Directors at two of the Federal Reserve’s 12 regional branches favored a 100-basis-point increase in the discount rate in July, minutes of discount-rate meetings show.
The boards of the St. Louis and Minneapolis banks voted for a bigger move on July 14, the Fed said in a statement released Tuesday. A day earlier, a report showed the US inflation rate jumped to a fresh four-decade high in the prior month.
Graeme Sloan/Bloomberg
Policymakers on the Federal Open Market Committee voted unanimously on July 27 to lift the target for their benchmark federal funds rate by 75 basis points to a range of 2.25% to 2.5%. The Fed board also raised the discount rate by the same amount to 2.5%. The discount rate governs the cost of borrowing for banks from the Fed’s discount window.
Discount-rate votes by regional Fed directors can be symbolically important as a sign of preference for how rates should move, and can semaphore the views of that bank’s president. St. Louis Fed chief James Bullard has been a longstanding hawk and Minneapolis’s Neel Kashkari has recently joined him on that wing of the policy-setting FOMC.
Directors at nine of the regional banks had voted for a 75-basis-point increase in the discount rate by the time of the July 27 meeting, while Kansas City Fed directors sought a 50 basis-point hike. Kansas City Fed President Esther George had dissented in June against a 75-basis- point increase, citing concern the larger move could stoke policy uncertainty.
Both George and Bullard voted with their FOMC colleagues for the 75-basis-point increase in July. Kashkari doesn’t vote this year.