November 26, 1963 FOMC Minutes

FOMC minutes

necessary only to step into the market a day early to supply reserves that in any case would be needed for the following week. (Later in Mr. Stone noted that new reserve estimates still indicated the meeting net borrowed reserves of $5 million for the current statement week, but that the estimate for the next statement week now stood at net borrowed reserves of $446 million. He reported that the Desk had just bought about $220 million Treasury bills in the market and would take additional bills being sold by foreign accounts into the System's portfolio.) Mr. Stone concluded by saying that in view of the market's good performance he did not feel that any special instructions from Committee were needed to deal with the present situation. In his the judgment there was ample room within the Committee's existing instructo deal with any turn in the market that seemed likely. tions and leeway Mr. Coombs supplemented his telegraphic report of the preceding placed is the files of the Committee, by day, a copy of which has been noting that the foreign exchange markets had remained quiet and orderly this morning. Exchange rates were being held by the foreign central banks, where necessary, at the same levels as those that had prevailed on Friday and Monday, and the Federal Reserve Bank of New York planned to do the same in the New York market after the European markets closed.

In the case of the Swiss franc, Mr. Coombs continued, the dollar had moved off the floor to a level of 4.3160 while the dollar rate on the guilder had also moved above the temporary support point of 3.5990 introduced by the Netherlands Bank on Monday. The mark continued in demand, however, with the Bundesbank taking in $4 million on Monday and $28 million today. The New York Bank planned to absorb one-half of the latter amount through a swap drawing. Mr. Coombs observed that the London gold market was quiet this morning, with small volume and a fixing price identical with that of Monday. Prices subsequently moved down to $35.08-.09. Far from losing gold, the London gold pool had gained $44 million since Friday, primarily owing to Russian sales. He had no recommendations to make to the Committee. Chairman Martin commented that in his judgment the Account Management had handled things well during this period with respect to both foreign exchange and domestic transactions. He described the purpose of this meeting as purely precautionary. Observing that it seemed desirable for the Committee to consider whether any change was appropriate in its current economic policy directiveto reflect the death of the President, the Chairman read a draft paragraph that had been suggested as a possible replacement for the second paragraph of the directive adopted et the preceding meeting of the Committee (November 12, 1963) and asked for comments.

The Committee members favored revising the directive along the general lines of the proposal, and the discussion was concerned primarily with specific phrasing. 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 Account in accordance with the following current economic policy directive: It is the Federal Open Market Committee's current policy to accommodate moderate growth in bank credit, while maintaining conditions in the money market that would contribute to continued improvement in the capital account of the U. S. balance of payments. This policy takes into consideration the fact that domestic economic activity is expanding further, although with a margin of underutilized resources; and the fact that the balance of payments position is still adverse despite a tendency to reduced deficits. It also recognizes the increases in bank credit, money supply, and the reserve base of recent months. To implement this policy, System open market operations shall be conducted with a view to cushioning any unsettlement that might arise in money markets stemming from the death of President Kennedy and to maintaining about the same conditions in the money market as have prevailed in recent weeks, while accommodating moderate expansion in aggregate bank reserves. Votes for this action: Messrs. Martin Hayes, Balderston, Bopp, Clay, Irons, Mitchell, Robertson, Scanlon, and Shepardson. Vote against this action: Mr. Mills. Mr. Mills dissented for the same reasons he had dissented from the directive adopted at the meeting of November 12, 1963; he thought should modify its policy to one of greater ease. the Committee

on the directive, indiMr. Robertson, while voting favorably to continue the previous directive cated that he would have preferred to the Federal Reserve Bank to issue a supplementary instruction and in financial markets that of New York to cushion any unsettlement from the President's death. might stem Thereupon the meeting adjourned. Secretary