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Boards of Fed divisions asked for increase on discount rate

Boards of eight from twelve divisions of US Federal Reserve asked last month for increase of interest rate on direct loans from the Fed with 25 basic points to 1.25%. This is the first time for moods in such direction, since the central bankers raised interest rates on federal funds in December, where the majority of the regional boards of Fed supported the increase of the discount rate. Votes can signal, whether the president of a regional bank wants a change in interest rates.

“The directors of Fed banks generally stressed that economic activity continues to expand at a moderate pace”, according to meeting minutes of the discussions about the level of the discount rate in July. “Several board indicating improvements in the property sector unchanged or rising levels of consumer spending”, adds the statement.

The directors of Fed divisions in Dallas and Philadelphia have voted for lifting, joining those of Boston, Cleveland, Kansas City, Richmond, San Francisco and St Louis, who also wished increase during meetings in June. Among the presidents supporting the lifting of discount rate, four are entitled aloud in the Federal Commission for the open market.

The directors of Fed divisions in New York, Minneapolis, Chicago and Atlanta have declared themselves to maintain the level of rates. These bankers indicate that the economic outlook and inflation are below the target, supported maintaining the current adaptive course of monetary policy. The president of Fed divisions in New York, William Dudley, is the only rightly aloud from this group. He has a constant voice in the Federal Commission for the open market.

The discount rate is the interest paid by banks and depository institutions on loans from credit facilities of the US Federal Reserve and other than the federal funds rate, which is the main instrument of monetary policy of the central bank.

The Management Board in Washington must approve any change in the discount rate. They did not changed in July, it is unchanged from December 2015 at 1%.

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