(Reuters) - U.S. central bankers may have been more deeply divided than previously understood over the decision last month to cut interest rates for the first time in more than a decade, records from meetings held across the Fed’s 12 regional Fed banks suggest.
The Fed cut its benchmark policy rate a quarter of a point to a range of 2%-2.25% on July 31. Most directors at regional Fed banks saw heightened trade tensions and uncertainty as risks to the economic outlook, summaries of their discussions released on Tuesday showed, similar to policymakers who voted on the rate cut.
But those at half of the Federal Reserve’s 12 regional Fed banks still wanted to keep the emergency lending rate for commercial banks unchanged in votes taken as late as just one week before the Fed’s July 30-31 policysetting meeting, the minutes showed.
Directors supporting no rate change cited “a strong labor market and inflation near” the Fed’s 2% goal, the minutes showed.
Recommendations from regional Fed bank directors on the so-called discount rate are not policy votes themselves, but at most Fed banks the votes of the directors — who represent not only banks but also foundations, community groups, and businesses — reflect the views of their presidents.
Minutes from the Fed’s policymaking meeting itself, released last week, also revealed divisions among rate-setters, including “several” who wanted no change in rates.
The vote from the New York Fed may not have indicated opposition to a rate cut, since directors there have in recent years made it a practice to weigh in after the Fed’s policy-setting panel changes rates.
New York Fed President John Williams, a close confidante of Fed Chair Jerome Powell, voted on July 31 with the majority at the Fed to reduce the policy rate.
MINNEAPOLIS WANTED HALF-POINT CUT
Directors at the other six Fed banks recommended a decrease to the so-called discount rate, “in light of risks to the economic outlook and muted inflation pressures,” the minutes showed.
Most of the half of Fed bank directors who supported a rate cut wanted the quarter-point reduction that Fed policymakers ultimately decided on at their July 30-31 policy-setting meeting.
Minneapolis Fed directors wanted to go further, recommending a half-point cut to the rate. That’s exactly what Minneapolis Fed President Neel Kashkari has publicly called for.
Similarly Cleveland Fed Bank President Loretta Mester, whose directors joined those of New York, Boston, Atlanta, Richmond and Kansas City in wanting the discount rate to be left at its then-current 3%, said earlier this month that she opposed the Fed’s July rate cut.
Boston Fed President Eric Rosengren and Kansas City Fed President Esther George dissented against the Fed’s July 31 decision to cut rates.
Reporting by Ann Saphir; Additional reporting by Trevor Hunnicutt; Editing by Chizu Nomiyama and Sandra Maler