September 8, 1964 FOMC Minutes

FOMC minutes

operation thus far was incomplete. First, the fact that the Committee had made a modest change in policy had not yet been conveyed fully to the public; and second, the shift had not yet been reflected fully in the figures. In his judgment a completed operation would involve a continuation of free reserves close to the $44 million level of the previous week--in the narrow range of $40-$60 million, if possible. Several weeks of figures in this range would convey effectively to the public the fact that a gentle shift had occurred, after which the range might be broadened--perhaps to $25-$75 million, and later to $0-$100 million. With respect to the bill rate, ne did not think the Committee favored a rate as high as 3.60 per cent for three-month bills maturing in December because of the seasonal factors tending to depress that particular rate. However, he noted, yields on bills maturing in January currently were in the 3.53-3.60 per cent If the policy shift was continued, he would contemplate range. three-month bills with January maturities were issuedthat when early in October, following the i.e., when bills were auctioned Committee's next meeting--their yield would be in the neighborhood of 3.60 per cent. Mr. Shuford commented that on the basis of Mr. Stone's statement he would be prepared to vote in favor of alternative B. Mr. Balderston suggested that the Committee vote on a directive composed of the staff draft for the first paragraph,

except that the balance of payments reference would be amended in the manner Mr. Deming had suggested; and with alternative B for the second paragraph. Thereupon, upon motion duly made and seconded, and by unanimous vote, 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 follow ing current economic policy directive: It is the Federal Open Market Committee's current policy to accommodate moderate growth in the reserve base, bank credit, and the money supply for the purpose of facilitating continued expansion of the economy, while fostering improve ment in the capital account of U.S. ir.ternational payments, and seeking to avoid the emergence of inflationary pressures. This policy takes into account the continued orderly expan sion in economic activity, some slackening in the rate of money supply expansion in recent weeks, and relative stability in broad commodity price averages. It also gives considera tion to indications that the deficit in the U.S. balance of payments was appreciably larger in July and August than in the preceding quarter. To implement this policy, System open market operations shall be conducted with a view to mairtaining the slightly firmer conditions in the money market that have prevailed in recent weeks, while accommodating moderate expansion in aggregate bank reserves. Mr. Stone referred to Mr. Hickman's remarks on the problems posed by inaccuracies in reserve estimates and the desirability of extending the daily reporting of reserve positions to all Districts. He commented that System-wide daily reporting would be most helpful to the operations of the Desk.

It was agreed the next meeting of the Comnittee would be held on Tuesday, September 29, 1964, at 9:30 a.m. Thereupon the meeting adjourned. Secretary

Attachment A CONFIDENTIAL (FR) September 4, 1964. Draft current economic policy direccives for consideration by the Federal Open Market Committee at its meeting on September 8, 1964 First Pararaph It is the Federal Open Market Ccntnittee's current policy to accommodate moderate growth in the resezve base, bank credit, and the money supply for the purpose of facilitating continued expan sion of the economy, while fostering improvement in the capital account ot U.S. international payments, and seeking to avoid the emergence of inflationary pressures. This policy takes into account the continued orderly expansion in economic activity, some slackening in the rate of money supply expansion in recent week3, and relative stability in broad commodity price averages. It also gives consideration to indications that the deficit in the U.S. balance of payments was disturbingly large in July and August. Second Paragraph Alternative A: To implement this policy, System open market operations shall be conducted with a view to maintaining slightly firmer conditions in the money market, while accommodating moderate expansion in aggregate bank reserves. Alternative B: policy, System open market operations To implement this a view to maintaining the slightly firmer shall be conducted with that have prevailed in recent weeks, conditions in the money market while accommodating moderate expansion in aggregate bank reserves.