December 17, 1963 FOMC Minutes

FOMC minutes

remarks Chairman Martin said the Committee should do In further the role of monetary policy in the everything in its power to assess the new year. He thought the Committee could take a early part of developments in 1963, but the real amount of satisfaction from certain come if a tax reduction was voted. With respect to the price test would situation, he did not believe that monetary policy could control prices, them. He did believe that prices were but it was one factor affecting and the Committee could not afford to be complacent. While on the move the wholesale price index continued to hold to its earlier level, the desire and the tendency to raise prices was quite evident in business had to recognize that the price problem was going today. The Committee could not ignore it and should try to to remain with it. The Committee reassess it. Chairman Martin said he thought the large majority of members for no change in policy today, and for no change in the directive were the deletion of the reference to President Kennedy. He would except hope that at some point early in the new year the Committee would have enough information to make a more fundamental judgment on policy, but in his opinion it did not have that information today. 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:

Open Market Committee's current It is the Federal 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-ofpayments 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 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, Bopp, Clay, Daane, Irons, Mitchell, Robertson, Scanlon, and Shepardson. Votes against this action: Messrs. Hayes and Mills. Mr. Mills said he did not object to the deletion from.the directive of the reference to the President's death, but he dissented from the decision to make no change in policy for reasons that he had cited previously. He observed that the actual experience of the last two weeks with respect to availability of reserves fitted his own judgment of a viable and constructive credit policy but in his opinion it did not conform to the language of the directive. There would be a relatively short period from now until the next meeting during which there might be some temporary seasonal tightness. However, such a development appeared unlikely since the weight of events seemed to be toward ease; the projected movements in reserves, the customary

early-year tencency towards credit liquidation, and the post-Christmas return flow of currency all tended in this direction. He did not understand why the Committee should be so concerned about inflation as a normal seasonal credit contraction and to produce to wish to accelerate a lower level of free reserves and credit availability. He could not reconcile this with the kind of credit and monetary policy that in his judgment it was the responsibility of the Committee to formulate. Over the years and particularly this year, Mr. Mills continued, he had become increasingly of the opinion that monetary policy could do a great deal more harm than good. He thought it was the tendency of the Committee to permit its fears and concerns to lead to the harmful side of contraction. Mr. Hayes said he favored deleting the reference to the death of President Kennedy but he dissented from both the directive and the for no change in policy. In his judgment the Chairman had consensus been quite realistic about the matter of timing; if no change in at this meeting the Committee would be precluded from policy was made making a change for about three months. and to his mind this was unwise. Mr. Ellis had put the case for a slight move toward less ease very ably. Mr. Hayes said he had the feeling that many people around the table saw inexorable forces leading the Committee to less.ease and he was at a loss as to why the Committee should not make a modest step now to pave the way. He had hoped for action at this meeting similar

it seemed as appropriate now as to the action taken last December; it had then. the Chairman, Mr. Stone said In response to a question from consider it necessary to recommend any amendment to the he did not authority directive with respect to the limit on the change cpntinuing Government securities held in the in the aggregate amount of U.S. Account during any period between meetings of the System Open Market Committee. that the next meeting of the Federal Open It was agreed be held on January 7, 1964. Market Committee would Thereupon the meeting adjourned. Assistant Secretary