Four Fed bank boards wanted rate hike, minutes show

DIRECTORS at four of the Federal Reserve’s 12 banks voted to increase the interest rate charged to commercial banks for emergency loans in the days before the US central bank’s July meeting, minutes of the central bank’s discount rate meetings released on Tuesday (Aug 25), showed.

The rate recommendations, overruled when Fed policymakers decided in a 9-3 vote to leave the policy rate unchanged at their Jul 28 to 29 meeting, provide a fresh window into how contested that decision was.

Voting for a primary credit rate increase of a quarter of a percentage point were the directors of the three banks that had dissented at the July meeting - Dallas, Cleveland and Minneapolis Fed - plus the board at the Kansas City Fed, whose president, Jeff Schmid, does not have a vote this year on the policy rate.

Fed bank directors are not policymakers and do not determine the Fed’s interest rate, but they do meet regularly with their respective Fed presidents who say their directors’ views help shape their own outlooks.

Regional Fed bank boards vote on the discount rate at regular meetings, but it is ultimately set by the Fed Board to match the top of the range of the policy target rate, which has been in the 3.5 per cent to 3.75 per cent range since December. REUTERS