Three Fed Presidents Recommend Interest-Rate Increase
Today, the Federal Reserve released the minutes of its Board of Governors meetings to discuss the United States’ monetary policy in April. In February, all twelve Federal Reserve regional bank presidents requested to keep the primary credit rate at 0.75 percent. In March, eleven banks voted for 0.75 percent, but the Federal Reserve Bank of Dallas voted to move to 1 percent. In mid-April, the heads of the Kansas City, St. Louis and Dallas banks all voted to establish a rate of 1 percent.
On one hand, this is no surprise. The three banks’ presidents are, respectively, Thomas Hoenig, James Bullard and Richard Fisher — all known as inflation hawks, more concerned with low rates leading to inflation than with high rates leading to unemployment. It is not a sign of an imminent rate increase either. (The Federal Reserve banks don’t set their own rates. Additionally, to be clear without getting too deep in the weeds here, the primary credit rate is different from the federal funds rate, and it impacts how much banks pay to borrow from the government rather than how much consumers pay banks for loans.)
Indeed, last month, for the sixteenth month in a row, the Federal Reserve recommended keeping the federal funds rate low for an “extended period”: “With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time. The Committee will maintain the target range for the federal funds rate at 0 to 0.25 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.”
Still, it demonstrates that more major figures within the Federal Reserve system are advocating a consideration of rate increases.