Speech

Excerpts from Remarks by M. S. Szymczak, Member, Board of Governors of the Federal Reserve System, before The Third Member Bank Assembly, Federal Reserve Bank of Minneapolis, Minneapolis, Minnesota, 0? go ( I^TBRAKX ; X ^U ttMRVE-S*'^ Dinner Meeting, sHotel Nicollet. April 25, 1955. FOR RELEASE ON DELIVERY Expected about 8 p.m. CST ttM \\ whi v, The last half of the has begun on a note reminiscent of that ushered in the beginning of the decade five years ago, r • Then> as now, were in the process of recovering from economic ee ession. The ability of the civilian economy to carry the weight of a overy movement, however, was not fully tested in 19^0. Before that recovery grea+^0Inplete, th® sudden outbreak of hostilities in Korea, with" the need, for upv.fi' 7 enlarSed military expenditures, catapulted us into a new economic inflation. achie whatever the future may hold, we can find in the broad recovery the st evidence that the civilian economy does have great strength— ngth t0 carry the burden of national progress. To this strength, I "K* "modern" monetary policy has made a substantial contribution. born p In sPeakinS of "modern" monetary policy, I am referring to the policy inflaH yearS ag0 1x1 March 19$l> out of the aguish of the post-Korean line f sur8e""a policy that has since served with some success in the front deflationUr defenSeS a£ainst the economic dangers of both inflation and Feder A notable characteristic of this policy, as administered by the sharrn Reserve System, has been flexibility, or prompt adaptation to the PJ-y changing financial needs of our dynamic economy. of iQtto The m0St dramatic instance of flexible adaptation came in May and June "fcrkeri A about the mid-point of the period we have covered. This was a time of de?eleration of advance in the major indexes that chart the course of in th!SS ln Production and employment and national output. The Federal Reserve e*erti tW° months shifted its operations in the field of credit from the "acti °f restraint to what subsequently became known as the promotion of ease," , When business activity subsequently entered a phase of downward instr nt> the Federal Reserve made vigorous, combined use of the policy 4 «s at its disposal—open market operations, reserve requirements, and i a c be rea?t rates—to provide reserves to the banking system so that funds would th +• available> on favorable terms, to credit-worthy borrowers throughout e n IOn* That these funds aided in cushioning readjustment and fostering PJ-oyment of resources is now a familiar story, accomm• Nothing in that episode, however, should be allowed to obscure the l9$3 Pilsbment of the preceding policy of restraint from early 1951 to early that f1 moderating the later downturn arid providing a base for the recovery ^durt^10™601, Restraint> hy helPing to keep credit expansion in line with ^ c e d6 and consumPtion activity, contributed to stability of prices and Way the dangers of over-commitment by businessmen and consumers. In this *nionTtary Poli°y cushioned the decline in activity that did come when faciw. defense expenditures and business commitments for inventory and Cities were cut back, ^flati purpose of the Federal Reserve System, in combating inflation or th1011' iS t0 foster stable economic progress and a rising standard of living not thS Al?erican people. The test of the policies it pursues to that end is a e direction they take--toward expansion or restraint—but whether they D PPropriate to the times in which they are applied.

M.S. Szymczak (1955, April 24). Speech. Speeches, Federal Reserve. https://whenthefedspeaks.com/doc/speech_19550425_szymczak

@misc{wtfs_speech_19550425_szymczak,
  author = {M.S. Szymczak},
  title = {Speech},
  year = {1955},
  month = {Apr},
  howpublished = {Speeches, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/speech_19550425_szymczak},
  note = {Retrieved via When the Fed Speaks corpus}
}