Off The Wire
Only two Fed banks voted to lower discount rate before last meeting: minutes
WASHINGTON (Reuters) - Only two out of the 12 regional Federal Reserve banks wanted to lower the rate commercial banks are charged for emergency loans ahead of the U.S. central bank’s last policy meeting, minutes from the discussion of the discount rate showed on Tuesday.
Despite that, the Fed decided to lower the discount rate to 2.25% from 2.50% at its Oct. 29-30 meeting at the same time that it cut its benchmark overnight lending rate by a quarter of a percentage point to a target range of between 1.50% and 1.75%.
Since the meeting, several regional Fed policymakers have made clear they were more hesitant to cut interest rates than previously acknowledged, characterizing it as a close call or saying they supported the decision on the condition the Fed paused its easing cycle.
The Fed has cut interest rates three times this year, but has said it now plans to keep rates unchanged for the foreseeable future, barring a material deterioration in the U.S. economic outlook.
Directors of the Fed banks of Minneapolis and San Francisco wanted to lower the existing discount rate, with some directors citing risks to the economic outlook and muted inflation pressures.
But directors of the other 10 Fed regional banks pushed for the discount rate to remain unchanged in light of their view of “current economic conditions as generally favorable, while remaining cautious about the risks to the outlook.”
Investors currently do not expect another reduction in borrowing costs until at least the middle of 2020.
Reporting by Lindsay Dunsmuir; Editing by Tom Brown