Four Fed banks renewed call for discount rate hike: minutes

(Reuters) – Four regional Federal Reserve banks continued their unsuccessful efforts to convince the central bank to raise the rate it charges commercial banks for emergency loans, meeting minutes released on Tuesday showed.

Ahead of the Fed’s April 28-29 policy-setting meeting, directors of the Philadelphia, Kansas City, Cleveland and Dallas Fed banks asked the Fed’s board to bump up the discount rate to 1 percent from 0.75 percent, according to the minutes of Fed board meetings. Minneapolis Fed directors, in contrast, asked to lower the rate, to 0.5 percent, to help the Fed achieve its 2 percent inflation target.

The board sided with the seven other regional Fed banks in opting to hold the rate steady.

The four 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 zero-0.25 percent range for years.

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

(Reporting by Ann Saphir)

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