Describes the continuing efforts to offset transient fluctuations in autonomous factors. Examines in particular the decision of the Treasury to keep virtually all of its cash balances at Federal Reserve Banks (in order to benefit indirectly from historically high short-term interest rates) and the consequences of that decision for open market operations.

Describes the transition from an interval of non-inflationary growth at the beginning of the decade to the first appearance of what would later become a virulent inflation. Start/stop efforts to rein in inflation led to more volatile interest rates and growing Federal Reserve impatience with its commitment to maintaining an “even keel” during Treasury offerings.

Strengthening economic activity in 1955 led to rising interest rates that forced the Fed to stand up to its commitment to support Treasury offerings priced at market levels. This chapter describes the development of “even keeling” – the practice of stabilizing the Treasury market while the Treasury was offering new securities – and the continuing preference for repos, rather than outright purchases and sales, for offsetting short-term fluctuations in autonomous factors.

Summarizes the institutional evolution of Federal Reserve open market operations, the U.S. government securities market, and Treasury debt management from 1951 to 1979.