Directors at three regional Federal Reserve banks voted in January to increase the interest rate charged to commercial banks for emergency loans by a quarter of a percentage point, minutes of their discount rate meetings showed on Tuesday.
The rate-hike recommendations—from directors of the Cleveland, St. Louis, and Kansas City Feds—were overruled two weeks later when U.S. central bankers determined to keep the Fed’s policy rate in its current range of 0-0.25 percent. The last time Fed regional banks split over discount-rate views was in October 2019, when the U.S. central bank was cutting rates.
Directors at the Fed banks who supported an earlier rate hike did so “in response to elevated inflation or to help manage economic and financial stability risks,” the minutes showed. Inflation has been running at more than twice the Fed’s 2 percent target.
Directors at the nine other banks wanted to leave the rate unchanged to continue to support the economy, the minutes said.
But even at those banks, the minutes said, “a number of directors noted that it might soon become appropriate” to begin removing accommodation in light of inflation pressures and strong labor market conditions.
At the Fed’s January meeting, policymakers threw out a similar signal, with Fed Chair Jerome Powell saying policymakers were “of a mind” to begin raising interest rates in March.
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.
St. Louis Fed President James Bullard has been among the most hawkish voices at the Fed in recent months, pushing for 100 basis points worth of rate hikes over the next three meetings.
By Ann Saphir