WASHINGTON — Three of the Federal Reserve’s 12 regional banks made a push last month to bump up the interest rate banks pay the Fed for emergency loans, according to a document released Tuesday.
The regional banks were in Kansas City, St. Louis and Dallas. They wanted to boost the discount rate to 1 percent from 0.75 percent. The rate doesn’t directly affect borrowing costs for Americans.
Late last month, Federal Reserve Chairman Ben Bernanke and his four other board members unanimously decided to keep the current rate.
Thomas Hoenig, president of the Federal Reserve Bank of Kanas City, James Bullard, president of the St. Louis Fed, and Richard Fisher, head of the Dallas Fed, have reputations for being inflation hawks. Hawks worry more about super-low borrowing costs stoking inflation, while doves worry more about high unemployment.
Minutes of the closed-door regional bank meetings, which took place on different days in April, said regional bank officials noted improvements in the economy, including stronger-than-anticipated spending by consumers.
Still, regional officials were "cautious" about the outlook, noting that companies remained wary of ramping up hiring. Squeezed state and local governments, meanwhile, could constrain spending and crimp employment.
At the same time, low inflation gives the Fed leeway to hold its key interest, which does affect consumer borrowing, at a record low near zero, the minutes said.
Hoenig, at each of the Fed’s three meetings so far this year, has opposed the central bank’s pledge to hold rates at record levels for an "extended period." He fears that could eventually led to speculative excesses in the prices of stocks, commodities and other assets and could spur inflation later on.
In mid-February, the Fed raised the discount rate by one-quarter percentage point to 0.75 percent, a move to bring policy closer to normal after the financial crisis.
BEFORE YOU GO…
… we’d like to ask for your support. More people are reading the Mississippi Business Journal than ever before, but advertising revenues for all conventional media are falling fast. Unlike many, we do not use a pay wall, because we want to continue providing Mississippi’s most comprehensive business news each and every day. But that takes time, money and hard work. We do it because it is important to us … and equally important to you, if you value the flow of trustworthy news and information which have always kept America strong and free for more than 200 years.
If those who read our content will help fund it, we can continue to bring you the very best in news and information. Please consider joining us as a valued member, or if you prefer, make a one-time contribution.Click for more info