WASHINGTON (Reuters) - Eleven regional Federal Reserve banks sought no change in the discount rate in the run-up to the Fed’s March policy meeting, after the Boston Fed dropped a call for a 25 basis point cut to 0.5 percent, according to Fed documents released on Tuesday.
Kansas City Fed directors, however, continued to seek an increase in the discount rate to 1 percent - a request which the Fed Board in Washington ignored.
The slight shift in policy preference by the Boston Fed revealed by minutes of the regional Fed branch directors’ discount rate meetings could indicate growing confidence in the resilience of the recovery.
That said, the minutes covered a period before the release of disappointing jobs data for March, and soft readings from the manufacturing and the retail sector, which have fanned concerns of a spring ‘swoon’ in national growth.
The stance of the Kansas City Fed reflected the views of its hawkish president Esther George, who dissented for the second straight Fed policy meeting in March against the majority’s decision to keep buying bonds at a $85 billion monthly pace.
George argued that this aggressive action, combined with a pledge to hold interest rates near zero until unemployment hits 6.5 percent, provided inflation remains under 2.5 percent, could fan future asset bubbles while undermining price stability.
The discount rate is the price banks pay for borrowing at the Fed’s discount window if they are unable or unwilling to raise funds in the interbank market.
Reporting by Alister Bull; Editing by Chizu Nomiyama