July 14, 2015 / 6:03 PM / in 2 years

Five Fed banks calling for discount rate hike: minutes

WASHINGTON (Reuters) - The number of Federal Reserve banks pushing the central bank to raise the rate it charges commercial banks for emergency loans rose to five from four, minutes from the Fed’s discount rate meeting last month showed.

Ahead of the Fed’s June 16-17 policy-setting meeting, directors of the Cleveland, Dallas, Philadelphia, Kansas City and Richmond Fed banks asked the Fed’s board to bump up the discount rate to 1 percent from 0.75 percent, according to the minutes, which were released on Tuesday.

The Richmond Fed had previously voted to keep the rate unchanged.

The board, however, sided with six other regional Fed banks in opting to hold the rate steady. Minneapolis Fed directors voted again to cut the rate to 0.5 percent.

The five regional banks that requested a hike want to normalize the spread between the discount rate governing Fed lending to banks and the overnight federal funds rate, which is the central bank’s primary economic lever. That lever has been locked in a range of zero percent to 0.25 percent since December 2008.

Ahead of the 2007-2009 financial crisis, the spread stood at 1 percent, but the Fed cut it to foster liquidity during the crisis.

The June discount meeting minutes show that directors were positive about U.S. economic growth, citing an uptick in housing activity, though they noted that consumer spending and business investment were mixed.

Reporting by Michael Flaherty; Editing by Paul Simao

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