Against the Tide: Malcolm Bryan and the Introduction of Monetary Aggregate Targets

R. W. Hafer
Economic Review, Vol. 84, No. 1, 1999

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Monetary policy was freed from the straightjacket of pegging U.S. Treasury interest rates following the Treasury-Federal Reserve Accord in 1951. This newfound freedom led to a growing debate inside and outside the Federal Reserve System about the appropriate measures to use as operating guides. This article examines the contributions of Malcolm Bryan, president of the Atlanta Fed from 1951 through 1965, to this debate and to the evolution of monetary policy in the postaccord era.

Bryan parted company with most of his colleagues on the Federal Open Market Committee by trying to steer policy away from a focus on interest rates and money market conditions to placing more weight on the monetary aggregates. This article reviews the transcripts of the committee meetings during Bryan's tenure, which reveal his desire to prevent the disruptive effects of short-run fluctuations in money growth and the longer-term effects of expansive Fed actions, namely, inflation.

Bryan's approach to monetary policy was a dramatic departure from the prevailing views of the FOMC at the time. In addition to trying to implement the new and controversial research results coming out of monetary economics, his introduction of short-run aggregate growth targets—growth cones—stands out as a significant and innovative development in U.S. monetary policy. Even though his targets and procedures were not adopted by the FOMC at the time, his strategy for monetary policy would resurface as the inflation produced by the policies against which Bryan fought became unacceptable.

March 1999