November 22, 1966 FOMC Minutes

FOMC minutes

of payments remains a serious problem. In this situa tion, it is the Federal Open Market Committee's policy to maintain money and credit conditions conducive to noninflationary economic expansion and progress toward reasonable equilibrium in the country's balance of payments. To implement this policy, System open market operations until the next meeting of the Committee shall be conducted with a view to attaining somewhat easier conditions in the money market, unless bank credit appears to be resuming a rapid rate of expansion. Mr. Hayes said that he had cast a negative vote with reluc tance; he found it necessary to dissent because of the interpretation of the action as an overt change in policy. Mr. Daane concurred in Mr. Hayes' statement. Mr. Shepardson indicated that his affirmative vote was cast with reluctance. Chairman Martin then noted that the Manager had recommended an amendment to the Committee's continuing authority directive to $500 million to $1 billion the limit on holdings of increase from of indebtedness purchased directly from the short-term certificates In his judgment such action would be appropriate. Treasury. agreement with the Chairman's statement. There was general upon motion duly made Thereupon, and seconded, and by unanimous vote, paragraph 2 of the continuing authority was amended to read as follows: directive authorizes and Open Market Committee The Federal Bank of New York to purchase directs the Federal Reserve the account of the Federal from the Treasury for directly in cases where New York (with discretion, Reserve Bank of

it seems desirable, to issue participations to one or more Federal Reserve Banks) such amounts of special short-term certificates of indebtedness as may be necessary from time to time for the temporary accom modation of the Treasury; provided that the rate charged on such certificates shall be a rate 1/4 of 1 per cent below the discount rate of the Federal Reserve Bank of New York at the time of such purchases, and provided further that the total amount of such certificates held at any one time by the Federal Reserve Banks shall not exceed $1 billion. In reply to a question by Mr. Daane, Mr. Holmes said that no formal action by the Committee to amend its directives was the offsetting purchases of longer-term bills required to authorize of short-term bills that he had indicated earlier might and sales be desirable under certain circumstances. He had brought the the Committee's attention because the Desk had not matter to customarily engaged in operations of that type. that he would favor such operations Mr. Daane then observed Mr. Holmes had described eventuated. Other if the circumstances members concurred. meeting of the Committee would be It was agreed the next 1966, at 9:30 a.m. Tuesday, December 13, held on Thereupon the meeting adjourned. Secretary

CONFIDENTIAL (FR) ATTACHMENT A November 21, 1966. Drafts of Current Economic Policy Directive for Consideration by the Federal Open Market Committee at its Meeting on November 22, Alternative A The economic and financial developments reviewed at this meeting indicate that over-all domestic economic activity is con tinuing to expand, with sharply rising defense expenditures but with evidences of moderating tendencies in various sectors of the private economy. While there has been some slowing in the pace of advance of broad price measures, upward price pressures persist for many finished goods and services. Bank credit and money have shown no expansion in recent months. Long-term interest rates have again risen somewhat after declining from their late summer peaks. 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 inflationary pressures and progress toward reasonable equilibrium in the country's balance of payments. To implement this policy, System open market operations until the next meeting of the Committee shall be conducted with a view to maintaining about the same range of money market conditions as have prevailed since the previous meeting of the Committee; provided, however, that operations shall be modified in the light of bank credit developments. Alternative B The economic and financial developments reviewed at this that over-all domestic economic activity is con meeting indicate rising defense expenditures but tinuing to expand, with sharply tendencies in various sectors of the with evidences of moderating private economy. While there has been some slowing in the pace of upward price pressures persist for advance of broad price measures, goods and services. Bank credit and money have shown many finished interest rates have again no expansion in recent months. Long-term declining from their late summer peaks. The risen somewhat after balance of payments remains a serious problem. In this situation, Market Committee's policy to maintain money it is the Federal Open conditions conducive to noninflationary economic and credit toward reasonable equilibrium in the country's expansion and progress balance of payments.

To implement this policy, System open market operations until the next meeting of the Committee shall be conducted with a view to attaining somewhat easier conditions in the money market, unless bank credit appears to be resuming a rapid rate of expansion.