December 1, 1964 FOMC Minutes

FOMC minutes

obscured partially by the effects of recent and threatened work stoppages; the recent increase in average wholesale prices of industrial goods; and the continued expansion of bank credit and money. It also gives consideration to the persistence of a sizable deficit in the U.S. balance of payments. To implement this policy, and recognizing that a larger than usual degree of flexibility in operations will be needed in this period when financial markets, while under strong seasonal pressures, are still adjusting to official rate actions here and abroad, System open market operations over the next two weeks shall be conducted with a view to ac commodating moderate expansion in aggregate bank reserves, while moderating adjustments of money market conditions to recent official actions. It was agreed that the next meeting of the Committee would be held on Tuesday, December 15, 1964, at 9:30 a.m. Thereupon the meeting adjoined. Secretary's Note: Following adjournment, the members of the Committee discussed further the question of the format of the current economic policy directive and certain related matters, including the conduct cf deliberations at meetings, reviews of District developments, and procedures with respect to the policy record entries. It was understood that the Committee would continue to explore new forms for the directive on a trial basis, look ing toward a decision on this subject by the time of its next organization meeting in March 1965. It also was understood that the Committee would undertake to experiment along the lines of certain proposals contained in a memo randum from Mr. Robertson dated November 19, 1964, entitled, "A Further Suggestion for Directive Writing." (A copy of this memorandum has been placed in the files of the Committee.) Specifically, it was understood that: (1) The staff would no longer be asked to draft elements 1 and 2 of the "trial" directives, but would prepare on an basis and distribute before each meeting a selected experimental list of the major economic and financial topics that in its

judgment were of central importance in the determination of monetary policy at that time. A brief analysis would be given on each topic, marshalling the relevant information and giving the staff's interpretation of its significance for current policy formulation. Alternative interpretations might be presented if the staff was divided in its views. (2) The Committee's usual go-around of comments and views on economic conditions and monetary policy would be organized, at least in part, around this list of major topics, with members noting their points of agreement and disagreement with the staff's interpretations. All speakers would be free to add or subtract topics from the staff's list and to comment on District developments in connection with these topics or independently of them to the extent they considered appropriate. This discussion, as reflected in the minute record for the meeting, would be used as a basis for drafting the policy record entry for that meeting. (3) In addition to preparing drafts for the regular directive, the staff would continue to draft language corre sponding more or less closely to elements 3 and 4 of the trial directives, to be used by the Committee as a basis for its further discussions of possible new forms for the directive. It was suggested that the staff might experiment with differ ent versions, perhaps varying them from meeting to meeting or alternatives for Committee consideration at one submitting meeting; and that the staff might also prepare background statements on the probable "linkages" among the different variables cited in the drafts. It was noted that Messrs. Brill, Sherman, and Young had certain proposals to Charman Martin in a memorandum submitted entitled, "A Suggested Program for dated November 16, 1964, (Copies of this memorandum were distributed FOMC Meetings." to this mee:ing, and a copy has been to the Committee subsequent placed in the Committee's files.) Among other things, the that a brief written review of recent memorandum proposed developments in each Federal Reserve District might be pre at the Reserve Banks prior to each meeting and distributed pared Committee through the Secretariat. Most members thought to the for any comments on District develop it would be preferable the meetings in the course of the ments to be made orally at go-around rather than in written statements.

There was further discussion of the proposal that the policy record entry for each meeting be submitted for the Committee's approval at the following meeting. The possibility was noted that there might be insufficient time prior to the next meeting for preparing and distributing a draft entry and revising it on the basis of comments received. In this connection it was suggested that establishing a firm cut-off date for comments on each draft entry might help to make the proposal feasible. Secretary

Attachment A CONFIDENTIAL ,(R) November 28, 1964. Draft language for current economic policy directive for consideration by the Federal Open Market Committee at its meeting on December 1, 1964 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 improvement in the capital account of U.S. internaticnal payments, and seeking to avoid the emergence of inflationary pressures. This policy takes into account the fact that financial markets are currently in a period of adjustment in the wake of the recent sterling crisis and the discount rate advances and other responses in England and the United States. This policy also takes into account the apparent underlying strength of the domestic economy, obscured partially by the effects of recent and threatened work stop pages; the recent increase in average wholesale prices of industrial goods, partly reflecting the carry-through of earlier advances in nonferrous metals prices; and the recent moderation in monetary expansion from the high rates of summer. It also gives consideration to the persistence of a sizable deficit in the U.S. balance of payments. To implement this policy, System open market operations shall be conducted with a view to accommodating continued moderate expansion in aggregate bank reserves, while permitting such further adjustments to recent official rate actions both here of money market conditions and abroad as are consistent with minimum impact on over-all credit availabilty.