Fed Rate Split Widens as Four Regional Banks Sought Discount-Rate Increase
Summary
- Divisions within the Federal Reserve over interest-rate policy are widening.
- Four of the 12 regional Federal Reserve banks called for a discount-rate increase ahead of the July FOMC meeting.
- The decision to hold the benchmark rate steady at the July FOMC meeting was made by a 9-3 vote, highlighting widening differences over inflation and the economy.
Forecast Trend Report by Period
Divisions within the Federal Reserve over interest-rate policy are widening. Ahead of the July Federal Open Market Committee meeting, four of the 12 regional Federal Reserve banks sought an increase in the discount rate.
Walter Bloomberg reported on August 25 that the boards of four regional Fed banks recommended raising the discount rate before the July FOMC meeting. The discount rate is the rate the Fed charges when it lends directly to financial institutions.
The Fed, however, left its benchmark interest rate unchanged at the July FOMC meeting. The decision was made by a 9-3 vote, underscoring internal differences over the appropriate level of rates.
The minutes showed widening differences within the Fed over inflation and the broader economy. The debate over how forcefully to respond to price pressures is set to continue as officials determine future rate policy.
JH Kim
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