(Reuters) - Minneapolis Federal Reserve Bank directors voted to keep the rate commercial banks are charged for emergency loans unchanged ahead of the Fed’s December policy-setting meeting, minutes from the discount rate meeting showed Tuesday.
Directors at all eleven other regional Fed banks voted to raise the discount rate by a quarter of a percentage point to 1-1/4 percent in board meetings held in November and December, up from nine banks ahead of the Fed’s policy meeting in early November.
Those banks thought the rate should rise in view of “actual and expected strengthening in economic activity and labor markets” and the likely return of inflation to the Fed’s 2-percent target.
In addition, the minutes said, “a number of directors noted the potential for significant changes in government policies, including the possibility of expansionary fiscal measures.”
Minneapolis Fed directors disagreed, preferring continued monetary accommodation to support both employment and inflation, the minutes said.
The discount rate had not budged since the Fed last raised its short-term rate target the previous December, and at the Dec. 12 discount rate meeting the Fed board left the rate unchanged.
But the overwhelming desire from regional banks to raise the emergency rate foreshadowed the decision by rate setters to raise the Fed’s target range for its policy rate at their Dec. 13-14 meeting. The discount rate was increased at the 11 banks that requested it at the end of that meeting.
A day later, Minneapolis Fed directors also voted to raise the discount rate, a request that was immediately approved by the Washington-based Fed Board.
Reporting by Ann Saphir; Editing by Andrea Ricci