November 1, 1966 FOMC Minutes

FOMC minutes

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 that over-all domestic economic activity is continuing to expand with sharply rising defense expenditures but some evidences of moderating tendencies in sectors of the private economy. While prices of some materials have declined recently, upward demand and cost pressures persist for many finished goods and services. Bank credit expansion has slackened. Earlier strains in financial markets have abated and certain fiscal policy measures have recently been enacted by the Congress. The balance of payments remains a serious problem. In this situation, it is the Federal Open Market Committee's policy to maintain money and credit conditions conducive to the restraint of infla tionary pressures and progress toward reasonable equilibrium in the country's balance of payments. To implement this policy, and taking account of the current Treasury financing, System open market operations until the next meeting of the Committee shall be conducted with a view to maintaining generally steady conditions in the money market; provided, however, that operations shall be modified, insofar as the Treasury financing in the light of bank credit developments during permits, the month. It was agreed that the next meeting of the Committee would be held on Tuesday, November 22, 1966, at 9:30 a.m. Chairman Martin noted that a tentative schedule for meetings of the Committee in 1967 had been distributed with the agenda for He asked whether anyone had any comments on or today's meeting. changes to suggest in the schedule.

Mr. Daane said that while the tentative schedule was acceptable to him, he would reiterate the view he had expressed on other occasions that the Committee might ideally meet monthly, at dates related to the availability of monthly economic statistics, with interim meetings called when necessary. Chairman Martin commented that the tentative schedule called in 1967, only two more than would be held if the for 14 meetings Committee met monthly. Thereupon the meeting adjourned. Secretary.

CONFIDENTIAL (FR) ATTACHMENT A October 31, 1966. Draft of Current Economic Policy Directive for Consideration by the Federal Open Market Committee at its meeting on November 1, 1966 The economic and financial developments reviewed at this meeting indicate that over-all domestic economic activity is still expanding, despite evidences of slackening in some sectors of the private economy. While prices of some materials have declined recently, upward demand and cost pressures persist for many finished goods and services. Bank credit expansion has slackened and earlier strains in financial markets have abated. The balance of payments remains in deficit; although capital inflows increased in the third quarter the trade surplus declined further. In this situation, and in light of the fiscal policy measures recently enacted by Congress, it is the Federal Open Market Committee's policy to maintain money and credit conditions conducive to the restraint of inflationary pressures and to the restoration of reasonable equilibrium in the country's balance of payments. To implement this policy, and taking account of the current Treasury financing, System open market operations until the next meeting of the Committee shall be conducted with a view to maintain ing generally steady conditions in the money market; provided, however, that operations shall be modified, insofar as the Treasury financing permits, to moderate any apparently significant deviations of bank credit from current expectations.

ATTACHMENTS B Current Economic Policy Directive Proposed by Mr. Hayes The economic and financial developments reviewed at this meeting indicate that over-all domestic economic activity is contin uing to expand, with rising defense expenditures offsetting moderating tendencies in some sectors of the private economy. While prices of some materials have declined recently, upward demand and cost pressures persist for many finished goods and services. Bank credit expansion has slackened and earlier strains in financial markets have abated. The balance of payments remains a serious problem. In this situation, and in light of recent and possible future fiscal policy measures, it is the Federal Open Market Committee's policy to maintain money and credit conditions conducive to the restraint of inflationary pressures and to the restoration of reasonable equilibrium in the country's balance of payments. To implement this policy, and taking account of the current Treasury financing, System open market operations until the next meeting of the Committee shall be conducted with a view to maintain ing generally steady conditions in the money market; provided, that operations shall be modified, insofar as the Treasury however, permits, in the light of bank credit developments during financing the month.