FOMC Minutes
A meeting of the Federal Open Market Committee was held in
the offices of the Board of Governors of the Federal Reserve System
in Washington on Tuesday, October 1, 1963, at 9:30 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Martin, Chairman
Hayes, Vice Chairman
Balderston
Bopp
Clay
Irons
Mitchell
Mills
Robertson
Scanlon
Shepardson
Messrs. Hickman, Shuford, and Swan, Alternate Members
of the Federal Open Market Committee
Messrs. Ellis, Bryan, and Deming, Presidents of the
Federal Reserve Banks of Boston, Atlanta, and
Minneapolis, respectively
Mr. Young, Secretary
Mr. Sherman, Assistart Secretary
Mr. Kenyon, Assistant Secretary
Mr. Hackley, General Counsel
Mr. Noyes, Economist
Messrs. Baughman, Brill, Eastburn, Furth, Green,
Holland, Koch, and Tow, Associate Economi.sts
Mr. Stone, Manager, System Open Market Account
Mr. Coombs, Special Manager, System Open Market
Account
Mr. Cardon, Legislative Counsel, Board of Governors
Mr. Broida, Assistant Secretary, Board of Governors
Mr. Williams, Adviser, Division of Research and
Statistics, Board of Governors
Mr. Yager, Chief, Government Finance Section,
Division of Research and Statistics, Board
of Governors
Miss Eaton, Secretary, Office of the Secretary,
Board of Governors
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Mr. Heflin, First Vice President of the Federal
Reserve Bank of Richmond
Messrs. Holmes, Mann, Ratchford, Rawlings, Jones,
and Grove, Vice Presidents of the Federal
Reserve Banks of New York, Cleveland,
Richmond, Atlanta, St. Louis, and San
Francisco, respectively
Mr. Litterer, Assistant Vice President, Federal
Reserve Bank of Minneapolis
Mr. Eisenmenger, Director of Research, Federal
Reserve Bank of Boston
Mr. Cooper, Manager, Securities Department,
Federal Reserve Bank of New York
Upon motion duly made and seconded,
and by unanimous vote, the minutes of the
meeting of the Federal Open Market Committee held on August 20, 1963, were
approved.
Before this meeting there had been distributed to the Committee
a report from the Special Manager of the System Open Market Account on
foreign exchange market conditions and on Open Market Account and
Treasury operations in foreign currer.cies .or the period September 10
through Septenber 25, 1963, together with a supplementary report
covering the period September 26 through September 30, 1963.
these reports have been placed in
Copies of
the files of the Committee.
Supplementing the written reports, Mr. Coombs commented that the
U. S. gold stock remained unchanged this week for the seventh successive
week.
He was hopeful that the Treasury would be able to get by for
another month without showing further losses.
From time to time there
had been a certain amount of speculative buying of gold in the London
market, but this influence had been overshadowed by heavy Russian sales
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to finance wheat purchases in addition to the usual seasonal needs.
At the beginning of September the gold pool reserve was reduced to a
low level, but since then it had been rebuilt and some gold had been
disbursed to members of the pool.
Mr. Coombs observed that the preliminary U. S. balance of
payments figures suggested improvement in the month of September from
the heavy August deficit.
While one would not be able to tell with
certainty until the figures for the third quarter were available in
more detail, he had the impression from various sources that there
might be a major improvement occurring in the capital market, with a
virtual freeze on new foreign long-term issues, and possibly a
substantial decline in short-term outflows.
This could conceivably be
offset by delay on the part of corporations in repatriating profits,
due to some concern about the possibility that additional measures might
be taken that would impair their ability to invest funds abroad.
A hopeful sign in the short-term capital area was the fact that
New York City banks seemed to be moving into a stronger competitive
position vis-a-vis the Euro-dollar market and Canadian banks.
A three-
month rate of 3-5/8 per cent was now fairly common in New York City,
with a number of quotations at 3-3/4 per cent recently, as compared with
Euro-dollar rates of 4-1/16 to 4-1/8 per cent and a Canadian rate of
3-7/8 per cent.
Even a slight stiffening of rates here, combined with a
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slight easing of European and Canadian rates, could bring about a
substantive return flow of deposits.
The foreign exchange markets had been beset by severe
pressures, mainly focusing on the Canadian dollar, the Dutch guilder,
the German mark, the Swiss franc, and the Italian lira.
A deficit
in the Italian payments balance was appearing again, and there were
indications that the Bank of Italy might be about to put pressure on
Italian commercial banks borrowing in the Euro-dollar market.
would be helpful in bringing down Euro-dollar rates.
This
If the Bank of
Italy were unsuccessful in its endeavor, it would be faced with a
choice of accepting heavy reserve losses or seeking credit assistance
by drawing against the Federal Reserve swap facility or going to the
International Monetary Fund.
In an effort to relieve somewhat this
prospective pressure on the Italian payments position, Mr. Coombs had
recommended to the Treasury that the Stabilization Fund begin to
acquire lire against dollars in anticipation of prepaying liradenominated Treasury bonds.
This suggestion had been accepted, and
the program was under way, with about $15 million of lire having been
purchased thus far.
It was also important, Mr. Coombs added, to inject
into the picture the concept of reversibility as far as Treasury
intermediate-term foreign currency bonds were concerned.
In the case of the Swiss franc, Mr. Coombs said that more than
$100 million in forward contracts had been made for the account of the
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U. S. Treasury to stem the volume of capital flows into Switzerland.
Speculation cn the possibility of some drastic revision of the
international financial system being proposed at Fund and Bank
meetings had probably played a role, and credit conditions in
Switzerland were a bit on the tight side.
In the past few days the
pressures had become even stronger, and it was impossible to deal with
them through forward operations.
The Swis% National Bank was compelled
to take in over $50 million, putting dollar reserves above the usual
ceiling of $175 million.
It seemed desirable to mop up the surplus
dollars by drawing on the swap facility wit.h the Bank for International
Settlements, and this had been done.
If there should be an improvement
in psychology, perhaps the Account could begin reverse operations.
During the past period, there had also been severe pressure in
the guilder market.
Thereupon, upon motion duly made and
seconded, and by unanimous vote, the
System Open Market Account transactions in
foreign currencies during the period
September 10 through 30, 1963, were
approved, ratified, and confirmed.
Mr. Coombs recommended renewal, on a three-month basis, of the
swap arrangements with the Swiss National Bank, the Bank for International Settlements, the Bank of Italy, the Austrian National Bank, and
the Bank of Sweden, all of which were to mature shortly (the most recent
renewals were dated July 18, 1963, in the first three cases, July 24 in
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the fourth case, and July 17 in the final case).
The amounts of the
current swap arrangements were $50 million with the Bank of Sweder.,
$150 million with the Bank of Italy, $100 million with the Swiss
National Bank and the Bank for International Settlements, and $50
million with the Austrian National Bank.
Mr. Swan noted that the Austrian swap was originally designed
for the purpose of delaying gold losses temporarily, and he inquired
as to the current situation.
Mr. Coombs replied that Austria was continuing to run a balance
of payments surplus and that he saw no turn in the immediate offing.
It seemed inadvisable to draw on the swap, in these circumstances, to
try to mop up the surplus dollars.
Probably the only answer, aside
from gold sales, to further Austrian acquisitions of dollars would be
the issuance of U. S. Treasury foreign currency bonds; since the
Treasury had that facility available, it seemed prudent for the
Federal Reserve to stay out of the picture.
Mr. Mills noted that certain European countries, such as
Austria, with balance of trade deficits were balancing their international accounts through tourist trade revenues.
In Italy, particularly,
there had been comments recently concerning the pressure Italy was
feeling at the present time because of the seasonal reduction in tourist
expenditures, which was aggravating the balance of payments deficit.
He
inquired whether there appeared to be any inclination to reduce imports
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from the United States as a means of lessening dependence on tourist
expenditures.
Also, there was an outflow of dollars from this country in the
form of such expenditures that could be plugged quickly if the
Government saw fit.
Mr. Coombs observed that any such restrictive action might
result in quick retaliation abroad.
Various types of moral suasion
might be used to some extent, but drastic efforts to reduce tourist
expenditures could result in the use of retaliatory measures.
In further discussion of this point., it was mentioned that
restrictions on tourist expenditures had been dropped by all of the
major industrialized countries except Japan and that the introduction
of new restrictions in that regard by countries with convertible
currencies might raise questions under Article VIII of the Articles
of Agreement of the International Monetary Fund.
It was also noted
that in the case of Austria, for example, tourist expenditures by U. S.
citizens formed only a small part of the total tourist revenue.
Mr. Coombs then noted that the International Monetary Fund,
at its annual meeting now in progress, would probably recommend a
comprehensive study of ways and means of dealing with the problem of
international liquidity.
The System's reciprocal currency arrangements
with foreign central banks performed an important function in providing
such liquidity.
If these arrangements were to come under some type of
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international study, he thought it would be desirable to close any
remaining gaps in the network and try to improve the alignment of
the individual swap arrangements to such extent as might seem
indicated in the light of potential payments swings.
The Committee
had discussed this on a number of occasions; and at the last meeting
he had suggested the desirability of increasing the size of the
German and Italian swap lines.
The potential swings in
the German
and Italian dollar positions as the result of temporary seasonal or
other reversible flows clearly appeared, in the light of actual
experience, to exceed the $150 million swap lines now in force.
He
would, therefore, like to request authorization to negotiate with the
German Federal Bank and the Bank of Italy to increase the swap
agreement to
a level of $250 million in each case.
Mr. Mills inquired as to the reason for an undertaking of
that sort with Italy when the payments swing was moving against that
country, and Mr. Coombs suggested that it was necessary, in these
matters,
to tink in
terms of a two-way street.
got into difficulty, it was just as iportant
When a
foreign partner
to do what was possible
through the swap arrangements to support its position as for that
country to support the U. S. position when this country was in
difficulty.
If the Italians ran into balance of payments problems, as
in recent months, it would be more advantageous for the United States
and for the world payments system if these swings could be taken care
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-9-
of through the use of such arrangements than if alternative measures
were used that would have an adverse impact on the U. S. balance of
payments deficit.
Mr. Mills inquired whether, in the case of Italy, the proposal
was aimed at providing background support for the lira; whether, even
though there was not an urgent need for this country to help, Mr. Coombs
would anticipate their drawing on the swap arrangement even in advance
of repayment of the longer term debts this country had already incurred
in
Italy.
Mr. Coombs indicated that he was hcpeful that the Treasury
would move to prepay outstanding lira-denominated bonds, but he doubted
that this would suffice to take care of the
Italian balance of payments.
possible deficit in the
In the present situation, it seemed likely
that the Italians would draw on the swap.
On the other hand, the System
had drawn on the swap too, and the Treasury had done a great deal of
financing in Italy.
Over the next few months, the System might have to
draw on the enlarged German swap; and the Italians might have to draw
on their swap arrangement.
Mr. Mills asked whether the Italians had indicated that they
hoped for an increase in the swap, and Mr. Coombs said the Italians
had indicated that they felt a bit short in terms of international credit.
They were seeking an increase in their quota from the Fund, but in the
short run they might well have a need for immediate credit.
The most
effective way of supplying that credit would be under the swap.
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Mr. Mitchell inquired whether the Bank of Italy should not
initiate negotiations if it felt the current swap line was inadequate,
and Mr. Coombs replied that in due course he thought such a general
procedure would be appropriate.
In actual fact, however, the System
had taken the lead throughout in the swap arrangements;
it was being
There were competing ideas as
looked to for leadership and guidance.
to just where the whole development of the international financial
system might be going, with some individuals supporting ideas that
were not at all sympathetic to the U. S.
He continued to feel that
for quite a while the System might have to retain the initiative.
Chairman Martin expressed the view that while the problem had
not been solved entirely, considerable progress had been made in
developing an understanding of what was involved.
Mr. Hayes emphasized the helpful attitude of the Italians
during the past couple of years at times when the U. S. needed help.
He agreed with Mr. Coombs that this country was being looked to for
leadership in the new fabric that was being built.
Other countries
seemed to like the idea of increasing the swap lines; this was a fully
cooperative move and not something the System was trying to press, but
the System was being looked to for guidance.
Mr. Robertson asked whether the enlarged swap line had already
been discussed with the Italians, and Mr. Coombs said that System representatives had been raising general questions over a period of months
as to what extent swap lines should be tied into swings in payments
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positions.
This had been done in the case of the Bank of Italy.
There had been nothing very specific in these discussions, but the
possibility of increasing the swap facility had been mentioned.
System representatives had taken the line generally that this was a
fluid, experimental thing, and that there was a real possibility in
certain instances that larger credit facilities might be useful.
Mr. Ellis suggested that as long as the U. S. remained in a
deficit position, the swap arrangement was looked upon as another stopgap device to help the U. S. with its balence of payments problem.
Each time the swap lines were increased piecemeal, this added to the
impression.
He asked whether it seemed that with the two proposed
increases, tne swap network might remain in status quo for some period
of time.
Mr. Coombs replied that with these two increases, and with
two other proposals that he would mention later, he felt that the
swap network would be pretty well rounded out.
Mr. Mills stated at this point that he would feel obliged to
dissent from the Italian proposal as being premature.
It was
important, he thought, that the record disclose this discussion because
this appeared to be a turning point.
The range of procedures that was
proposed to be followed varied from some of the considerations that
had drawn the Committee initially into the program of foreign currency
operations.
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Mr. Hayes then commented that it seemed to him that from the
outset the Committee had recognized that, although the pressures then
being dealt with were nearly all against the dollar, the swap arrargements were two-way facilities.
Chairman Martin expressed the view that it would be unfortunate
at this juncture to say that this was the point where the swap program
was going to be cut off.
It seemed to him that these experimental
operations hac been useful and effective.
Mr. Mills commented, however, that in the Italian matter the
System was offering a plan that had not been proposed to it, and with
no fundamental reason that he could see for undertaking it at this
point.
He alo suggested that Committee representatives should be
on
cautious about engaging in conversations leading to commitments
behalf of the Committee.
Mr. Coombs replied that there had been no commitment.
It seemed
to him that it was essential, in such a matter, for the Committee to
have knowledge as to how a foreign central bank would react; whethe. it
would look with
favor or disfavor upon a particular operation.
This
sort of thing was discussed in general terms on a regular basis.
Otherwise, he would not be able to inform the Committee as to how the
whole picture was shaping up in the eyes of the foreign central banks.
Chairman Martin commented that he felt there had been an evolution of thinking even within the Committee, which had been somewhat
skeptical in its original approach.
In his opinion, considerable progress
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had been made
But negotiations, to be successful, had to be conducted
over a period of time and in a framework of continuous discussions.
Mr. Mitchell again raised the question whether it would not
be appropriate in principle to let the Bank of Italy bring up the
matter of an increase in the swap line.
He recalled that the Com-
mittee had discussed on several occasions possible guidelines for the
size of swap
agreements.
A staff memorandum had been prepared at one
point that, as he recalled, indicated that it was not practicable to
lay down hard and fast guidelines, so the Committee had been moving
more or less as the need dictated.
He did not feel that there was
anything to dictate a need for an increase in the swap agreement with
the Bank
of Italy as far as the System was concerned.
Mr. Coombs expressed doubt that it was possible to calculate
too far in advance.
A year ago, for example, it would have been
difficult to foresee developments that led now to suggest increasirg
certain swap lines.
Mr. Robertson inquired about the possibility of acting on a
basis whereby the Committee would agree to approve an increase in the
swap agreement if the Bank of Italy so requested, and Mr. Coombs
suggested that if the System approached the German Federal Bank and
negotiated a swap increase, the Bank of Italy might wonder why it had
not been approached in similar fashion.
If the System waited to be
approached, that might create some misunderstanding.
10/1/63
-14Mr,. Hickman referred to the beneficial effects, in terms of
the U. S. balance of payments, from a drawing by the Bank of Italy
under the swap facility as opposed to possible alternative procedures,
following which Mr. Balderston said that when the Committee initiated
the foreign currency program, he was somewhat concerned about how
these arrangements might end up.
dissipated,
Although his concern had been
.t seemed to him that one criticism that had been leveled
should be dissipated, namely, that the United States had arranged these
operations ir.order to avoid meeting the basic issue of re-establishing
equilibrium in its balance of payments.
Unless the System continued to
take the initiative in arranging these swaps with foreign central banks,
the critics would be confirmed in their opinion that the System's only
interest was in meeting U. S. difficulties rather than in working with
the industrialized nations toward the development of a formula that
would meet speculative runs on a currency.
If the Committee were to
approve the German swap increase, but. not approve the Italian, that
would confirm the views of the critics that the U. S. was looking out
for itself only.
Mr. Hayes said he thought it was worth stressing that, while
the Italian balance of payments picture looked rather weak now, such
things have a way of changing fast.
It had been only about a year
since the Italian picture looked very strong, and the U. S. Treasury
was concerned about how to meet the pressure on the dollar.
This was
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a country of considerable importance, with payments swings large
enough in both directions to warrant a swap agreement of $250
million.
Mr. Mitchell then indicated that although he would prefer
to have the Bank of Italy approach the Federal Reserve, he would not
pursue the point further.
He would withdraw his objections on that
basis.
Mr. Mills stated that he would wish to be recorded as
dissenting.
He thought it was important that there be a clear
indication in the record that the subject had had exhaustive discussion., and was anything but a closed matter.
Thereupon, upon mot on duly made
and seconded, the renewal
for three
months each of five reciprocal currency
agreements that were to mature shortly,
as recommended by Mr. Coombs, was
authorized; and Mr. Coombs was authorized to negotiate increases from $150
million to $250 million each in the
reciprocal currency agreements with the
German Federal Bank and Bank of Italy.
The actions taken were by unanimous
vote except that Mr. Mills dissented
from authorizing the negctiation of an
increase in the swap agreement with the
Bank of Italy.
Mr. Coombs said there was ample evidence that the present
swap arrangement with the Netherlands Bank, for $50 million, was on the
low side.
There had been drawings on three occasions, each time in the
full amount of the swap, and flows into the Netherlands had from time
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to time been
eavy.
In the most recent instance, rumors of a
revaluation cf the guilder contributed to a large flow of dollars
into Amsterdam.
The System drew under the swap arrangement and
disbursed the full amount, but the dollar holdings of the Netherlands
Bank were still above the ceiling.
The issue was clear:
the arrange-
ment of additional financing under the swa. or purchases of gold
the Netherlands.
by
The Netherlands Bank would be agreeable to an
increase in the swap facility to $100 million, and he would so
recommend, with the understanding that probably the additional
guilders would immediately be drawn and disbursed to bring the dollar
holdings of the Netherlands Bank back down to around $200 million.
In discussion, Mr. Coombs said that the original skepticism
of Netherlands authorities with regard to the swap agreement procedure
appeared to have diminished as the result of the record that had been
compiled of liquidating drawings promptly; there was recognition of
the fact that the Federal Reserve had adhered to its promises with
regard to the nature and objectives of the swap program.
As to the
consequences of the speculation engendered by rumors of devaluation
of the guilder, Mr. Coombs pointed out that Amsterdam is a relatively
small money market; he felt that the flow of funds into the Netherlands
might rather promptly be reversed.
Thereupon, upon motion duly made
and seconded, and by unanimous vote,
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-17the Special Manager was authorized
to negotiate an increase from $50
million to $100 million in the swap
facility with the Netherlands Bank.
Mr. Coombs then brought up the question of entering into a
swap arrangement with the Bank of Japan.
He pointed out that Japan
is a major industrial nation, a sizable factor in international trade,
and experiences important swings in its payments balance.
The
deterrent to entering into negotiations with the Bank of Japan had
been its lack of status under Article VIII of the International Monetary
Fund; the yen had not yet qualified as a fully convertible currency.
However, it was anticipated that the Japanese Minister of Finance,
during the Fund and Bank meetings, would probably announce Japan's firm
intention of moving to Article VIII status next year.
There was also a
strong likelihood that Japan would be brought into the Organization for
Economic Cooperation and Development group within the next month or so.
In a sense, once these moves were accomplished, Japan would be even
better qualified for inclusion in the swap network than some of the
smaller European countries.
In view of what might now be regarded
more or less as a certainty, that is, the obtaining of Article VIII
status, Mr. Coombs could see considerable advantage in anticipating
the step by bringing Japan into participation in the swap network, and
in so doing roundirg out the network, possibly in more or less final
form, especially as to geographical coverage.
If the Committee should
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want to adhere strictly to Article VIII status as a prerequisite for
participation in the swap network, there might be a compromise
arrangement under which a standby swap agreement with the Bank of
Japan would be negotiated and announced, subject to the understanding
that neither the Federal Reserve nor the Bank of Japan would draw
against the swap until the Japanese move to Article VIII status had
been formally completed.
In discussion of the matter, Mr. Mills said that he would
raise even more strongly in the Japanese case the objections he had
expressed with regard to the Italian proposal.
He felt that an
approach to the Bank of Japan would be premature in the extreme.
The
Committee had received from the staff, under dates of September 27
and 30, 1963, an extensive survey of the Japanese economic and
financial position which showed that the Japanese external shortterm debt was far in excess of gold and foreign exchange reserves.
Also, there had been a sharp rise in imports and a rapid growth in
the deficit on trade account.
If the swap arrangement were approved
at the present time, this would be one less reason for the Japanese
to subscribe to sound international financial principles according to
Monetary Fund discipline, because they would have another line of
credit at their disposal.
Mr. Coombs said that if Japan were in a basic deficit position, he would assume it would be made quite clear to Japan that it
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should go to the Monetary Fund rather than draw under a swap arrangement.
Adherence to the basic rules of the game was expected on the
part of all partners to the swap agreements; all of the swap arrangements were subject to the explicit understanding that no drawings
would be made except by mutual agreement.
Mr. Balderston asked Mr. Coombs whether it might not be
well if the Open Market Committee were to withhold any negotiation
or announcement of a standby arrangement with Japan until Japan's
Article VIII status was definite.
If this were done conditionally,
it might encourage approaches from other countries for inclusion in
the swap network.
Mr. Coombs replied that he thought the Committee might
prefer to move fast and give the impression that the swap network
had been completed.
He felt that it would be a mistake to allow the
swap program to extend beyond the major industrialized countries,
and sooner or later this would have to be made clear on the record.
As long as a
lace was held open for Japan in the swap network, there
seemed more risk of vulnerability to other approaches.
Mr. Mitchell commented that the swap relationships with the
Europeans were regarded by Latin American countries as an evidence of
solidarity and mutual concern that the United States did not share so
far as they (the Latin American countries) were concerned.
It seemed
to him that a rounding out of the swap network by bringing Japan into
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it would only give added impetus to the feeling that the United
States was nct too much interested in the countries to the south.
From the standpoint of the future, he felt that this country should
be showing a great deal more interest. in that area.
The Committee,
he noted, has not considered carefully the proposition that a swap
arrangement with Japan would constitute the end of expansion of the
swap network for some time to come.
Thus far the Committee had
proceeded on a case-by-case basis, as the need dictated.
Accordingly,
he was rather surprised by the comment that. a Japanese agreement
would close the swap network for some time to come; this would
represent a major decision that should receive considerable attention
on the part of the Committee.
Chairman Martin noted that the problem here was a little
different from the German and Italian matters, previously discussed,
because the Japanese were anxious to come into the swap system.
The
currency, however, was not yet fully convertible, which raised a
question as to how to handle the matter.
Mr. Mitchell said that he would feel more comfortable if he
had more time, and the benefit of the thinking of others, on the
proposition of confining swap arrangements essentially to countries
within the OECD group.
on that issue today.
He would not feel prepared to take a position
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Chairman Martin then asked Mr. Coombs whether it would serve
his purpose if the Committee authorized him to talk to the Japanese
and bring back to the Committee for consideration any proposal that
might be suggested.
Mr. .ayes commented that there were pressures from many
directions for building greater international liquidity, and some of
these pressures were from persons who would build it in a much less
effective way than through the methods being used by the System and
the Treasury.
He felt that an effective structure of bilateral
arrangements, with the inclusion of Japan, would act as a deterrent
to the less sound suggestions that were circulating in a number of
high places around
the world.
Question was raised whether an understanding, in connection
with a swap arrangement with the Bank of Japan, that the facility
would not be utilized until Japan achieved Article VIII status would
be likely to speed up that process, and Mr
Coombs pointed out that
certain regular procedures would have to be followed before Article
VIII status could be obtained.
He doubted that the necessary actions
could be taken before next February or thereabouts.
Asked whether
the Japanese might not be particularly anxious to obtain a swap line
of credit as a support against speculative pressures attendant upon
the achievement of Article VIII status, Mr. Coombs said he would not
expect the yen, if fully convertible, to be subject to any greater
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speculative pressures than had existed thus far.
However, there were
certain trade relationships between Japan and the Western countries
that would have to be worked out.
In further discussion, Mr. Yourg
recounted the extent of steps taken to date, and remaining to be
taken, by Japan in the removal of restrictions on current account
payments.
Question also was raised as to the possible magnitude of
any swap arrangement with the Bank of Japan, and Mr. Coombs said that
he was not sure.
As an offhand guess, he would say something in the
order of $150 million.
Chairman Martin then suggested again that Mr. Coombs be
authorized to discuss the matter of a possible swap arrangement with
the Bank of Japan, with the understanding that the matter would then
be brought back to the Committee for further consideration.
In the
meantime the staff could prepare a memorandum on the whole problem
of the scope of the swap network for consideration by the Committee.
There was general agreement with this suggestion.
Mr. Coombs said that his last recommendation related to
In an appendix to the Special Manager's report to
forward operations.
the Committee on operations during the period September 10-25, 1963,
there appeared a summary of operations for Treasury account in forward
Canadian dollars.
Briefly, incident to the Russian wheat deal in
process, there was in prospect a heavy transfer of U. S. dollars to
Canada.
This had resulted in a heavy demand for forward Canadian
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dollars, which in turn added considerably to the interest arbitrage
in favor of Canada.
If this process had been allowed to run its
course, conceivably it could have resulted in a heavy flow of shortterm funds to Canada.
Through operations of the Bank of Canada and
of the New York Reserve Bank (acting for the Treasury) to sell
Canadian dollars forward while buying Canadian dollars spot, the
premium on the forward Canadian dollar disappeared.
This squeezed
out the arbitrage in favor of Canada and nipped what might have been
a sizable flow of funds.
The operation had been a useful one, and
the Canadians were pleased with it.
He could visualize that from
time to time in the future similar operations might be of considerable
help in checking, before they got under way, arbitrage flows of even
greater magnitude than what had been the potential flow to Canada.
If there was an authority for operating in the forward market on such
occasions--selling forward and simultaneously buying a currency spot-some outflows of short-term capital could be checked.
He would like,
therefore, to request authority, up to a total of $50 million, for
buying foreign currencies spot and selling them forward for the
specific purpose of restraining short-term capital outflows induced
by arbitrage considerations.
This would be in addition to the two
outstanding authorizations for forward operations, each in the amount
of $50 million, that related to covering commitments under swap
drawings.
-24-
10/1/63
In discussion, a suggestion was made that it might be
preferable to raise the over-all authority for forward transactions
to $150 million, such figure to cover all three types of such operations, and Mr. Coombs replied that he would welcome the additional
flexibility.
Accordingly, upon motion duly made
and seconded, and by unanimous vote, the
continuing authority directive for
System foreign currency operations was
amended, effective immediately, to read
as follows:
The Federal Reserve Bank of New York is authorized and
directed to purchase and sell through spot transactions any
or all of the following currencies in accordance with the
Guidelines on System Foreign Currency Operations reaffirmed
by the Federal Open Market Committee on March 5, 1963, as
amended May 28, 1963:
Pounds sterling
French francs
German marks
Italian lire
Netherlands guilders
Swiss francs
Belgian francs
Canadian dollars
Austrian schillings
Swedish kronor
The Federal Reserve Bank of New York is also authorized
and directed to operate in any or all of the foregoing
currencies, in accordance with the Guidelines and up to a
combined total of $150 million equivalent, by means of:
(a) purchases through forward transactions,
for the purpose of allowing greater flexibility
in covering commitments under reciprocal currency
agreements;
(b) purchases and sales through forward as
well as spot transactions, for the purpose of
-25-
10/1/63
utilizing its holdings of one currency for the
settlement of commitments denominated in other
currencies; and
(c) purchases through spot transactions
and sales through forward transactions, for the
purpose of restraining short-term outflows of
funds induced by arbitrage consicerations.
Total foreign currencies held at any one time shall
not exceed $1.75 billion.
Before this meeting there had been distributed to the members
of the Committee a report covering open market operations in U. S.
Government securities and bankers' acceptances for the period September
10 through September 25, 1963, and a supplementary report covering the
period September 26 through September 30, 1963.
Copies of these
reports have been placed in the files of the Committee.
In supplementation of the written reports, Mr. Stone commented
as follows:
The money and securities markets have weathered the past
three weeks of advance refunding and tax and dividend payments
quite smoothly. Net reserve availability was permitted to
respond flexibly to market needs, rising when those needs were
at their peak and then moving lower as the needs receded. In
this way it was possible to maintain a generally steady dayto.-day tone in the money market. The great bulk of Federal
funds trading was at 3-1/2 per cent, while member bank
borrowing fluctuated quite sharply from day to day but, on
average, was in the recent range variation for the period as
a whole. Once again, events during the period were a reminder
that summary reserve statistics are an imperfect guide to the
condition of the money market--particularly when distribution
within the total may swing so sharply from day to day and
when even the aggregates themselves are subject to substantial
later revision.
System operations withdrew reserves to offset market
forces in the first half of the recent period. These withdrawals were undertaken cautiously, however, in view of the
10/1/63
-26-
great volume of churning in financial markets around the tax
date and in connection with the advance refunding. Starting
September 19, the System turned around and began supplying
reserves as market factors absorbed them.
The advance refunding, of course, has been the center
of attention in the long-term bond market during the past
several weeks. As described in the written reports, the
advance refunding of some $6-1/2 bill:on out of $23 billion
of public holdings of rights was considered a highly satisfactory result--both by the Treasury and in the market.
Public takings of $3.7 billion of the new 4's of 1973 and
$1.3 billion of the reopened 4-1/8's of 1989-94 were
especially gratifying in view of the recent comments made by
some market observers to the effect that current long-term
rates were out of touch with the "real" state of demand and
supply because of official purchases of intermediate and
longer issues.
The dealers took substantial positions in the refunding
issues, and thus far have been willing to reduce those positions orly at rising prices--and even then they have shown
no aggressiveness in letting bonds go. The atmosphere
surrounding this distribution process, and the bond market
in general, remains good. Prices of most longer term issues
are above their levels of three weeks ago notwithstanding
the larger-than-expected additions to supplies produced by
the exchange.
In the meantime a better at.mosphere has also emerged in
other long-term markets. Last week, a high grade industrial
bond offering in the amount of $100 million sold out quickly
at a yield well within the range of recent reoffering yields.
In the tax-exempt area, distribution of the slower-moving
recent offerings has picked up after prices were reduced and
Further tests
the latest offerings have moved quite well.
await the tax-exempt market, however, with a large calendar
of offerings to be assimilated in the weeks ahead.
Turning to Treasury bills, there was some concern expressed at the last meeting of the Committee to the effect
that demand for bills growing out of the advance refunding
might tend to pull rates substantially lower. As it turned
out, the demand for bills from sellers of rights tapered off
in the latter part of the period that subscription books
were open, and offsetting upward pressures on bill rates
soon emerged as the mid-month tax date approached. Investment
demand reappeared after the tax date but market supplies,
10/1/63
-27-
augmented by the Treasury's second monthly offering of oneyear bills, have been adequate and no serious erosion of
rates has developed. In yesterday's auction the 3- and
6-month rates were set at about 3.41 and 3.52 per cent-roughly 5 basis points higher than they were three weeks
ago, but within the range in which they have recently moved.
Treasury financing operations in the next few weeks are
expected to center in the bill market. Payment is being
made today for the second billion dollar offering of monthend one-year bills, which raises about $0.5 billion new
cash after paying down a $0.5 billion issue of maturing
1-1/2 per cent notes. On October 15 there is a $2.5
billion maturity of the old quarterly series of one-year
bills, and it is expected that the Treasury will meet most
of this outpayment through the sale of $2 billion of March
tax anticipation bills. Later in the month they may sell
a $1 billion strip of bills to recoup the balance of the
cash drain on October 15 and to raise some additional cash.
And of course they plan to sell, around the end of the
month, the third in the monthly series of $1 billion oneyear bills. Finally, the Treasury plans to announce the
terms of its November refunding on October 23 or 24.
Our projections, and particularly those of the Board's
staff, point to a substantial bulge is reserves during the
last two weeks of the period ahead. The offsetting of
that bulge could push us close to, and possibly through,
the $1 billion limit on net changes in the Account. To be
on the safe side, I should like to recommend that the limit
be raised from $1 billion to $1.5 billion for the next
three weeks.
Thereupon, upon motion duly made
and seconded, and by unanimous vote,
the open market transactions in Government securities and bankers'
acceptances during the period September 10 through September 30, 1963,
were approved, ratified, and confirmed.
The staff economic and financial review at this meeting was in
the form of a visual-auditory presentation, for which Messrs. Garfield,
Hersey, Altmann, and Axilrod of the Board's staff joined the meeting.
-28.-
10/1/63
Copies of the
Other participants included Messrs. Noyes and Koch.
text of the presentation and of the accompanying charts have been
placed in the files of the Committee.
The introductory portion of the review, presented by Mr. Noyes,
was as follows:
On occasion, economic news of little significance in
itself because it is attributable to special circumstances
calls our attention to important questions that might
otherwise escape our notice. The decline in industrial
production from July to August was news of this sort. It
reflected chiefly a cut-back in steel output as a sequel
to the earlier build-up of stocks. To a lesser extent it
reflected a moderate further decline in auto output from
an exceptional high in June. Other industrial activities
taken together showed only a little further increase, but
this should not be considered exceptional
for a single
month in a period of generally rapid advance.
Thus the
August drop in the index may be explained away.
The decline,
nevertheless, brings into the foreground of discussion
questios concerning more fundamental changes in the course
and composition of production--questions already implicit
in the rapidity and unevenness of the advance from January
to July.
First, we will review the general course of events
since the cyclical low in February 1961. An initial rapid
advance in 1961, and then a more moderate rise, brought
output to a level in July 1962 that was 9 per cent above the
prerecession level of the spring of 1960.
Production held
unchanged at this level for 7 months, through January this
year.
As late as March, evidence of the direction of the
next move did not seem conclusive to most observers. This
was partly because the previous period of recovery and
expansion, from the low in April 1958, had lasted only a
little over two years and on this precedent a decline might
be due. Actually, output had started to rise in February and
by July it was 6 per cent higher than in January.
The expansion of 1954-57 lasted a little over three
years, an unusually long period in the annals of cycles.
Is
the present period perhaps of that sort? Similarities can be
found, but the differences are great. The advance in
10/1/63
-29-
production from January to July this year was sharper than
any rise after the early stages of the 1954-57 expansion,
disregarding the steel strike of July 1956. Also,
production in July this year was appreciably higher relative to the prerecession rate than production in early 1957,
the corresponding time in that upswing.
With the unemployment rate generally between 5-1/2 and
6 per cent, labor force use in the past year and a half has
been between 94 and 94-1/2 per cent. This is close to the
level prevailing in 1959-60 but appreciably below the 96
per cent rate from early 1955 to mid-1957. Also, the rate
of use of capacity for production of major materials this
year has been well below the 90-92 per cent range prevailing
for several quarters in 1955 and 1956.
With resources being utilized less fully than in
1955-57, competition from abroad keener, and belief in the
inevitability of creeping inflation at. least suppressed by
events in recent years, industrial commodity prices this
time have not changed enough to have any appreciable impact
on broad indexes. By early 1957--the corresponding date in
the expansion of the middle 50's--industrial prices had
risen 10 per cent. Wage rates also show a contrast, rising
at a rate less than two-thirds as fast in the recent
expansion.
In addition to these marked differences from the
mid-1950's in production, resource ut.lization, and prices
for goods and services, there are many other differences.
These include a different balance of payments situation,
much keener competition from abroad, less volatile behavior
of interest rates, and the implications of the tax bill now
before Congress. It thus seems evident that no close
parallel with the past can be drawn, and that our attention
should instead be focused on the nature of recent changes.
There followed sections dealing with foreign developments and
the balance of payments, industrial employment and activity, business
capital expenditures, prices and credit market developments.
The
concluding portion of the review, presented by Mr. Koch, was as follows:
We have touched on a wide range of economic developments
at home and abroad. We have called particular attention to
10/1/63
-30-
the sharp rise in industrial production from January to
July, achieved with only such price increases as have been
largely offset in their effects on the broader indices by
declines elsewhere. The advance in output, we have noted,
was so rapid and so much greater in materials than in
final products that some slowing down in the advance and
some shift in the composition of the advance seem to be
indicated.
We have made no prediction on the course of
prices, not regarding the firming in numerous markets as
conclusive evidence of the beginning of a widespread
advance, yet not accepting the view that there is enough
slack in current and prospective resources use to make
unnecessary concern for developments in this area.
Nevertheless, unemployment continues to be a serious
problem. It was still at a level of 5-1/2 per cent in the
third quarter. Over the past year the unemployment rate
has changed little, while GNP has risen over $30 billion.
Turning more specifically to monetary policy, enough
time has now elapsed since the actions taken in July to
evaluate in a preliminary way their effects. On the
domestic side, the major effect has been in firming money
market conditions somewhat further. Customer loan rates
at bank. have apparently shown little change.
The rise
in longer term interest rates in early September was more
a reflection
of the Treasury advance refunding than of
money market conditions.
It
is
interesting to note that
the narrowing of the spread between short- and long-term
interest rates in 1963 has had more the characteristics of
normal behavior of the rate structure in a period of
economic expansion and reduced monetary ease, that is, the
whole structure of rates has risen, with short rates
rising more than long rates.
As for other basic effects of monetary actions, the
evidence is by no means conclusive. The money supply
declined in August but rose again in September. Thus far
this year, it has increased at a 3 per cent rate. Growth
in bank loans and investments slackened in August, but,
like money, picked up fairly briskly in September. These
recent changes in money and bank credit were probably more
affected by changes in the intensity of private demands for
bank funds and in the specific timing of Treasury financing
operations than by changes in monetary actions.
The changes in maximum rates payable on time deposits,
and action on the part of some banks in raising actual
rates paid, led to a sharper increase in the volume of such
10/1/63
-31-
deposits outstanding during late July and August than
earlier. In September, however, the rate of increase
slackened, in part reflecting some deposit liquidation for
tax payment purposes.
The evidence on the effect of this summer's policy
changes in international capital flows is also mixed.
Some offsetting actions and developments have occurred in
foreign rates and forward discounts. As a result, the
covered rate differentials on money market paper between
New York and London, and between New York and Montreal
have not changed much. Also, Euro-dollar rates have risen,
although not so much as to offset fully the rise in shortterm U. S. rates.
On the other hand, the bank-reported outflow of funds
abroad has slowed down substantially. That outflow, which
averaged $150 million a month during the second quarter,
was reduced substantially in July and still further in
August. But the magnitude of recent flows of funds abroad
not reported by banks is still mostly unknown. Moreover,
exchange market developments during September
suggest a
rise in short-term outflows, especially to Canada but
perhaps also to some Continental European countries. These
flows, however, apparently were due mainly to factors other
than interest rate considerations.
The sharp reduction in bank-reported flows in July
and August, together with very light offerings of new issues,
has no doubt reduced the over-all U. S. payments deficit
But after gratifyfrom its very high second quarter rate.
ing resuts for July, a deterioration occurred in August.
Tentative weekly figures for September are inconclusive.
In deciding on the most appropriate monetary policy
for the next few weeks, attention might well focus on the
If
fact that demands for funds picked up in September.
this pickup continues, additional upward pressure on
interest rates could develop as a result of market forces.
Any diminution in the savings flow would accentuate this
In this case, the Committee might wish to permit
tendency.
the increased demands for funds to be reflected, in part at
least, in higher rates of interest.
This would seem a more
appropriate course than further action on the supply side
to inch up rates. On the other hand, as the analysis this
morning suggests, the pace of economic expansion could
slacken and the savings flow could continue robust, in which
case interest rates might come under some downward pressure.
In this case, forthcoming balance of payments developments
10/1/63
-32--
could be a key factor in deciding whether such downward
influences on interest rates might more appropriately be
offset or allowed to materialize.
The Chairman then called for the go-around of comments on
economic conditions and monetary policy beginning with Mr. Hayes who
presented the following statement:
As we meet today, two and a half months after the
System's latest policy moves with respect to the discount
rate and Regulation Q, it seems appropriate to review very
briefly what has happened in the principal areas to which we
must give our attention in formulating monetary policy.
We find that the domestic business situation has continued to improve gradually, and that despite a dip in
August due largely to a few special factors, there is
appreciably more optimism on the outlook for business than
there was in July. The major price indices have still not
broken out of the narrow range in which they have moved
for some four years, though there have been enough increases
for individual products to suggest a need for watchfulness.
Liquidity continues ample, with no clear evidence that our
series of moderate moves toward lesser ease has appreciably
slowed the substantial rate of bank credit expansion that
has characterized the past year or more. Banks are still
avidly seeking additional loans, both here and abroad. The
level of short-term market rates has risen part way toward
the new discount rate but is still short of it by about 1/8
per cent, long-term rates have firmed only very slightly,
and the pronounced success of the Treasury's advance refunding operation has pointed up the continuing abundance of
savings in relation to the demand for long-term funds.
Firally, while the balance of payments should show some
improvement in the current quarter over the very sad showing
of the second quarter, the deficit is nevertheless running
at an unsustainably high rate, and the complications introduced by the interest equalization tax make it virtually
impossible to measure the results of our own policy actions.
In any case, we are not achieving the degree of improvement
that the world at large, and especially the principal
foreign holders of dollars, many of whom are represented
here in Washington this week, might reasonably expect in
the light of the Administration's ringing pronouncements of
mid-July.
10/1/63
-33-
To cite a few recent developments in greater detail,
statistics that have become available since our last
meeting suggest that the August dip in business activity
was largely attributable, directly or indirectly, to the
automobile model changeover and the continuing steel
inventory adjustment; but that there was also a slower
rate of advance in other sectors, with the notable exception of retail trade, which continued to move ahead
strongly. With auto production now moving up, with the
steel picture brightening, and with a generally favorable
prospect for consumer buying and business investment in
plant ard equipment, it seems likely that a pick-up in
general activity may have occurred in September or will
occur at the latest in October. One encouraging item is
the rise in after-tax corporate profits in the second
quarter to the highest level since the fourth quarter of
1950. After-tax profits plus depreciation allowances
reached an all-time peak, and the ratio of this aggregate
to GNP equaled the previous peak of the last quarter of
1955. Even the unemployment statistics provide some
slight cegree of comfort, in that the unemployment rate
for married men moved down in August to 3 per cent--a full
one-half of a percentage point below a year earlier, and
the lowest level since 1957.
The stock market's performance, with the major
averages having broken into new high ground early in
September, is perhaps symptomatic of the relatively high
degree of business optimism.
That optimism will not be
lessened by the fact that the tax reduction bill
has
finally emerged from the House of Representatives--even
though Senate action is uncertain.
As for credit developments, neither the data on total
bank credit nor those on money supply plus time deposits
clearly point to a change in the rate of expansion over
recent months. Many of the elements that served to depress
credit growth in August seem to have been quite temporary
in nature.
A reversal of some of these factors, together
with tax date considerations, was instrumental in bringing
a speed-up in the expansion of bank credit and bank loans
in the first three weeks of September. However, this
period is not long enough to take account of loan run-offs
after the tax date. New York bank loan officers do not
report any significant change in business loan demand.
The revised August balance of payments deficit of $525
million is close to the highest monthly deficit ever
10/1/63
-34-
recorded. Unfortunately, we have no detailed information
on the causes of this deterioration, but surprisingly it
occurred in the face of a sharp drop in new long-term foreign
bond issues and despite some evidence of a slackening in
short-term capital outflows. Very heavy seasonal tourist
outlays doubtless played an important role. In more recent
weeks, substantial transfers of balances to Canada have been
reported, and it is also possible that there have been some
precautionary transfers of capital, or unusual retention of
foreign earnings, by corporations that anticipate additional
taxes or controls on capital exports. This was a danger
that was clearly visible when the interest equalization tax
was proposed.
Over the next three weeks, the System will be relatively
free to form its policies without special consideration for
the Treasury's operations. Such financing as the Treasury
conducts will be more or less routine and will not be
jeopardized by minor policy shifts. By the time of the
next Committee meeting, however, the Treasury will be on the
point of announcing the terms of the November refunding.
With the balance of payments still very serious, despite
some recent evidence of improvement in the short-term capital
area, ard with domestic business, still quite encouraging,
international considerations must inevitably continue to
receive heavy weight in the determination of monetary policy.
I think we should try to maintain the momentum of whatever
benefits our discount rate action has brought with respect
to capital flows. Also, the Committee members have often
discussed, over the past year or so, the desirability of
some slowing in the rate of growth of.bank reserves and bank
deposits--yet to date, as I have already mentioned, that
slowing has been almost imperceptible.
I believe we should
seek a slightly less degree of credit availability, both to
support a somewhat firmer short-term rate structure and to
cause a little greater reluctance on the part of banks to
lend freely abroad.
In the next few months additional reserves must be pro-
vided in any case to meet seasonal needs; but I would urge
that we exercise some caution in providing them, rather than
anticipating these needs.
I would hope that the Federal
funds rate would stay consistently at 3-1/2 per cent, that
the 90-day bill rate would move up close to 3-1/2 per cent
and perhaps fluctuate moderately around that figure.
Borrowings might well be allowed to average around $400
million, with free reserves probably moving around the zero
10/1/63
-35-
level, although I would regard the level of free reserves as
a secondary consideration.
The directive should, I think,
be modified to reflect this moderate additional move toward
lesser ease.
For the time being, I believe our attention should be
focussed on making the 3-1/2 per cent discount rate fully
effective rather than on any additional overt step. However.,
it seems quite possible that some further discount rate action
may be needed later this fall if the balance of payments fails
to respond favorably enough to the measures already taken.
Mr. Shuford reported that the improvement in Eighth District
conditions that had occurred since the first of the year was continuing,
though with some slackening in the pace of improvement in the past
couple of months.
Business loans outstanding had risen steadily since
March and this, combined with the recent increase in market rates, may
have had some effect on lending rates in the St. Louis area.
In June,
57 per cent of the larger loans were made at the so-called prime rate
of 4-1/2 per cent, but in September only 44 per cent.
At the national level, it appeared that the economic expansion
that began more than two and one-half years ago was still under way.
Although the economy had come a long way since early 1961, there did
not appear tc be any apparent significant upward pressure on prices.
The record of price stability during the current expansion had been
impressive.
Wholesale prices were about unchanged on balance since
1961; consumer prices had risen at an annual rate of approximately
1-1/2 per cent, about half the annual rate of increase during the
three previous periods of economic expansion.
Since July, member bank
reserves and the money supply had shown little change.
However, it
10/1/63
-36-
seemed more reasonable to consider monetary developments over
somewhat longer periods,and on such basis rather significant increases in bank reserves and the money supply could be observed.
With respect to policy, Mr. Shuford saw no strong reason to
propose any significant change at this time.
In view of the balance
of payments situation, he would not want to see any reduction of
short-term rates.
At the same time, he felt that monetary policy
For the
should continue to facilitate economic growth domestically.
next three weeks, he would aim at maintaining short-term rates at
about present levels, and he would hope that member bank reserves and
the money supply would continue to rise at moderate rates.
He would
not recommend a change in the discount rate at this time nor would
he suggest ary change in the directive, except for deletion of the
reference to the Treasury refunding.
Mr. Bryan reported that Sixth District statistics for August
showed
ittle change.
The District figures differed from the national
figures in that such declines as appeared were less than nationally,
while increases--chiefly on the finarcial side--were greater.
Mr. Bryan said he would favor essentially no change in policy.
However, reserve availability had somewhat outrun his ideas of what
should have happened under current policy.
reserves fluctuate around the zero level.
He would prefer that free
10/1/63
-37Mr. Bopp said that although Third District indicators had
shown some improvement recently, the performance was not strong
enough to overcome the disappointing behavior of the economy so far
this year.
As far as policy was concerned, Mr. Bopp expressed the view
that things seemed to be proceeding reasonably well.
Credit demand
was continuing moderately strong and the balance of payments seemed
to have improved somewhat.
Looking ahead, he would be inclined to do
nothing to alter present policy, with emphasis maintained on the tone
and feel of the market rather than the level of free reserves.
He
would make no change in the directive except to delete the reference
to the Treasury refunding.
Mr. Hickman commented that while the level of economic activity
had shown little net change in recent weeks, the tenor of recent news
suggested recovery from the more-than-seascnal late summer dip.
So
far as he could determine, production had probably increased in
September.
Steel output, as expected, had begun to show some expat ,ion;
auto out.put had increased moderately, on a seasonally adjusted bas:.s,
and was expected to increase substantially in October.
sales picture
for September was not yet clear.
The retail
Auto sales were off
sharply in the first 20 days of the month because of the unavailability
of new models.
Department store sales were fairly strong compared with
a year ago, but looked weak when contrasted with August's record level.
10/1/63
-38Although the industrial component of the wholesale price
index still showed no significant change, recent announcements of
price changes had, on the whole, been on the upside.
Increases had
become more widespread in certain industries, such as steel, nonferrous metals, paper, and household appliances, and were appearing
in selected lines of machine tools.
In this connection, the Board's
estimates of utilization of manufacturing capacity would bear
watching. The utilization figure had increased from 77 per cent of
capacity in the first quarter of 1961 to 87 per cent in the third
quarter of this year, and thus was nearing the 90 per cent level at
which price pressures had appeared in the past.
Economic changes in the Fourth District had been mixed,
Mr. Hickman said, but with a clearly favorable development emerging
in the area of insured unemployment.
Insured unemployment rates in
the 14 major labor market areas of the District, after seasonal
adjustment, showed 10 centers with declines in unemployment between
mid-August and mid-September, three with increases, and one with no
change.
The increases in unemployment rates occurred in steel centers.
Monetary policy in the weeks immediately ahead should, in
Mr. Hickman's opinion, continue along the path of recent weeks, but
with the bill rate encouraged to remain in the 3.40-3.50 per cent
range.
Because of the higher covered yields that had recently developed
on Canadian bills, and the scattered evidence of outflows of short-term
10/1/63
-39-
funds to that country, he would favor a bil1 rate in the upper end
of the aforementioned range, coupled, if needed, with further sales
of Canadian dollars forward against purchases of spot Canadian
dollars, within the new authorization of $150 million.
So far as the Federal Reserve System could be effective in
the international sphere generally, Mr. Hickman suggested that the
Committee exercise its influence to persuade countries whose currencies
were strong vis-a-vis the dollar to relax their local credit conditions.
He referred specifically to Canada, the Netherlands, Germany,
and Switzerland, whose currencies had been very strong recently against
the dollar.
Mr. Hickman said that, as he had suggested in the past, he
would urge the Committee to instruct the Desk to allow bond yields to
drift upward in response to natural market forces.
With a period of
large seasonal demands now approaching, reserve needs could best be
met by reducing reserve requirements rather than through open market
operations.
He would recommend no substantive change in the directive.
Mr. Mitchell commented that the outlook for consumer performance seemed quite uncertain.
The seasonals probably gave a false
impression in August, and it was his impression that September did
not look very good.
Also, it seemed to him, from looking at the
components, that the rise in the production index might be over for
10/1/63
-40Although he was not bearish about
a while.
the business outlook, he
was not particularly encouraged by the most recent developments.
On the proposition of letting the bill rate get up to the
discount rate, Mr. Mitchell felt that if the bill rate was allowed
to fluctuate around the discount rate, the System would be under
considerable pressure to raise the discount rate again.
As to policy
for the pericd immediately ahead, he would go along with those who
suggested that there be no change in posture at this time.
Mr. Shepardson said that he had participated yesterday in a
meeting of institutional lenders to agriculture, and was interested
to find that the concern about undue extensions of agricultural credit
had increased,
Insurance
if anything, since the group's meeting in May.
company mortgage
loans,
both in
volume and number,
were
up
by percentages ranging from 10 per cent to as much as 35 per cent.
The Farm Credit Administration was having a somewhat similar experience.
All participants
available
reported pressure to place
the overabundance
of
funds; and all of them pointed to the "other fellow" in
terms of laxity in lending standards.
One paper discussed by a
representative of the life insurance companies charged an undue
increase in the money supply, taking into account time deposits.
Rather grave concern also was expressed about developments in housing
loans, along with concern about the farm loan situation and the
continuing increase in farm land prices.
-41-
10/1/63
Mr. Shepardson said that in light of the total situation he
would be inclined to follow the recommendations on policy that had
been made by Mr. Hayes.
Mr. Robertson said it seemed to him the kind of economic and
financial reorts to which the Committee had been listening today
argued strongly against any tightening of monetary policy at this
juncture.
He
would, therefore, recommend no change in policy,
preferring to "wait and see."
Mr. Robertson then submitted the
following statement for inclusion in the record in further exposition
of his views:
It seems to me that the kind of economic and financial
reports we have been hearing argue strongly for making
monetary policy no tighter than it in at this juncture.
To begin with, it seems obvious that the rate of busi-
ness advance has slowed slightly in recent weeks. The
chances for any strong fall upsurge in activity have been
correspondingly reduced.
From this point of view, what we
need is a policy which helps to undergird business
confidence rather than restrain it.
On the financial side we have seen a run-up in bank
loans, investments, and the money supply, but these seem
largely related to the tax date and the Treasury refunding
operation, and to that extent they have a temporary character that. does not call for any policy attention. On the
contrary, within these fluctuating totals the banking system
seems to have been moving into a significantly less liquid
position, with more borrowing from the Federal Reserve,
reduced holdings of short-term Governments, and substantial
lengthening of portfolios through bank participation in the
advance refunding. To this extent, banks have less room to
accommodate any fall loan expansion that ensues, and I
think we must watch very carefully for any signs of
undesirable restraints developing from this posture.
Long-term capital markets also do not seem to me to be
invulnerable to any further tightening of reserve availability. A growing number of municipal market experts are
10/1/63
-42-
warning of the blow that could strike that market from any
significant reduction in the rate of commercial bank
acquisitions, such as might stem from even a modest degree
of reserve restraint. In the Government securities market
there is a relatively large total of dealer investment in
long-term issues as a result of their participation in the
recent refunding. This could easily produce some sharp
upward pressure on rates if dealers became restive over
such exposure or found financing sufficiently difficult to
make them want to reduce positions.
Developments on the balance of payments front in
recent weeks, both good and bad, do not seem to me to be
the sort that call for monetary policy adjustments.
Indeed, staff appraisals of the reported statistics since
our raising of the discount rate and tightening of reserve
policy in the end of July do not. seem to have been able to
pinpoint any concrete and significant benefits realized
from our higher money market rates. I, for one, have no
stomach for swallowing any more doses of the kind of
medicine that has been of such little proven help in dealing with what really ails our balance of payments. The
machinations that have been going on in the Canadian
exchange picture certainly should not lead us to take any
further steps to tighten our markets. Canada is one
country where official actions on the discount rate and
in the financial markets have been di-ectly designed to
frustrate any possible gains from our previous interest
rate increases, and the statements of their authorities
should lead us to expect exactly the same type of frustration if we were to endeavor to move again.
I believe our best policy at this juncture should be
to hold steady and watch very carefully the unfolding of
the consequences of what we have already done. If,
unhappily, business expansion should falter further, and
signs develop of reduced bank liquidity impinging upon
securities markets and credit availab lity generally, then
a prompt move back toward a more easy monetary policy
would be very much in order. If, on the other hand,
business should belatedly strengthen and develop some of
the fall acceleration of which it is still potentially
capable, then some well-timed adjustment toward more
restrictive monetary policy might be appropriate. If I
had to choose one course or the other at this moment,
I think the balance of risks is clearly in favor of easing
rather than tightening. But I also believe that we have
10/1/63
-43-
sufficient leeway to wait a little longer in order to be
sure of the direction of events before committing ourselves
further. Accordingly, I would favor no change in policy,
no change in the discount rate, and no change in the
directive other than the dropping of the reference to the
Treasury financing.
Mr. Mills presented the following statement:
It is now time to adapt Federal Reserve System monetary and credit policy to prospective financial and economic
developments in the last quarter of 1963. On the strength
of statistical evidence through the month of September, it
is reasonable to anticipate a somewhat more than seasonal
rise in economic activity over the rest of the year. However, no real improvement in the nation's balance of
payments difficulties can be foreseen, and it is possible
that they may be aggravated by publicized arguments aired at
the meeting of the International Monetary Fund concerning
conflicting theories for stabilizing the international
exchanges. Such publicity could lead to speculation against
the United States dollar. Although the proposed interest
equalization tax seems at least to have temporarily checked
the outflow of long-term funds, gains in that direction may
be lost through increased outflows of short-term funds,
partly stimulated by the liberalizing effects of the Board's
revised Regulations M and K. The effectiveness of the
Federal Reserve System's operations in foreign currencies
would be lessened by such developments. If these adverse
events should materialize, fiscal controls limiting foreign
access to the short- and long-term U. S. capital markets
should be instituted promptly; and it is hoped that
preparations have been made to that end.
As has been the case in 1963 to date, monetary and
credit policy must take into account both domestic and
international considerations. As the main attack on the
balance of payments problem has focused on admittedly
temporizing Federal Reserve System operations in the field
of foreign currencies, that have not been supported by
appropriate fiscal controls for reaching the problem at its
source, the burden of attempting a solution has been
shouldered onto the Federal Reserve System and has necessitated a more restrictive monetary and credit policy than
is justified by present economic conditions. Without a
10/1/63
-44-
change in official policy attitudes bearing on the balance
of payments problem, the Federal Reserve System regrettably
is committed to promoting an interest rate policy aimed at
shielding the United States against the further loss of
gold and dollars. But in view of inflationary developments
in several continental European countries and their
understandably self-serving needs, races of interest
abroad are tending to move up and to stay above those
ruling in the United States. As that is the case, it is
unlikely that policy actions attempting to force competitively higher interest rates in this country can be
undertaken successfully without causing a contraction of
credit and a reduction in the money supply that would
severely retard any improvement in economic activities
that otherwise could be achieved.
If the balance of payments situation should worsen, it
is my belief that the Federal Reserve System should not
offer resistance by strengthening the restrictiveness of
its credit policy. There would then oe visibly good and
sufficient reasons for urging the Federal fiscal authorities to promulgate selective controls over outward capital
flows from the United States which, if introduced, would
serve to relieve the Federal Reserve System from adherence
to its present debatable monetary and credit policy which
is vaguely expressed in the current economic policy
directive to the Federal Reserve Bank of New York as being,
"conducted with a view to maintaining the prevailing degree
of firmness in the money market, while accommodating
Under
moderate expansion in aggregate bank reserves."
such circumstances, Federal Reserve System monetary and
credit policy could proceed to concentrate on the domestic
economy by exercising its full influence toward stimulating
economic growth and activity. A change in policy of this
kind shculd carry with it the opportunity for discontinuing
the pegged interest rate policy now in vogue and for
returning to a policy that would permit interest rates to
move freely in response to supply and demand factors in the
financial markets subject only to the marginal influence
exerted by the System as it saw fit to supply or withdraw
reserves from the commercial banking system, in keeping
with the justifiable credit requirements of the business
and financial communities.
Release from the shackles of an artificially coddled
U. S. Government securities market and return to free market
-45-
10/1/63
principles in the conduct of monetary and credit policy
would contemplate reverting to at least a "bills
usually" policy and ceasing from actions that have
attempted to raise short-term and lower long-term
interest rates. In the process of resuming this previously favored monetary and credit policy, it is
reasonable to expect that a nornal spread between shortand long-term interest yields on U. S. Government
securities would result, and as the present flat yield
curve disappeared, commercial bank investors could again
judge the market realistically. In that event, overconfidence in the stability of the interest rate
structure would also vanish and the temptation to commercial banks to extend the maturities of their investments
in order to obtain fractionally higher interest income
would be removed, and along with it the risk of a
depreciation in their investment holdings occurring at
the inevitable time that unforeseen contingencies would
result in destroying the artificial structure of the
market for U. S. Government securities that now exists.
Mr. Mills said that the foregoing statement contained a great
deal of wishful thinking that he felt sure would not be realized.
In
the circumstances, it was his position that there should be no change
in policy at the moment, although he would veer more in the direction
suggested by Mr.
Bryan.
Mr. Hflin reported that Fifth District business had maintained
a slow, sometimes uneven, upward course, much as it had over a period
of many months.
Consistent gains in nonfarm employment had continued
to show that progress was quite widespread and seemingly possessed a
fair degree of momentum.
Department store sales reached a new high
in August and preliminary indications were favorable for September.
Construction employment had remained at record levels, although contract
10/1/63
-46-
awards and building permits had sagged slightly.
A note of
uncertainty existed in the District's agricultural sector, which
had not fared as well recently as the rest of the economy.
With
about 45 per cent of the District's flue-cured tobacco crop sold,
prices had averaged 4 per cent below last year, volume was down
about 16 per cent, and gross returns were off 19 per cent.
Those
trends could mean a reduction in income from flue-cured tobacco
sales of as nuch as $85 million compared with 1962.
Except for
agriculture, trends revealed in the latest Reserve Bank survey were
again quite favorable.
General business sentiment was considerably
stronger than three weeks ago, and manufacturers gave moderately
favorable accounts of new orders and shipments, with little or no
change in employment and hours.
About one-third of the manufacturers
reported wage increases.
Mr. Clay said that the domestic economy appeared to be
performing essentially in line with earlier expectations.
Expansion
at a moderate pace appeared to have characterized the third quarter.
While the record of the fourth quarter was yet to be written, continued economic expansion remained a reasonable prospect.
On balance,
however, this meant that the domestic economy continued at an expanding
level of activity that was inadequate to absorb the economy's growing
resources.
Accordingly, the domestic economy still needed the
stimulus of an expansive monetary policy.
10/1/63
-47Obviously, the international balance of payments deficit
remained a serious problem, Mr. Clay noted.
At the moment, there
appeared to be a need for more adequate information as to recent
developments in the various components of the balance and as to the
response to public policy actions taken during the last two and a
half months.
Some additional modification in monetary policy could
be made by the Committee within the limits of the recent change in
the discount rate.
In view of the continuing question as to the
appropriate role of monetary policy under existing circumstances, it
would appear to be in order at this time to await some clarification
of developments and response to policy actions already taken before
proceeding further.
Considering all factors, both domestic and international
Mr. Clay expressed the view that it would appear desirable to maintain
essentially the same monetary policy posture that had developed since
the discount rate increase in mid-July.
The directive could be left
unchanged except for deletion of the reference to Treasury financing.
Mr. Scanlon reported that economic activity in the Seventh
District had continued to improve gradually.
Steel production was
rising further, the early reactions to the 1964 model autos were
favorable, grain prices were well above year-ago levels in the face
of large crops, and business sentiment was generally optimistic.
Retail sales of soft goods in September apparently had not equaled
10/1/63
-48-
the August level, but it seemed premature to conclude that this was
the beginning of a downward trend.
Current data on savings flows, Mr. Scanlon said, indicated
that consumers might be spending somewhat more freely.
While sales
of savings bonds had continued above year-ago levels, redemptions
had risen and in the early weeks of September had exceeded sales.
The net inflow of funds to savings and loan associations in August
was below the year-ago level, largely because of an increase in
withdrawals, and at Seventh District banks gross withdrawals of
personal savings-type deposits rose sharply in August.
Banking and credit developments in the Seventh District in
recent weeks had been similar to those for the nation, except that
the rise of loans in the District appeared to be stronger.
Although
for the most part District banks had been able to cover their needs
in the Federal
funds market, there was evidence that a few of the
large banks had felt increased reserve pressure since early September.
Two of these banks had been borrowing at the discount window rather
steadily and one had liquidated bills.
For all Seventh District
weekly reporting banks, however, sales of short-term Governments were
more than offset by purchases of maturities over five years.
It was
a matter of concern to him, Mr. Scanlon said, that banks, in the face
of the yield curve, were willing to handle their portfolios in this way.
-49-
10/1/63
Mr. Scanlon was gratified that it had been possible to
maintain short rates near the 3-3/8 per cent level without cutting
back on total reserves and without forcing up the over-all levels
of member bank borrowing any more than had been done.
With the mid-
September pressures over, this might be more difficult in the period
ahead, even with the help of a cash financing and the need to supply
reserves seasonally.
If the demand for funds continued in suffi-
cient volume to absorb a rising amount of reserves, he would consider
some further increase in short-term rates appropriate, but he would
like to see that pressure come from the market.
It appeared to him,
however, that the Committee should still give a relatively high
priority to achieving moderate credit growth.
The present directive
provided this posture, and he would favor continuing it without
change other than to eliminate the reference to Treasury financing.
He would not favor changing the discount rate.
Mr. Deming commented that since Labor Day much of the Ninth
District had had generous rainfall, which insured excellent fall
pastures and feed for livestock.
virtually assured.
A large crop outturn was now
For reasons that were not apparent in view of the
good weather, the September wheat estimate was below the August
estimate, but the wheat crop would still be good.
The estimate for
corn was 20 per cent more than last year, and for soybeans 30 per cent
-50-
10/1/63
more.
Thus, the farm sector was in a favorable setting.
Available
information for August and September indicated that nonfarm activity
had expanded in the District in the third quarter, and it seemed
likely that this expansion would continue in the fourth quarter,
probably at an increased rate.
The District bank credit situation in September showed mixed
developments and was difficult to appraise.
September loan growth
at both city and country banks apparently would be well above normal
and about equivalent to last year.
Almost all of the gain, however,
had come in one week at mid-September when there was a sizable
expansion in business loans.
It was of interest to note that,
measured against a year ago, loans were up 8 per cent at city banks
and 14 per cent at country banks.
There was no recent information
about the composition of loan growth at country banks.
At city banks,
however, the data indicated that four-fifths of the gain had come in
loans to financial institutions other than banks, loans on securities
(mainly to nondealers), and loans on real estate.
Business loans
were up only 3 per cent and "other" loans only 1 per cent.
The
picture seemed to be one of ample--perhaps more than ample--credit
supply.
Mr. Deming said that his position with respect to policy came
fairly close to that of Mr. Bryan.
His thinking centered more on
10/1/63
-51-
reserve availibility than interest rates.
While he would not resist
some upward movement of short-term rates, he would work more on the
availability side, which meant veering toward a somewhat lower level
of free reserves.
He would leave the directive unchanged except for
deletion of the reference to Treasury financing.
Mr. Swan said that the Twelfth District had seen a continuation of modest expansion in business activity.
In August, total
employment in the Pacific Coast States increased slightly more than
seasonally, with every major nonagricultural sector except mining
showing some gain.
However, a still greater expansion of the labor
force nudged the unemployment rate up slightly.
In the banking area,
District banks, after having been net sellers of Federal funds for
some time, made larger purchases than sales in the week ending
September 25, and borrowing from the Reserve Bank increased
substantially during that week.
The major banks also expected to
be net buyers during the current week.
This seemed in considerable
measure to be related to a reduction of sales of Federal funds and
increased bill purchases on the part of one bank.
Mr. Swan said that the general business situation seemed far
from exuberant.
The international situation was far from satisfactory,
but there had been a few encouraging developments recently.
It seemed
to him that no change in monetary policy was called for at this point.
-52-
10/1/63
The bill rate was reasonably well in line with the discount rate,
and he would hope that this relationship could be maintained for the
next few weeks.
At the same time, he would want to supply reserves
to meet seasonal needs quite readily.
He would favor no change in
the directive except for deletion of the reference to the Treasury
refunding.
Mr. Irons reported that Eleventh District conditions were
good, with activity at a high level.
As to the national economic
situation, he felt that the economy was quite strong.
Some of the
statistical weaknesses in August and early September were traceable
rather clearly to developments in the automotive industry and metals.
There still seemed to be little change in the international picture.
On the matter of policy, Mr, Irons said that he had been
quite well satisfied with developments in the past few weeks.
In
his opinion, things were at a point where the Committee could seek
a lesser degree of ease over the next three-week period.
He leaned
toward the view that there might be a slightly lesser degree of
reserve availability, which might have some effect on the rate
structure in the market.
While he would provide reserves for seasonal
purposes, he doubted the desirability of anticipating seasonal needs
or forcing them.
He would seek, without being too aggressive, the
achievement of a slightly greater degree of firmness in the market;
in other words, to get as much of a condition of firmness in the market
-53-
10/1/63
That would
as was compatible with a 3-1/2 per cent discount rate.
mean a Federal funds rate of 3-1/2 per cent and a bill rate closer
to 3-1/2 per cent than at the moment.
He would not be disturbed by
some increase in member bank borrowing or by some decrease in free
reserves.
In summary, while he would not suggest pushing aggressively
to get the bill rate above the discount rate, he would try to achieve
the full effect of the 3-1/2 per cent discount rate.
What he had in
mind could be accomplished within the scope of the existing directive,
and he would not change the discount rate at this time.
Mr. Ellis said that the New England economy continued to move
along at a pace a bit short of the nationel record.
The Reserve Bank
was in the process of tabulating the semi-annual survey of manufacturers' outlook and capital spending intentions, and if equal
weight were given to all opinions, he would say that those expecting
sales this fall to exceed the previous record were in excess of those
foreseeing a decline by a ratio of five to one.
to 1964 sales
was even more prevalent.
Optimism with regard
It seemed worth noting that
some manufacturers depending largely on defense and space-related
outlays expressed concern about the possibility of a drag in coming
months as defense and space programs were reviewed.
As to policy, Mr. Ellis said he agreed basically with the
proposals made by Mr. Irons.
He concurred in the thought that reserve
availability could well be a matter of primary concern to the
10/1/63
-54-
Committee.
Required reserves had been moving along at the top of
the staff 3 per cent growth guideline, and total reserves had
expanded more than 7 per cent in the past 12 months.
This had
contributed to a situation where foreign bankers were pointing out
that "U. S. corporations have money running out of their ears."
In
these circumstances, it was small wonder that corporate funds were
seeking outlets outside the domestic econcmy.
It seemed possible
that depreciation and investment credits might combine with a tax
cut to accelerate cash flows to such extent that business firms might
be more stimulated to make investments abroad than investments
domestically.
These considerations led him to concur substantially
with the views on policy expressed by Mr. Irons.
Mr. Balderston noted that Mr. Hickman had expressed the hope
that perhaps European nations might take steps to lower their interest
rates.
He thought this unlikely, however; the wage explosion in
Holland was giving the Dutch authorities great concern, and what
France had done to counteract the wage push was a matter of general
knowledge.
It seemed to him that one could not count on inflation in
Europe relieving the burden on the United States.
With an average
hourly rate of 71 cents paid by manufacturing industries in France,
as compared with $2.45 in this country, even if French wage rates were
to rise 10 per cent, that would be almost precisely the equivalent of
a 3 per cent rise here.
One could not take too much comfort that our
10/1/63
-55-
average hourly increase is running somewhat below our average annual
gain in manufacturing productivity of 3-1/2 per cent even though the
European wage advance is ahead of the productivity increase there.
In
absolute terms, the wage differential, as distinct from the cost
differential, has not been narrowed.
As to policy, Mr. Balderston said that he would subscribe to
the position taken by Messrs. Irons and Ellis.
Chairman Martin noted that the Commiittee was faced again with
a division of opinion as to policy.
However, it seemed to him that
the question involved only a small matter:
slightly less ease.
If
he were doing it on his own, he would side with the position of
slightly less ease as being more consistent and more appropriate, but
it was not a decision that would either make or break the economy.
Since there appeared to be a substantial group that did not want to
change policy at all at this time, it seemed to him that it would be
wise to recogrize that fact and not overplay the thought that the
situation could be altered substantially by any very modest shift of
policy.
Accordingly, he would suggest that a vote be taken on the
basis of no change in policy at this time, with the understanding that
any members of the Committee who dissented would have an opportunity
to record their views in that way.
The current economic policy
directive to the Federal Reserve Bank of New York would not be changed
except to delete "and taking account of the current Treasury refunding
operation" in the first part of the second paragraph.
10/1/63
-56Thereupon, 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:
It is the Committee's current policy to accommodate
moderate growth in bank credit, while putting increased
emphasis on money market conditions that would contribute to
an improvement in the capital account of the U. S. balance
of payments. This policy takes into consideration the
continuing adverse balance of payments position and its
cumulative effects and the high level of domestic business
activity, as well as the increases in bank credit, money
supply, and the reserve base in recent months. At the same
time, however, it recognizes the continuing underutilization
of resources.
To implement this policy, System open market operations
shall be conducted with a view to maintaining the prevailing
degree of firmness in the money market, while accommodating
moderate expansion in aggregate bank reserves.
Messrs.
Votes for this action:
Martin, Bopp, Clay, Irons, Mitchell,
Robertson, and Scanlon. Vctes against
this action: Messrs. Hayes, Balderston,
Mills, and Shepardson.
Mr. Hayes stated, in connection with his vote, that he did .ot
feel that all policy shifts had to be dramatic.
The decision today
involved a relatively small matter, but he thought it appropriate to
record a dissent on the basis that a modification of policy such as he
had suggested would, in his judgment, have some significance.
Upon motion duly made and seconded,
and by unanimous vote, section 1(a) of
the continuing authority directive was
10/1/63
-57amended, in line with the earlier suggestion of the Account Manager, to
authorize the Federal Reserve Bank of
New York, to the extent necessary to
carry out the current economic policy
directive:
(a) To buy or sell United States Government securities
in the open market, from or to Government securities dealers
and foreign and international accounts maintained at the
Federal Reserve Bank of New York, on a cash, regular, or
deferred delivery basis, for the System Open Market Account
at market prices and, for such Accounc, to exchange maturing United States Government securities with the Treasury
or allow them to mature without replacement; provided that
the aggregate amount of such securities held in such Account
(including forward commitments, but not including such
special short-term certificates of indebtedness as may be
purchased from the Treasury under paragraph 2 hereof) shall
not be increased or decreased by more than $1.5 billion
during any period between meetings of the Committee.
At the suggestion of Chairman Martin, it was agreed that discussion of the memorandum from Messrs. Young and Sherman that had been
distributed to the Committee under date of September 28, 1963, regarding
the question of making minutes of the Federal Open Market Committee for
some past period available in some manner for the use of scholars and
others be deferred until the next meeting.
It
was
agreed that the next meeting, of the Federal Open Maket
Committee would be held on Tuesday, October 22, 1963.
The meeting then adjourned.
Secretary
Cite this document
Federal Reserve (1963, September 30). FOMC Minutes. Fomc Minutes, Federal Reserve. https://whenthefedspeaks.com/doc/fomc_minutes_19631001
@misc{wtfs_fomc_minutes_19631001,
author = {Federal Reserve},
title = {FOMC Minutes},
year = {1963},
month = {Sep},
howpublished = {Fomc Minutes, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/fomc_minutes_19631001},
note = {Retrieved via When the Fed Speaks corpus}
}