WASHINGTON (
MNI) - In general, directors at the regional Federal Reserve banks saw risks on the downside along with continuing moderate growth, better housing and mixed consumer spending trends, the periodic discount rate minutes showed Tuesday.
Some regional Federal Reserve Bank directors again disagreed with the Board of Governors, wanting a higher discount rate that banks pay on any borrowings from the Fed and, the latest minutes of those considerations showed Tuesday, the Board voted to ignore them.
That was nothing new since the Board has voted against the regional dissenters since the discount rate was lowered to facilitate such lending if necessary after the financial crisis.
Yet the minutes provide a clue to grass-roots sentiment among the business people, civic and labor leaders usually chosen to be regional bank directors. This time around, the minutes described them as again noting improvements in the housing sector and in business investment. In February they also noted improvements in consumer spending and this time the minutes said they had "mixed reports" with "some directors indicating it had been stronger than expected of late while other directors cited uneven activity across income groups."
Many noted "the damping effect of fiscal policy and increased health care costs on hiring and on economic growth more broadly," the latest discount rate minutes said."
"Overall, directors continued to see downside risks to the outlook," while inflation was seen as "subdued" with long-term expectations "stable," the minutes said.
Without giving a number, the minutes said "some" directors supported increasing the primary credit rate by 25 basis points to bring back the 75 basis point differential with the federal funds rate.
Those certainly included the directors at the Kansas City bank who for years now have mustered majorities to formally vote in favor of a 25 basis point increase in the discount rate.
Kansas City has often been counterbalanced by the Boston Fed, where directors have voted to lower the discount rate.
By March 18, Boston was voting with the majority to maintain currency policy even as Kansas City's directors soldiered on in favor of a rate hike for banks.
As always, "Board members considered the primary credit rate and discussed, on a preliminary basis, their individual assessments of the appropriate rate and its communication, which would be discussed at the meeting of the Federal Open Market Committee" and "No sentiment was expressed for changing the primary credit rate."
--MNI Washington Bureau; tel: +1 202-371-2121; email:
dgulino@mni-news.com
Federal Reserve Bank Of New York: Staff Report No. 574 October 2012 - "The Forward Guidance Puzzle" Dynamic Stochastic General Equilibrium Model Predicts Explosive Inflation
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Stone & McCarthy Research Associates: 12/31/2013 The Federal Reserve Will Start Losing Money (Negative Net Interest Margin)
Regional Federal Reserve Bank Directors Generally See Downside Risks
