March 7, 1967 FOMC Minutes

FOMC minutes

omission from the draft text of information concerning a drawing made by the Bank of Canada on its swap line with the System in the fall of 1966, and the reasons for limiting the information given on System operations in sterling during the course of the 1/ year. Mr. Brimmer asked whether the issues that had been raised in the Board's discussion had not already been largely resolved. Mr. Coombs replied affirmatively. He noted that the Bank of England had raised questions regarding certain figures included in an early draft that had been sent to them for comment and, accordingly, he had deleted those figures from the text sent to the Board for review. However, when the sterling situation took a turn for the better in late February the British attitude regarding publication became more relaxed, and the current plan was to include all of the data on sterling that had been questioned earlier. The sterling report would thus be complete. The Bank of Canada still preferred to have information on its 1966 drawing withheld at this time, but that information would be included in the Special Manager's next semi-annual report. Apart from that drawing, the only information that would not be made public concern ing operations through the end of 1966 related to the dollar volume of the System's forward lira commitments. referred to have been placed in 1/ Copies of the documents the Committee's files.

Mr. Robertson commented that, looking toward the future, there was a question of policy in this area that the Committee should resolve, although not necessarily today. While he rec ognized the need for flexibility, he thought the Committee might want to consider presenting a statement along the following lines to each of its partners in the swap network: It is the general policy of the FOMC that all foreign currency operations in which it is involved, whether at its initiative or that of partner central banks, be disclosed within a reasonable period of time. The Committee intends to continue to publish information on Federal Reserve use of these facilities with a time lag of no longer than seven months. In addition, the Committee desires to propose to its the network that they agree to a similar pub partners in lication procedure by us with respect to their use of these facilities, with the understanding that exceptions be made only after discussions between the Governor will of the central bank proposing the exception and the Chairman of the FOMC. on this proposed procedure will be Final decision postponed until after consideration thereof by the partners in the network. he did not question the desirability Mr. Daane commented that however, that presenting full publication. He was concerned, of banks might affect their attitudes a statement to foreign central such inhibit the most in a manner that would toward the swap network use of the network. effective noting the lateness of the hour, suggested Chairman Martin, discussion of publication on continuing the the Committee plan that at its next meeting. to foreign currency operations policy with regard

It was agreed that the next meeting of the Federal Open Market Committee would be held on Tuesday, April 4, 1967, at 9:30 a.m. Thereupon the meeting adjourned. Secretary Secretary

ATTACHMENT A CONFIDENTIAL (FR) Drafts of Current Economic Policy Directive for Consideration by the Federal Open Market Committee at its Meeting on March 7, FIRST PARAGRAPH The economic and financial developments reviewed at this meeting indicate some decline in industrial production and a marked slowing of expansion in over-all economic activity. Lack of growth in retail sales may be retarding adjustment of inventory accumula tion from its recent excessive rate. Average commodity prices have changed little recently, but unit labor costs in manufacturing have risen further. Bank credit expansion has been vigorous and, after a period of rising interest rates and congested bond markets, financial conditions have again turned easier. Recent data suggest little improvement in the foreign trade surplus but also little increase in the outflow of U.S. capital. In several important countries abroad, economic activity has been softening for several months and monetary and fiscal policies have eased somewhat. In this situation, it is the Federal Open Market Committee's policy to foster money and credit conditions, including bank credit growth, conducive to noninflationary economic expansion and progress toward reasonable equilibrium in the country's balance of payments. SECOND PARAGRAPH Alternative A the background of the To implement this policy against reductions in reserve requirements, System open market opera current tions until the next meeting of the Committee shall be conducted with to maintaining the prevailing easier conditions in the money a view be modified as necessary to moderate any market, but operations shall deviations of bank credit from current apparently significant expectations. Alternative B against the background of the To implement this policy requirements, System open market current reductions in reserve next meeting of the Committee shall be conducted operations until the somewhat easier conditions in the money with a view to attaining still easier conditions if bank credit market, and to attaining to be expanding significantly less than currently anticipated. appears