Moments ago, the Fed’s discount rate minutes for the months of March/April suggested that a rate hike may be indeed closer than some expect, because after just two regional Feds – those of Richmond Fed and Kansas City – requested an increase in the rate charged on direct loans from the central bank to 1.25% from 1% in the Feb/March meeting, this number doubled to four, with the inclusion of the San Fran and Cleveland Feds joining the group of regional Feds pushing for a 25 bps rate hike to the discount rate.
The four regional Feds, however, were overriden by the balance of the 12 regional Feds, including the Boston, New York, Chicago, Minneapolis, Dallas, Philadelphia, Atlanta, St. Louis Feds, all of whom recommended keeping the discount rate unchanged.
From the minutes:
Subject to review and determination by the Board of Governors, the directors of the Federal Reserve Banks of Chicago, Minneapolis, and Dallas had voted on April 14, 2016, and the directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Atlanta, and St. Louis had voted on April 21, to reestablish the existing rate for discounts and advances (1 percent) under the primary credit program (primary credit rate). The directors of the Federal Reserve Banks of Cleveland, Richmond, Kansas City, and San Francisco had voted on April 14 to establish a rate of 1-1/4 percent (an increase from 1 percent). At its meeting on April 11, the Board had taken no action on requests by the Richmond and Kansas City Reserve Banks to increase the primary credit rate.
Federal Reserve Bank directors cited continued improvement in labor markets, including significant payroll gains and increases in labor force participation. Although many directors noted a recent slowdown in economic growth, they were generally positive about the prospects for moderate increases in economic activity going forward. Directors provided mixed reports on consumer spending, including some easing in the growth of auto sales. Several directors noted steady-to-increasing housing-sector activity, but others cited ongoing weakness in the agriculture and energy sectors. Some directors noted the potential implications of global economic and financial developments for export-related activity. Some directors reported moderate wage pressures for certain jobs, as well as difficulty hiring and retaining some types of skilled and unskilled workers. Inflation remained below the Federal Reserve’s 2 percent objective.
Against this backdrop, most Federal Reserve Bank directors recommended that the current primary credit rate be maintained. Other Federal Reserve Bank directors recommended increasing the primary credit rate to 1-1/4 percent, in light of current and anticipated economic conditions, improvements in the labor market, and expectations that inflation would rise toward the Federal Reserve’s 2 percent objective over the medium term.
Today, Board members considered the primary credit rate and discussed, on a preliminary basis, their individual assessments of the appropriate rate and its communication, which would be discussed at the meeting of the Federal Open Market Committee this week. No sentiment was expressed for changing the primary credit rate before the Committee’s meeting, and the existing rate was maintained. Thereafter, a discussion of economic and financial developments and issues related to possible policy actions took place.
Is this enough? Recall that on November 24, one month before the Fed did hike rates by 25 bps, a whopping 9 regional Fed requested a Discount Rate hike: that took place less than a month before the Fed’s first rate hike in nearly a decade. With only four regional Feds on the same page as of this moment, it is very unlikely that June is when the Fed’s rate hike will take place, and with July missing a press conference, it remains to be seen just how the Fed can proceeds with the much touted rate hike in the coming 2 months.
via http://ift.tt/25eL69J Tyler Durden