Four Fed bank boards wanted different policy decision ahead of March hike

By Ann Saphir

(Reuters) – Directors at four of the 12 Federal Reserve regional banks did not want the quarter-percentage-point interest rate increase that the U.S. central bank delivered in March, but it was unclear whether they preferred a pause or a bigger hike, the Fed indicated in a footnote to the minutes from that meeting.

Fed bank directors don’t vote on monetary policy, but they do express their views through non-binding votes on the discount rate, which is what the Fed charges to commercial banks for emergency loans. Fed bank presidents say their directors provide key information on the state of the economy.

What exactly the boards at the Cleveland, Chicago, St. Louis and Minneapolis Fed banks would have liked the U.S. central bank to do at the March 21-22 meeting, which was held after the collapse of two regional U.S. banks, won’t be known until the Fed publishes separate minutes of its meetings on the discount rate. Those would typically be published next week.

Despite their boards’ preference for something different, Chicago Fed President Austan Goolsbee and Minneapolis Fed President Neel Kashkari joined other Fed policymakers in a unanimous vote last month to lift the benchmark overnight interest rate to the 4.75%-5.00% range.

Goolsbee has subsequently called for “patience” on rate hikes.

St. Louis Fed President James Bullard and Cleveland Fed President Loretta Mester do not cast policy votes this year. Both of them have indicated they lean toward tighter policy to battle high inflation.

The minutes of the Fed’s meeting last month, which were released on Wednesday, showed “several” policymakers considered pausing interest rate increases, but that they changed their minds after seeing how the central bank and other regulators had calmed conditions with emergency backstops and other measures.

Fed meeting minutes never specify which policymakers made which comments.

“Some” policymakers also would have considered a half-percentage-point increase absent the banking sector stress, the minutes said.

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