February 11, 1964 FOMC Minutes

FOMC minutes

average, bad risen 12.6 per cent in the last five years, or about 2-1/2 per cent per year, and in consequence the consumer price index had moved up from a 1957-59 base of 100 to a level of 107.6. While this was not a frightening rate of increase, a continual upward creep in the co;t of services was something the Committee could not afford to ignore. Mr. Balderston said he was willing to go along with the majority this morning in not favoring overt action at this time, but he hoped the Committee could agree with Mr. Ellis and Mr. Hickman that some movement toward less ea.e was prudent. In his judgment, the 7 per cent rate of increase since last July in reserves required against private deposits, if continued, would eventually lead to trouble. However, he shared Mr. Mills' point that adherence to any one percentage rate of growth was not desirable. Martin said that he could concur in practically everyChairman make one comment with respect to said this morning. He did want to thing if the Committee had desired to move in the the Treasury financing. Even firmer conditions, he thought it had some obligadirection of somewhat connection with the current financing. In his tion to the Treasury in the Committee should lean over backward to avoid any inference judgment, conditions and then pulled out the rug. that it had set up certain that the consensus today clearly The Chairman said he understood at this time, no change in the discount rate, was for no change in policy than deletion of the phrase, "and and no change in the directive other

taking into account an imminent Treasury refunding", and there was no indication to the contrary. 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 underuti:.ized resources; and the fact tht 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 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, Balderston, Bopp, Clay, Daane, Irons, Mitchell, Robertson, Scanlon, Shepardson, and Treiber. Votes against this action: None. Abstaining: Mr. Mills. Mr. Mills said he felt obliged, as at the previous meeting, to abstain. He was still unable to ascertain whether "no change in policy" referred to maintenance of a certain interest rate structure or was intended to focus on the supply of reserves. He would like to follow the statistics from now until the next meeting to see what they might

indicate as to the actual implementation of policy, and to determine whether he considered the implementation objectionable or acceptable. This analysis, he added, would be an international effort on his part. Upon motion duly made and seconded, and vote, section 1 (a) of the conby unanimous tinuing authority directive was amended, in line with the earlier suggestion of the Account Manager, to authorize the Federal Reserve Bank of New York, to the extent necessary to carry out the current economic policy directive: (a) To buy or sell United States Government securities in the open market, from or o Government securities dealers and foreign and internationa. acccunts maintained at the Federal Reserve Bank of New York, on a cash, regular, or deferred delivery basis, for the System Open Market Account at market prices and, for such Account, to exchange maturing United States Government securities with the Treasury or allow them to mature without replacement; provided that the aggregate amount of such held in such Account (including forward commitments, securities but not including such special short-term certificates of indebtedness as may be purchased from the Treasury under paragraph 2 hereof) shall not be increased or decreased by more thar $1 billion during any period between meetirgs of the Committee. then discussed at some length the request that The Committee on January 22, 1964, by the Subcommittee had been made to Chairman Martin Finance of the House Banking and Currency Committee, that on Domestic the minutes of the Federal Open Marthe Subcommittee be furnished with inclusive. There also was further ket Committee for the years 1960-63, the minutes of the Committee of the matter of making available discussion that had been considered most historical period, a question for some No decisions were reached on December 3, 1963. recently at the meeting

on either subject, and it was agreed that the two matters would be explored further at the next meeting of the Committee. It was agreed that the next meeting of the Federal Open Market Committee would be held on March 3, 1964. The meeting then adjourned. Secretary