WASHINGTON (Reuters) - Two regional Federal Reserve banks again sought a modest increase in the rate for emergency bank loans but were overruled by those wanting no change, minutes of Fed Reserve board meetings in March and April showed on Tuesday.
Directors of Federal Reserve banks in Kansas City and Dallas sought a 0.25-percent increase in the discount rate, but the other 10 regional Fed banks argued the rate should be left at 0.75 percent. The U.S. central bank’s board sided with the majority.
The Kansas City and Dallas Fed banks have for months sought to raise the discount rate to 1 percent as a step toward moving the spread between it and the benchmark federal funds rate closer to pre-crisis levels.
Indeed, Kansas City Fed President Thomas Hoenig has been the only top Fed official to call for an increase in the fed funds rate itself since the central bank cut official borrowing costs to effectively zero.
The minutes showed lingering worries about a lackluster recovery.
“Federal Reserve Bank directors generally noted that although the economic recovery was progressing, they were cautious about the economic outlook,” the minutes said.
Some directors saw upside risks to inflation, while others believe higher energy and commodity costs — coupled with efforts to slash government spending — posed more of a threat to consumer spending.
“Risks included rising commodity and energy prices, which had the potential to dampen consumer spending, and increased fiscal stringency at all levels of government,” the minutes said.