at money market condi tions that would minimize capital outflows internationally. This policy takes into account the recent deterioration in the United States balance of payments and the recent sub stantial increases in bank credit, demand deposits, and the reserve base, but at the same time recognizes the limited progress of the domestic economy in recent months, the continuing underutilization of resources, and the absence of inflationary pressures. To implement this policy, and in view of the forth coming Treasury financing, System open market operations during the next two weeks shall be conducted with a view to maintaining about the same degree of firmness in the money market that has prevailed in recent weeks and to offsetting downward pressures on short-term interest rates, while providing for continued moderate reserve expansion. Votes for this action: Messrs. Martin, Hayes, Balderston, Bryan, Deming, Ellis, Fulton, Mills, Mitchell, Robertson, and Shepardson. Votes against this action: none. Martin commented that he hoped the members of the Chairman Committee would continue to devote thought to the formulation of the policy directives. It was important to try to put them in as good a form as possible because the directives, when published, would provide the core of the record of Committee policy.

It was agreed that the next meeting of the Federal Open Market Committee would be held on Tuesday, February 12, 1963. The meeting then adjourned. Secretary