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Tuesday, September 2, 2008

The Fed: The Battle Rages Within

The battle rages within…

Three Fed Banks Sought an Increase in Discount Rate (Update1): “One-quarter of the Federal Reserve's regional district banks lobbied to raise the discount rate in July, signaling rising pressure to increase borrowing costs to banks even as economic growth slows.

Citing a rising danger of inflation, the boards in Chicago, Dallas and Kansas City sought a quarter-point increase in the discount rate from 2.25 percent, according to minutes of officials' discussions prior to the Aug. 5 policy meeting that were released today in Washington. The other nine Fed district banks asked for no change, in line with the decision to keep the discount rate and benchmark federal funds rate unchanged.

The minutes indicate broader support for lifting interest rates than revealed by the tally at last month's Federal Open Market Committee meeting, where just one of the 11 members voted for an increase. The division comes as officials debate the likely impact of the retreat in commodities on consumer prices, which surged the most since 1991 in the year to July.”

It looks like not everybody is on the same page…
Will a divided Fed make a bad thing worse?

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