New York Fed, two more wanted no discount rate change in March: minutes

[NEW YORK] Just two weeks before the Federal Reserve's mid-March decision to raise US interest rates, only seven out of 12 regional Federal Reserve banks appeared to back the idea, minutes from discussions of the discount rate showed on Tuesday.

And even by March 9, less than a week before the meeting, directors at the influential New York Fed wanted the Fed to stand pat on its discount rate, which is what commercial banks are charged for emergency loans and which typically moves in tandem with the Fed's main short-term policy rate. Directors at the St Louis and Minneapolis Fed also wanted no change in the discount rate.

At the conclusion of its March 14-15 meeting, the Fed raised its target rate. New York Fed President William Dudley voted for the rate hike; Minneapolis Fed President Neel Kashkari voted against. The chief of the St Louis Fed, James Bullard, does not vote this year on Fed policy.

The minutes of the discount rate meetings suggest more disagreement from regional banks over the increase than had previously been understood.

The Federal Reserve Banks of New York, San Francisco, Atlanta, St Louis and Minneapolis asked the Fed's board to keep the discount rate unchanged at 1-1/4 per cent in meetings held Feb 23 and March 2, ahead of the Fed's March 14-15 meeting, the minutes released Tuesday showed.

Directors at those five banks thought leaving the rate unchanged would be appropriate, pending the assessment of new data "over the coming months".

Directors at the seven other banks wanted an increase because they believed economic activity and labour markets were strengthening and inflation would rise to the Fed's 2-per cent goal in the medium term, the minutes said.

In meetings held March 9, only about a week before the Fed's policy-setting meeting, directors of the San Francisco and Atlanta Feds switched sides, joining the seven that had already asked for an increase in the rate.

REUTERS