January 12, 1965 FOMC Minutes

FOMC minutes

being dealt with involved human choice and judgment, there inevitably were many imponderables. The Chairman said he had little to add to the discussion this morning. It seemed perfectly clear that everyone was in favor of maintaining an even keel in the money market for the next three weeks. There was some disagreement as to how "even keel" should be defined under present circumstances, but the Committee always was faced with this kind of problem in its deliberations. In light of a Treasury financing so successful that it led to some complications, he thought it was apparent that the conditions in the money narket prevailing during the current period should be maintained as closely as possible over the next few weeks. Chairman Martin favored the amendment to the staff's that Mr. Ellis had suggested; namely, to delete draft directive the words "may continue to" in the second paragraph. He noted that Mr. Robertson had suggested the addition of a clause at the end of this paragraph, but he questioned whether the clause would add much in view of the different shades of emphasis around the table. He suggested that a vote be taken on the staff's draft directive with Mr. Ellis' proposed amendment. Mr. Hayes suggested adding the following language at the end of the first paragraph: "particularly in view of the current unsettlement in financial markets abroad." Mr. Mitchell

concurred in the suggestion, noting that a considerable amount of concern on this subject had been expressed in the discussion today. Thereupon, upon motion duly made and seconded, and by unanimous vote, the Federal Reserve Bank of New York was authorized and directd, until otherwise directed by the Committee, to execute transactions in the System Account in accordance with the follow ing current economic policy directive: In light of the economic and financial developments reviewed at this meeting, and taking the current Treasury refunding into account, it remains the Federal Open Market Committee's current policy to facilitate continued expansion of the economy by accommodating moderate growth in the reserve base, bank credit, and the money supply, while seeking to avoid the emergence of inflationary pressures and to strengthen the inter national position of the dollar, particularly in view of the current unsettlement in financial markets abroad. To implement this policy, and recognizing that international uncertainties and shifting seasonal pressures require a larger than usual degree of flexibility in operations, System open market opera tions over the next three weeks shall be conducted with a view co maintaining about the same conditions in the money market as have prevailed in recent weeks. It was agreed that the next meeting of the Committee would be held on Tuesday, February 2, 1965, at 9:30 a.m. Chairman Martin commented that he thought the Committee was making progress on the matter of the directive. He noted that Mr. Daane had spoken about the length of the minutes under the new procedure, and he had some sympathy with Mr. Daane's comment. However, the Committee did have the problem at each

meeting of urcovering the various shades of emphasis in the views of members. He thought progress was being made in this connection also. The Chairman noted that the Committee had planned to discuss question of quantification in the directive after conclusion the agenda today. He proposed that the discussion be of the regular deferred until the date of the next meeting, to allow more time for members to think about the question. Also, Mr. Mitchell had distributed a memorandum on this subject today that would provide a good basis for the discussion, and it would be desirable for the members to have time to study this document. (Note: A copy of Mr. Mitchell's memorandum has been placed in the files of the Committee.) There were no objections to the Chairman's suggestion. Thereupon the meeting adjourned. Secretary

Attachment A CONFIDENTIAL (FR) January 11, 1965. Draft language for current economic policy directive for consideration by the Federal Open Market Committee at its meeting on January 12, 1965 In light of the economic and financial developments reviewed at this meeting, and taking the current Treasury refunding into account, it remains the Federal Open Market Committee's current policy to facilitate continued expansion of the economy by accommodating moderate growth in the reserve base, bank credit, and the money supply, while seeking to avoid the emergence of inflationary pressures and to strengthen the international position of the dollar. To implement this policy, and recognizing that international uncertainties and shifting seasonal pressures may continue to require a larger than usual degree of flexibility in operations, System open market operations over the next three weeks shall be conducted with a view to maintaining about the same conditions in the money market as have prevailed in recent weeks.