The Federal Reserve Board Discount rate meeting minutes from May 19 and June 23 show that ten out of twelve reserve banks voted to leave the discount rate unchanged. The Dallas Fed and the Kansas Fed requested to have the discount rate increase by 0.25%.
The Federal Reserve Bank of Kansas City and the Federal Reserve Bank of Dallas had voted on June 12 and 19 respectively to raise the rate for discounts and advances under the primary credit program to 2.50% to from 2.25%.
The directors of the Federal Reserve banks of Boston, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, and San Francisco had voted on June 12 while the directors of the Federal Reserve Banks of New York and Philadelphia had voted on June 19 to maintain the existing rate.
The Federal Reserve banks in favour of maintaining the existing rate expressed concern over inflation expectations and pressures from rising commodity prices. The banks also were concerned about the downside risks to the economy. Given the current situation, the ten reserve banks preferred to take a wait-and-see approach to evaluate incoming economic data.
The two Federal Reserve banks that recommended a 25-basis increase also noted the downside risks, but concluded that these were outweighed by rising inflation expectations. According to the minutes, the two directors expressed concerned about a potential wage spiral taking hold. "Under these circumstances, they favored reversing some of the monetary policy easing that had been implemented in recent months," noted the minutes.
By Steve Stecyk and edited by Cristina Markham