Fed chiefs in Chicago and NY favored cutting interest rates in July by Reuters

By Michael S. Derby

(Reuters) – Members of the boards that oversee the Federal Reserve Banks of Chicago and New York voted to cut the central bank’s discount rate by a quarter of a percentage point in July, according to meeting minutes released on Tuesday.

The Fed said in a news release that while 10 of the Fed’s 12 regional banks wanted to keep the discount rate at 5.5 percent in votes taken last month, Fed directors in Chicago and New York wanted the loan rate to drop to 5.25%.

The discount rate is what deposit-taking banks pay to borrow directly from the central bank. It is a rate that is generally set relative to where the central bank’s target interest rate range is also set. At the Federal Open Market Committee meeting in late July, the Fed kept its interest rate target range between 5.25% and 5.5%, with the discount rate constant at 5.5%.

Minutes of meetings in the tapering window provide insight into the likely direction of monetary policy. With inflationary pressures easing and risks surrounding the labor market rising, the Fed is almost certain to cut its rate target at its September policy meeting. Fed Chairman Jerome Powell said this when he spoke at the Kansas City Fed’s annual research conference in Jackson Hole, Wyoming, on Friday.

Released last Wednesday, the minutes of the FOMC’s July meeting noted that the “vast majority” of policymakers are in favor of a rate cut for next month.

Minutes of the discount rate meeting said that as of last month, the Fed’s Board of Governors had not expressed any opinion on the rate level.

In the minutes, the Fed’s regional directors “reported generally stable economic activity, with many directors noting moderate inflation.” The executives also said that “labor market conditions continued to move into better balance, and wage growth stabilized or slowed in most districts.”

The Fed’s 12 regional banks are overseen by private sector executives. The minutes stated that it was approved on July 22.