No Fed Bank Wanted Discount Rate Increase in July; Infl Soft

By Jean Yung

     WASHINGTON (MNI) - All 12 regional Federal Reserve banks supported keeping

the discount rate steady at 1.75% on account of weaker inflation ahead of the

Federal Open Market Committee's last policy meeting, according to minutes of the

banks' discussions released Tuesday.

     The Fed did not raise rates in July and the fact that none of the regional

banks were pushing to raise the discount rate rate, which is charged on

emergency loans to banks and moves in step with the lower end of the fed funds

rate's target range, shows all were in support for keeping rates steady.

     "Given recent soft readings on inflation, they judged that it would be

appropriate to maintain the current stance of monetary policy for the time being

and to assess whether incoming data support the current outlook for continued

moderate economic growth, some further strengthening in labor market conditions,

and a gradual return of inflation to 2 percent over the medium term," the

minutes said, echoing the FOMC's stance. 

     A number of regional Fed bank directors reported further tightening in

labor markets some noted moderate wage pressures, the minutes said. 

     "Several directors noted that inflation remained somewhat below the Federal

Reserve's 2 percent objective, due at least in part to transitory factors," but

longer term inflation expectations were "generally stable," they said. 

     Economic activity improved across sectors, including in real estate,

consumer spending and manufacturing, the directors observed, though a number of

them also commented that "uncertainty about potential fiscal and other

government policies could be restraining spending to some extent." 

--MNI Washington Bureau; +1 202-371-2121; email: jean.yung@marketnews.com

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