March 23, 1965 FOMC Minutes

FOMC minutes

important issue. He was convinced that it was necessary to do something to reduce foreign central banks' holdings of unwanted dollars, and he felt, as indicated earlier, that a higher Euro dollar rate and a widened spread between that rate and U.S. short-term rates was one way of accomplishing that objective. Chairman Martin said he agreed that further discussion of the matter would be desirable at some point. The Committee then returned to consideration of the directive. After discussion, the Chairman suggested that a vote be taken on a directive with a first paragraph essentially like that proposed by Mr. Shepardson and with a second paragraph taken from alternative B of the staff's drafts. 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: The economic and financial developments reviewed at this meeting indicate a generally strong further expansion of the domestic economy and the continuing need to improve our international balance of payments, as highlighted by heavy gold outflows in recent months. In this situation, it is the Federal Open Market Committee's current policy to reinforce the voluntary restraint program to strengthen the international position of the dollar and to avoid the emergence of inflationary pressures, while accommodating moderate growth in the reserve base, bank credit, and the money supply. To implement this policy, System open market opera the next three weeks shall be conducted with tions over

a view to attaining slightly firmer conditions in the money market. Votes for this action: Messrs. Martin, Hayes, Balderston, Bryan, Daane, Ellis, Scanlon, and Shepardson. Votes against this action: Messrs. Mitchell, Robertson, and Clay. It was agreed that the next meeting of the Committee would be held on Tuesday, April 13, 1965, at 9:30 a.m. The Chairman then noted that tentative plans would call for the two subsequent meetings to be held on May 4 and May The May 4 date, however, conflicted with the Second Meeting of the Governors of Central Banks of the American Continent, to be held in Uruguay during the first week of May. Several members of the Committee and staff were expecting to attend that meeting. Accordingly, it might be best to shift the Committee meeting tentatively planned for May 4 to May 11. After May 11, the Committee could return to its normal schedule, and plan to meet next on May 25. There was agreement with the Chairman's suggestion. At this point all members of the staff left the meeting, and the Committee went into executive session. Subsequently, the Chairman reported that in the course of the executive session the Committee, upon motion duly made and seconded and by unanimous vote, had accepted the resignation of Mr. Robert W. Stone as Manager of the System Open Market Account, effective as of the close of business March 23, 1965, and had selected Mr. Alan R. Holmes,

Vice President of the Federal Reserve Bank of New York, to serve at the pleasure of the Federal Open Market Committee as Manager of the System Open Market Account, effective March 24, 1965, on the understanding that Mr. Holmes' selection was subject to his being satisfactory to the Board of Directors of the Federal Reserve Bank of New York. Note: Advice subsequently was received that Mr. Holmes was satisfactory to the Board of Directors of the Federal Reserve Bank of New York for service in the capacity indicated. Thereupon the meeting adjourned. Secretary

Attachment A CONFIDENTIAL (FR) March 22, 1965. Draft Current Economic Policy Directives for Consideration by the Federal Open Market Committee at its Meeting on March 23, 1965 Alternative A (no change in policy) In light of the economic and financial developments reviewed at this meeting, including the generally strong further expansion of the domestic economy and the continuing need to improve our international balance of payments, it remains the Federal Open Market Committee's current policy to accommodate moderate growth in the reserve base, bank credit, and the money supply. This policy seeks to support fully the national program to strengthen the international position of the dollar, and to avoid the emergence of inflationary pressures. To implement this policy, 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. Alternative B (slightly firmer policy) In light of the economic and financial developments reviewed at this meeting, including the generally strong further expansion of the domestic economy and the continuing need to improve our inter national balance of payments, highlighted by heavy gold outflows in recent months, it remains the Federal Open Market Committee's current policy to accommodate moderate growth in the reserve base, bank credit, and the money supply. This policy seeks to assure full success of the voluntary restraint program to strengthen the inter national position of the dollar, and to avoid the emergence of inflationary pressures. To implement this policy, System open market operations three weeks shall be conducted with a view to over the next in the money market than have attaining slightly firmer conditions prevailed in recent weeks.